Cancellation of the Export Tariff – A controversial viewpoint??
So, the UK Government has announced that they are going to revoke the export payment from March 2019.
You can find the Government’s response here https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/765647/FIT_Closure_Government_Response.pdf or a short article from the Solar Power Portal here https://www.solarpowerportal.co.uk/news/government_confirms_export_tariff_cull.
The industry is up in arms, which seems to be the simple response to a more complex scenario.
FIT has Led to Benefits
The Feed In tariff (FIT) in the UK has done what it was meant to do, which is to reduce costs dramatically by stimulating investment. Costs for new solar PV have come down by 75% plus over the last 5 years.
This price reduction has gone hand in hand with a huge investment in renewables - particularly wind & solar PV - over the past 5-8 years.
As a result of this investment, we have got to a point where we cannot just keep adding renewables to the Grid with no regard to when they export power back to the Grid.
The Grid was not built for distributed generation – it was built for centralised generation plants e.g. coal, nuclear.
We can’t keep exporting when we want to
As a result, the continued deployment of renewables is requiring the dynamic management of exported power more and more. These Grid constraints (also known as export limits) ensure exported power is limited at specified months of the year / times of the day to ensure the Grid’s physical limits are not broken.
Our GridGEM export limitation solution (see https://www.argandsolutions.com/connect-and-control-renewables-energy-storage/) is a product to manage this problem and is approved by al the DNOs in the UK.
These export limits are effectively saying that export at the times / dates specified by the DNOs is worth zero (maybe it might have a negative value if you look at the flexibility markets, from a network management perspective.)
And so, in a world where we need more and more renewables to meet our low carbon targets, we will start to see more and more Grid constraints imposed on projects. In essence, we will more towards a place where export at peak generation times or times of Grid stress will be (and is) worthless to the network. As such, the Grid will increasingly need anyone generating energy to use it as opposed to exporting it.
The Government moving export values to zero removes the incentive to export whenever you want and will start to drive behaviour towards using it to reduce demand at more economically beneficial times.
Driving storage
So, although the loss of the export tariff is bad for solar PV & wind development on its own, it is the right thing to do given the state of the wider network(s) and what they need to function properly.
The news can be seen as a positive move for energy storage development as it will encourage the movement of energy from low (zero) value export periods to higher value periods where you are displacing expensive energy costs.
This has to be a good thing.
If I look at my energy bills at home (£0.18p / kWh with Good Energy) it is clearly better for me to attempt to move energy with zero value to high value. It will / should incentivise me (if I have solar) to flatten my demand curve.
In the light of this changing tariff landscape, the key is to get the investment strategy right and to make the investment case succinctly to enable people / businesses to make decisions easily. We need to get investment moving if we’re to hit our climate targets.
Developing a subsidy free business case
This is why we’ve developed GridMAP (https://gridmap.argandsolutions.com).
It is a tool that quickly identifies the optimum investment for anyone trying to develop / sell renewables & / or storage.
So, in conclusion, although it is easier to get an export tariff and not think about the network consequences, I think we’ll be better off without it. A world without export tariffs will drive us to use our resources more smartly and get us looking at energy storage more widely. And if we can develop a business case that is export / subsidy free to get us all to the low carbon future we need then that has to be a good thing and our ultimate goal as an industry.
Thanks for your attention.
Fraser Durham
Commercial Director