Government opposition to Feed-in Tariffs softens

In a move welcomed by renewable energy firms, the government yesterday gave the clearest signal yet that it will investigate introducing a Feed-in Tariff (FIT) to promote adoption of onsite renewable energy technologies, such as solar panels and micro wind turbines.

Speaking at an evidence session for the imminent energy bill, energy minister Malcolm Wicks said the government would launch a consultation early this summer to look at strategies to ensure the UK's EU-imposed renewable target is met, adding that it would pay particular attention to the subsidies offered to microgeneration technologies.

"We will be looking afresh at microgeneration. Any proposals to boost microgeneration, including a Feed-in Tariff, are ones we are open to consider," Wicks said.

A spokeswoman for the Department for Business, Enterprise and Regulatory Reform (BERR) confirmed the consultation would be launched this summer, with the results expected to be published in spring 2008.

The move was welcomed by renewable energy groups, which have lobbied for the adoption of a FIT to replace the government's much-criticised Low Carbon Buildings Programme grant scheme.

FITs guarantee firms and households that install onsite renewable technologies an above-market price for any energy they sell back to the grid, providing them with a long-term financial incentive for installing green energy systems. The scheme was pioneered in Germany where it is credited with the creation of over 100,000 jobs and has made the country one of Europe's biggest producers of renewable energy.

Advocates of FITs – including the Conservative Party, which last year announced it would introduce the model if elected – argue they provide a highly efficient means of subsidising installation of onsite renewables, sharing the cost between all energy bill payers while requiring low levels of administration. Furthermore, the resulting increase in demand for microgeneration systems allows renewable energy firms to exploit economies of scale that allow them to cut the price of their products.

In contrast, the government's Low Carbon Building's Programme was labelled a failure last week after it emerged that cuts in the grants available has led to a collapse in the number of people applying to install microgeneration technologies.

Alex Murley, small systems manager at the British Wind Energy Association (BWEA), welcomed the prospect of a consultation over microgeneration policy. " It is good that they recognise more support is needed," he said. "The current system is not working and a replacement is needed. We would support a FIT as the most effective means of delivering the scale of adoption required."

Charlotte Webster of solar energy firm Solar Century echoed Murley's calls for a FIT, arguing there was growing evidence from across Europe that the model delivers significant results. "If you look at the grant scheme it really is a short-term option," she said. "What a FIT gives you, and what our customers want, is long-term security that they will receive returns on their investment. "

However, experts warned that any attempt to introduce a FIT in the UK would have to be carefully tailored to ensure it only impacts onsite renewables and does not undermine the existing Renewables Obligation scheme, which is broadly supported by energy firms.