Department of Energy and Climate Change Announcements

    The period when politicians have their summer break is commonly known as “Silly Season” due to the lack of newsworthy stories reported by the press. In the renewable energy sector, the run up to parliament’s recess could be hailed as silly season because of the volume of policy updates that are issued.

    This July, potential developers had to keep an eye on a number of announcements from the Department of Energy and Climate Change (DECC). These included the anticipated reduction in Renewable Obligations Certificates (the support mechanism for large-scale renewable energy installations) and the results of the Feed in Tariff (FiT) consultation, which saw rates almost universally held at current levels or reduced.

    These reductions brought into focus the importance of robust project models to ensure that proposals remain financially viable. Of course businesses must understand the financial elements of a project, but they must also have a realistic timeline for each phase of development, including pre-planning, planning, procurement and grid connection. Without these elements, making an informed decision on whether to proceed is nigh on impossible.

    FiT rates are set to drop over time as more projects come on stream, so it is critical that businesses calculate not only what returns are likely to be if the project went live now, but also what rates are likely to prevail if and when their project is commissioned.

    It can take many months or even years to develop a project to full commissioning – and it is a competitive market. The following table illustrates the number of installations currently registered for FiTs (source: OFGEM), as well as the number of eligible installations still in the planning system (source: DECC).

    View the rates table

    To avoid missing out on higher FiT rates, businesses can now lock into current tariffs under the new preliminary accreditation scheme. From 1 December, eligible projects can lock into the FiT for up to two years (six months for solar), giving them a valuable period of certainty while procurement and funding arrangements are finalised.

    With the government recess now over, we can expect even more announcements from DECC to consider. However, a well thought-out project with financial budgets and a project timeline in place will be better placed to react quickly for optimum success.

     
     

    Key contacts

    Nick Green

    Nick Green

    Director
    Energy & Infrastructure

    Savills Perth

    +44 (0) 1738 477 518

    +44 (0) 1738 477 518