** The following article comes from Kevin Langley at http://solarfeedintariff.co.uk ...
UK Solar future
With recent news that the British government has made provisions for the incentivization of investment in renewable energy, investor eyes have been fixed on the UK to watch developments.
As a solution to the global economic crisis, Gordon Brown the UK Prime Minister has called for an international ‘Green New Deal' in order to spark investment in new technologies and create jobs in the emerging renewable sector. In reference to F.D. Roosevelt's economic plan to revitalize the US economy during the Great Depression the Prime Minister explained that he believes striving to evolve the UK in to a low carbon economy will create jobs while at the same time help the government to meet its climate change targets.
The British government has already set the target of an 80 percent reduction in greenhouse gases by 2050 and have taken some measures to instigate this reduction. Overseeing this gradual change towards a low carbon economy will be the Secretary of State for the Department for Energy and Climate Change, Ed Milliband. The minister has already advocated government investment in renewable energy technology and research and was a key figure behind last November's Energy Act which set out the main provisions for government funding for green energy and paved the way for the implementation of a feed-in tariff in 2010.
The UK government, which is currently going through a consultancy process on the feed-in tariff (FIT) will see it as absolutely fundamental that the provisions for the FIT allow the UK to have the legal infrastructure for investors to feel safe in the knowledge that any investment they make will yield high returns and be protected in the long term as it is in other states with strong feed-in tariff systems.
How will the tariff affect investors?
The feed-in tariff system is designed as an incentive for energy producers to move away from conventional fossil fuels to renewable energy sources. Essentially, it is government legislation which guarantees a fixed, premium rate for renewable electricity fed into the national grid. The power companies are obliged by the government legislation to buy the renewable electricity, the additional costs of which are passed onto the customers.
The UK government is committed to reducing its carbon emissions through the adoption of renewable energy sources, particularly in regards to the generation of power in order to combat climate change. The Energy Act of November 2008 set out a series of provisions in order to help the government meet its targets. The need for a feed in tariff comes from the fact that it is far more expensive to produce energy from green sources than it is from fossil fuels. This of course renders the retail price of fossil fuel electricity cheaper than that from renewable producers. In order to attract renewable investors, it is therefore necessary to incentivise those wishing to invest in the installation of a renewable plant.
Feed-in tariff legislation fixes an above market rate for utility companies to buy electricity from renewable energy producers. It could therefore mean for example that if the retail price of fossil fuel electricity were 15p per kWh, then the rate for renewable electricity could be up to 60p per kWh. In this case, the 45p difference per kWh would be spread across every customer of the relevant utility company. It is this fixed tariff paid by the utilities which makes renewable energy an attractive prospect for investors as it guarantees them a return over a long period and has been highly successful at attracting investment where it has been implemented across Europe. Germany for example now produces over 14 per cent of its energy from renewable sources, something which has been attributed to the generous and comprehensive feed-in tariff system implemented by the German government.
In a December 2008 report titled The Renewable energy country attractiveness indices by consultants Ernst & Young, the UK ranks highly as a potential target for renewable investors. Indeed, citing the falling value of the Pound and the imminent introduction of feed-in tariffs, Ernst & Young now rate the UK as joint fifth in a list of countries in terms of their attractiveness to investors. Germany rates top of this report, a success which is attributed to their excellent feed-in tariff system (Erneuerbare-Energien-Gesetz EEG).
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