Microrenewables grant scheme set for shortfall

The government’s flagship scheme to promote microrenewables has come in for criticism again, after the government confirmed a major plank would close in May. On current rates of take-up, the scheme will close 25% short of budget.

Microrenewables firms have reacted with disappointment after the Department of Energy and Climate Change (DECC) announced it would not extend the life of its flagship grants scheme - in spite of an expected large surplus of funds.

The low-carbon buildings programme (LCBP), which supports the uptake of small scale renewable energy sources, has been dogged by problems since its launch (ENDS Reports 397, p 7  , 387, p 13   and 381, p 14 ). Attention has focused on its stream for households. Some £10.7 million has been allocated to 8,072 households since May 2006. Most of these grants - 59.5% - have been for solar thermal installations. Another 17.5% have been for solar photovoltaic panels.

On current rates of take-up, this stream will still have £1.2 million of its budget unspent when it closes in May 2010. But it is ‘phase II’ of the LCBP that causes concern. This stream offers grants to public sector bodies and charities, worth up to 50% of a project’s cost.

When the phase was launched in December 2006, it was criticised as uncompetitive (ENDS Report 385, p 12 ). The government appointed seven "framework suppliers", three for each technology. This meant a school wishing to install solar PV panels could only buy them from British Gas, the Low Carbon Partnership - a Dulas-led consortium - or Solarcentury.

According to the Renewable Energy Association, this is why take-up has been low. Some projects have not gone ahead because public bodies want to use other products better suited to their needs.

In January, DECC ministers urged charities, schools and hospitals to apply for grants, warning that the programme would close at the end of May 2009. This is in spite of only around half the available funds having been allocated: £24.9 million to 1,330 projects. The average rate of funds committed per month during the second half of 2008 was £2.03 million. So if take-up rates do not increase, phase II will close almost £14 million short of its £48 million budget.

If this is added to the shortfalls from other, already closed, parts of the LCBP, the programme’s entire shortfall could be £21.7 million - or around 25% of its original budget.

Without grant funding, community groups and public bodies will have to rely on support under the Renewables Obligation system. However, obtaining this can be complex. The government has acknowledged this, and is developing feed-in tariffs for electricity and an incentive for heat from microrenewables (ENDS Report 406, p 39 ). But these are not expected to be operating until April 2010.

"We’re keen to avoid a hiatus in funding and it looks like there will be one for nearly a year," said Philip Wolfe, director general of the Renewable Energy Association. "If anything, we need funding to ramp up so that when the feed-in tariffs come in, there will be enough manufacturing and installation capacity to meet demand."

The government’s Renewables Advisory Board has warned that serious shortages in manufacturing and installation capacity for microrenewables could prevent the UK meeting its zero-carbon homes target in 2016 (ENDS Report 395, pp 14-15 ).

Derry Newman, CEO of photovoltaic panel installers Solarcentury said the current state of affairs would create "a prolonged and highly damaging vacuum" for the industry.

Jonah Anthony, policy director of the Micropower Council, a trade association, agreed. However, he said that if phase II is to be extended, it would have to be opened up to all manufacturers. "If you don’t do that, all you’ll be doing is benefiting seven companies." If the government did not favour this option, any shortfall in LCBP funds could be used to train installers and certify products under the Microgeneration Certification Scheme, he said.

When asked why they were not extending the scheme, a DECC spokesman said support was available to microrenewables through the Renewables Obligation. No decision has been taken on what to do with any shortfall from the programme, they added.

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