RHI and the Solar Thermal Industry

1. RHI and the Solar Thermal Industry James Higgins, Senior Policy Consultant JDS Associates

2. Agenda: • Evidence • Case for the prosecution • A solar industry defence

3. Spending Review Conclusions • Substantial funds available (£850m to 2014/15) • Funding mechanism switched to general taxation • DECC are committed to finding savings of • 5/10/15/20 per cent from 2011-12 to 2014-15 • Savings expected to be £105 million per annum by 2014-15

4. Agenda: • Evidence • Case for the prosecution • A solar industry defence

5. Exhibit A: NERA Modelling UK Renewable Heat Supply Curve – NERA Economic Consulting

6. Exhibit A: NERA Modelling Design of the RHI – NERA Economic Consulting

7. Exhibit A: NERA Modelling UK Renewable Heat Supply Curve – NERA Economic Consulting

8. Exhibit B:

9. Exhibit B: RHI Consultation Consultation document stated that solar thermal technologies are: • relatively well known • present low installation challenges • do not require any compensation for non-financial barriers • must be limited in order to control overall scheme costs

10. Solar thermal -ve +ve

11. Agenda: • Evidence • Case for the prosecution • A solar industry defence

12. Energy Users: ‘’We must avoid a situation where large volumes of the most expensive technologies are being widely deployed’’

13. Think Tanks ‘’RHI will be implemented at a reduced level compared to that proposed by the previous Government, eliminating poorest value for money subsidies’’

14. Media:

15. The Spending Review • Transferring RHI to general taxation may reduce the opposition to microgen • But DECC must find cost savings, and has promised to improve FiTs and RHI by: • “prioritising the most cost effective technologies”

16. Political realities • DECC have confirmed solar is included, but.... • Industry may have to accept cost-concerns cannot be overcome • Some form of cost-control mechanism is required Strong industry proposal could be crucial

17. Agenda: • Evidence • Case for the prosecution • A solar industry defence

18. A solar industry defence

19. A solar industry defence

20. Market Assumptions • Mature market? • 100,000 installs = 0.4% of UK housing stock • 20,000 units per annum = 1.25% of UK boiler market • RSL and ALMOs driving growth prior to 2010 • Germany installed 2.1million m2 in 2008 • Simple installation? • Combi market growth challenge • Not just an ‘on-roof’ solution

21. Carbon and Renewable Analysis • Completely renewable with no fossil fuel input required. • Less likely perform sub-optimal in use. • Immature technologies subject to much less rigorous assessment of cost-effectiveness.

22. New ideas • Visible, yet un-intrusive microgeneration • Delivering community energy benefits – the ‘’Big Society’’ • Tangible hook for Green Deal.

23. A Solar Industry Defence

24. Allocated pot of funds • Positives: • certainty for period of support • short-term bonanza • Negatives: • Cliff-edge situation • Consumer confusion (see LCBP) • Long-term uncertainty

25. Further tariff reductions • Positives: • Remain in the RHI scheme • Future opportunity to lobby up tariff levels • Negatives: • Uncompetitive versus alternative RHI and FiT options • Scale economies will not be achieved • Race to bottom on cost

26. Volume support with early review: • Positives: • Competitive tariff level • Early review reduces cliff-edge and uncertainty Guaranteed support for X installations 0 40% 100% Review kicks in for 100% +1 New Tariff Level

27. Exhibit A: NERA Modelling Design of the RHI – NERA Economic Consulting

28. What might X look like? • 12% of £420 million (2014-15 projected cost) = £50.4 million • £50.4m/£350 = 144,000 installations

29. A Solar Industry Defence

30. Execute arguments • Develop detailed arguments • Industry consensus • Submitted to DECC policy team • Targeting of key influencers:

31. Thank You James Higgins Senior Consultant, JDS Associates James.higgins@jdsassociates.com