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 January 10, 2012
DECC quietly delivers £197m boost to feed-in tariff budget

 The government has quietly raised the feed-in tariff spending cap by nearly £200m in a bid to prevent the subsidy scheme exceeding its budget, after re-allocating funds previously earmarked for the Renewables Obligation (RO) incentive scheme.

The Department of Energy and Climate Change (DECC) published a document last month following a parliamentary hearing into solar feed-in tariffs, which detailed changes to the Control Framework for DECC levy-funded spending that covers three energy policies where the Treasury has imposed spending caps intended to help avoid steep rises in energy bills.

The document reveals that DECC shifted £197m previously available for the RO scheme into the budget for feed-in tariffs, increasing the total budget for the feed-in tariff scheme from £867m to £1,064m.

Climate change minister Greg Barker told a parliamentary inquiry into solar power feed-in tariffs on 1 December that his department had adjusted the feed-in tariff "spending envelope" to subsidise small-scale renewables using money from the RO instead of FIT budget.

DECC then published questions and answers on the Control Framework for DECC levy-funded spending seven days later, for the first time revealing the scale of those adjustments.

The government has consistently maintained there is an urgent need to slash solar feed-in tariffs, in order to prevent the scheme exceeding the spending cap set by the Treasury for the whole spending period.

Barker last week revealed to BusinessGreen that the surge in new solar panel installations during the second half of last year meant the scheme had already exceeded its spending cap for this financial year, although he acknowledged there was some flexibility in the budget on a year-by-year basis as long as the overall spending cap for the budget period remained intact.

A spokeswoman for DECC maintained the changes to the Control Framework and the feed-in tariff spending were merely "technical" because the £197m was money that had previously been set aside for small-scale projects with less than 5MW, of capacity that could opt for the RO or feed-in tariff incentive.

"This is purely a technical adjustment and makes no difference to the actual amount of subsidy available for these levies," she told BusinessGreen. "It merely clarifies the amount that was always available for these schemes. Nor does it change the department's concerns about the risks to the FIT budget of continuing with the current tariffs for solar PV."

However, solar industry insiders told BusinessGreen that the change undermined the government's case for rushing through the proposed cuts, on the grounds that there was greater flexibility in the scheme's budget than had been previously assumed.

"There was rumour of this, so it is nice to see some numbers," said Howard Johns, a leading feed-in tariff campaigner and managing director of Southern Solar. "It makes a bit of a mockery of the 'protect the budget at all costs' mantra that ministers have been reciting."

Martyn Williams, who worked on the Cut Don't Kill Campaign to save solar feed-in tariffs, argued that in not publicising the increase in the spending cap the government had sought to strengthen its argument that urgent rather than phased cuts to feed-in tariff incentives were required. "They would be wanting to keep this quiet because it undermines Plan A," he said.

A spokeswoman from Friends of the Earth welcomed the increase to the scheme's spending cap; however, she said it was regretful that the government had not made similar changes prior to launching its six-week consultation to cut the solar tariff by more than half, causing projects to be scrapped and redundancies at some companies.

She also suggested that the government decided to raise the cap in order to retain some credibility about the way it has managed the scheme.

"If the scheme had run out of money before 12 December, then it would show that the government should have listened to industry and introduced a phased degression of the tariff in line with the falling cost of technology earlier in the year," she said.

The government will this Friday find out if it can appeal against a High Court ruling, which branded its plans to rush through cuts to solar feed-in tariffs as unlawful.