Whitehall wrangling raises fears of feed-in tariff delay

The government has rejected suggestions that its planned clean energy cashback feed-in tariff (FIT) scheme could be delayed, insisting that it remains on track to be launched next April.

Concerns are mounting that the final details of the scheme will not be announced until next year, giving renewable energy firms little time to prepare for the new incentive mechanism, which will provide businesses and households with the opportunity to sell any power they generate onsite to their energy provider at preset tariffs.

It had been widely expected that following the end of the government's consultation period last month, the final level of the tariffs would be announced around the time of Alistair Darling's pre-Budget report on December 9.

However, according to reports in The Observer, Treasury officials are concerned about the potential cost of the scheme and as a result a final decision is likely to be delayed until January at the earliest – a move that some fear could have a knock-on impact on the scheme's launch.

A spokeswoman for the Department of Energy & Climate Change attempted to allay any fears about the introduction of the scheme. "There's zero doubt surrounding the introduction of FITs," she said. "We've legislated, we've published the proposed tariff levels and we're on track to have them in place for April next year."

Speaking to BusinessGreen.com, one renewable energy industry insider said it was unrealistic to expect the final decision on tariff levels to be reached in time for the pre-Budget report.

"There is a team of four civil servants working on it and they have had to read through around 750 responses to the consultation," he observed. "It would be harsh to expect them to have clear announcements ready by December. I'd expect to see an announcement in January, although the earlier the better, as it would add to investor certainty and give firms more time to prepare."

Another industry source suggested the delay could represent good news for the renewables sector, which has been lobbying for the government to increase the tariffs to a level similar to that adopted in Germany. Tariffs there have delivered annual returns on investment of around 10 per cent and have driven a massive increase in renewable energy capacity.

"If there is a delay it suggests they are still debating the levels which were originally proposed," they said. "That could be a good sign as those tariffs were far too low and need increasing."

However, there is still a risk the Treasury could move to reduce the proposed tariffs after industry watchdog Ofgem filed a response to the consultation criticising feed-in tariff models as inefficient and costly. It also argued that providing a return on investment of five to eight per cent is " disproportionately high compensation".

Leonie Greene of the Renewable Energy Association (REA), said that large energy firms were protecting their vested interests and lobbying against an initiative that had the potential to revolutionise the way the way energy is generated over the next 20 years.

"The problem is that the government is focusing on the costs of the scheme and not looking at the benefits," she said. "In Germany in 2006, the feed-in tariff cost €3.3bn (£3bn) but the increased supply of renewables meant that the cost of wholesale electricity spot prices fell, saving the economy €5bn. That is before you consider all the other benefits in energy security, job creation and so on."