There has been speculation for weeks about the feed-in tariff rates changing and now the Comprehensive Feed-In Tariff document has been published. It was announced just after 10:30 this morning by the Department of Energy and Climate Change (DECC) what the proposed changes are and when they will come into affect, the consultation is set to close on 23 December 2011.

As the rumors had pre-empted, the DECC has decided to cut the feed-in tariff payments that are paid for solar power by more than 50%. This is likely to cause a mixture of feelings from those within the industry and the homeowners and business owners that had solar panels on the 'to do list' as it were. The proposed changes include a new tariff for systems up to 4kW in size of 21p/kWh – the current rate is 43.3p/kWh, this is more than a 50% reduction. Changes will also be made to systems between 4kW and 250kW.

The press had been reporting rumors of the changes for a number of weeks following Greg Barker, Climate Change and Energy Minister, explaining how the solar industry in the UK is growing faster than the budgets can withstand. Greg Barker was quoted saying, "My priority is to put the solar industry on a firm footing so that it can remain a successful and prosperous part of the green economy, and so that it doesn't fall victim to boom and bust. The plummeting costs of solar means we've got no option but to act so that we stay within budget and not threaten the whole viability of the FITs scheme. Although I fully realise that adjusting to the new lower tariffs will be a big challenge for many firms, it won't come as a surprise to many in the solar industry who've themselves acknowledged the big fall in costs and the big increase in their rate of return over the past year."

It was outlined by the minister that the changes will not go ahead in December as the press had reported, instead any new solar PV installations with a FITs eligibility date of on or after the 12th December 2011 will receive the current tariff until the 31st March 2012 and move over to the new rates as of the 1st April 2012.

The DECC have reiterated that anyone who currently receives feed-in tariff payments will remain unchanged, any installations with an eligibility date of before the 12th December will receive the current higher rates for 25 years as agreed. The eligibility date is the date that the system has its request for accreditation received by a FIT licensee for systems up to 50kW or Ofgem for more than 50kW. The DECC has stated that they believe the new rates offer a rate of return between 4.5% to 5% index linked and still completely tax free for household installations.

The proposed changes also include:

• From 1st April 2012 there will be a new energy efficiency requirement, which a property must reach to be eligible for the feed-in tariff. This is likely to include needing to reach an Energy Performance Certificate level of C or by taking advantage of all measures available under the Green Deal finance scheme. This is not a definite requirement; this will be decided on following the consultation period. If this goes ahead there will be a 12-month period of transition for any installations with eligibility dates between 1st April 2012 and 31st March 2013, the home/business owner will have 12 months from their eligibility date to comply with the new energy efficiency requirement.
• There are also inclusions for new multi-installation rates for aggregated solar PV schemes. This means for any individuals or organisations that receive multiple FITs payments from more than one PV installation located on different sites they will only receive 80% of the standard tariff rate per individual installation. This is for systems that have an eligibility date of on or after 1st April 2012.
• There is also a call for a definition of a 'community scheme' and to look at how these types of schemes could benefit the communities fully by utilising the FIT scheme.

So quite a dramatic change to the current system, but all measures that many in the industry feel can be combatted by a reduction in the material and installation costs. If this can happen then the interest is likely to continue from the public and businesses, as they will still be able to see a healthy return on investment over time.