The aim behind these cuts is to move renewable within the UK to become entirely subsidy free and therefore fully able to compete with fossil and nuclear fuelled energy production.

The Feed in Tariff (FiT) for wind has been hit harder than solar, with all cuts coming into effect on 15 January 2016. Luckily those already receiving FiTs are unaffected by the changes. There was a pause in the FiT scheme from 15 January to 7 February inclusive during which no new installations were FiT accredited.

Under the new guidelines, a typical 50kW PV system that had received 10.17p/kWhr is now reduced to 4.59p/kWhr. Despite these reductions, returns of approximately 5.5% in the north of England and 7.7% in the south should still be possible. The FiTs for wind projects larger than 1.5MW have been removed entirely and with planning permission difficult to obtain, often coupled with heavily restricted grid capacities and high connection costs, there are few new wind projects being built.

With the lower tariffs now in place, our advice is to tailor generation to match demand to achieve the best paybacks. The closer one can get to using 100% of the energy generated on site the more impressive the IRR becomes.

Quarterly expenditure caps have been set to limit the cost of the FiT scheme to £100 million per year by the end of 2018/2019. Once the caps are reached no further funding will be available. In the run up to the complete removal of the support for renewables, there will be mandatory degression in each quarter for all FiT eligible technologies. This will be 4-5% for the 50-250kW band.

Funding for the RHI has been confirmed until the end of March 2021. There are some changes to tariffs, for example a 10% reduction to the small commercial biomass one. This year of extra funding means there is an opportunity to install renewable heating this year. IRRs for biomass are still attractive, with figures in the low teens for installations where there is the potential to sell the heat on to tenants occupying land owned by an estate/trust. Here, it is possible to benefit from the non-domestic RHI by providing heat and or hot water to tenants at a rate lower than they would pay for oil. With oil prices set to rise, it makes this more attractive than it currently is.

In the first instance, before looking at generation opportunities, it is important to become more efficient with the current energy demand; minimising the amounts that are required by reducing wastage and potentially installing more efficient technologies, LED lighting being a shining example. We recommend following a Lean, Mean and then Green strategy when looking at your energy demands. Only once wastage is reduced and efficiency is improved to the maximum it can be for the property, should generation options be considered.