The government forecast that 86MW of solar installations would be complete in the year ending March 2012, but by September 2011 the industry had already installed 316MW. So it looks like they are going to cut FITs for new installations. The amount and date when the cut will take place has not been finalised, but the rumour is that the new FIT rate will be 21p per KW/h and will take effect from the 8th December 2011.
So, what does this mean?
There is likely to be a massive boost to demand for systems that can be installed and commissioned before the 8th of December as people will want to lock into the higher 43.4p / KWh rate.
Medium – Long term
We always knew the government were going to cut the FIT rates, it just looks like they are doing it sooner and further than expected. However, at the same time, the cost of panels has fallen a lot faster than anticipated. A 3.68KW system supplied and installed for £9999 – will generate approx £620 at the new 21p FIT rate, with export income and electricity savings of approx £230, so total income/savings of £850, which is still an 8.5% inflation protected return. Not quite as exciting as the 15% you can currently get, but still better than a lot of other investments.
Energy prices are still set to go up, and as a nation we need to make the switch to renewables. The industry is still predicted to grow massively over the long term, there just might be a few bumps along the way.