This edition of this biennial report has been extended from covering just the renewables microgeneration sector and renewable heat generation, to covering small and medium size renewable electricity and heat generation. The upper limits are in accordance with the parameters of the Feed In Tariff (FIT) and Renewable Heat Incentive (RHI) subsidy programmes, which are for installed capacities of 5 MW and 200 kWth respectively. While the FIT incentive has been almost the sole demand driver for nearly all sub 5 MW solar PV schemes, other small-medium size renewable energy projects have been developed either under the Renewables Obligation (RO) or without government support. While the RO was closed off to new sub 5 MW developments after the launch of FIT, it still continued to support new developments in Northern Ireland, where the FIT is not available.
Market values in the small and medium renewable electricity and renewable heat market, at estimated installed values, saw a peak in 2011, reflecting the highly advantageous subsidies at that time. Since then, the market has fluctuated but remained at a level above £2bn per annum. The main driver has been solar photovoltaics (PV), which accounts for over 80% of all renewable electricity and 98% of all installations under the FIT. While private households have been the main area of application, since 2012 this market has declined while demand from the commercial sector has grown. All other small-medium size renewable energy technologies have shown growth since the introduction of FIT in 2010, albeit at much more modest rates than the solar PV market. The RHI subsidy programme has also provided a significant boost to the number of renewable heat technologies, although wood-fuelled boilers are by far the most widely installed type in the non-domestic sector. In the domestic sector, the main area of demand has been for heat pumps and, to a lesser extent, wood-fuelled boilers.
The forecasts through to 2020 illustrate the expectation that the market is likely to face significant challenges, in the form of reducing Government support as well as lower levels of gas and electricity prices. This is likely to mean that any growth in the market will be at an individual product level, rather than an overall market level, unless the Government provides a greater level of support. While the prospects for solar PV and windpower do not look promising, other sector are expected to fare better, in particular non-water industry anaerobic digestion (AD). One of the least mature renewable technologies, the impact of digression has been relatively small because new capacity coming on-stream each quarter has not been sufficiently high to trigger large drops in tariff rates. One key factor expected to drive the market is the recent availability of RHI tariffs for biomethane-to-grid injection. With negligible capacity prior to 2014, it increased by over 400% in 2014 and is forecast to grow fourfold in 2016.
Unlike solar PV and windpower FIT tariffs, the RHI programme appears to be relatively safe for now, with £1.5bn a year of support pledged by the Government in the Autumn 2015 review. How this is apportioned across the eligible technologies is as yet unknown but as well as AD biomethane, heat pumps and commercial wood-fuelled boilers are likely to benefit from increased demand. In spite of this, the whole renewables industry is now faced with a raft of problems that could curtail growth, including the proposed implementation of EU requirements to raise VAT levels to 20%, the removal of the Climate Change Levy Exemption Certificates (LECs) for all renewable power generation, whether new or existing schemes, the withdrawal of the Allowable Solutions scheme and the abandonment of the Zero Carbon Homes targets, and the removal of tax breaks for community energy projects.