Suppliers were invoiced for Q118 (January – March) Feed-in Tariff levelisation on 25 April, confirming total scheme costs for the quarter at just under £290mn. This consisted of £281.7mn in generation payments, £7.7mn in deemed export payments and £0.3mn in qualifying costs that help cover the supplier cost to administer the scheme. With demand eligible to pay the FiT levy confirmed at 77.4TWh, outturn FiT costs charged to suppliers (and therefore consumers) are £3.74/MWh.
This price sat between Cornwall Insight’s Central and Low forecast scenarios for Q118 of £3.92/MWh and £3.53/MWh respectively. Slightly lower costs were primarily due to higher outturn electricity demand, which acts to push costs down on a £/MWh basis, as well as lower than normal load factors for solar PV, both of which were trends we identified as part of our forecasting service.
This blog explores two of the FiT trends observed over the past quarter and has a look ahead at what to expect for Q218 (April – June) before the publication of our next quarterly forecast.
Q1 demand reverses trends
FiT levelisation confirmed total GB electricity demand (as at the meter) for Q118 at 79.3TWh, ~1.5% above demand in Q117 and reversing previous trends of falling demand. The predominant driver for this increase in demand was cold weather during late February and early March brought on by the storm labelled the Beast from the East. This led to a greater demand charging base for the quarter and reduced FiT costs to suppliers and therefore consumers on a £/MWh basis.
Accounting for levy exempt power imports – meaning overseas electricity that suppliers can prove via Guarantees of Origins and which is exempt from paying FiT costs – demand eligible to pay the FiT levy in Q118 was 77.4TWh.
Falling demand trends in recent years have acted to increase the share that subsidy costs represent on consumer bills, with the overall payments made to generators rising but with the share of the costs being spread over a smaller demand charging base – it’s effectively the same pie being shared among fewer people. This shows that consuming less electricity doesn’t necessarily reduce your exposure to current policy costs.
Solar load factors depressed costs
Indicative average solar load factors for Q118 were 5.97%, according to National Grid data, down 0.06pp on the same period of the previous year (6.03%); the lowest solar load factors for Q1 since 2013. Lower solar load factors consequently act as a downward influence on FiT costs.
Although solar load factors have comparatively less impact during winter months on FiT costs, they remain an important driver of costs year-round. Cornwall Insight tracks solar and wind load factors as part of its FiT forecasting services to help identify cost trends for levelisation.
A look ahead at Q218
As of 31 March, a total of 5,965MW of capacity across 819,534 installations was accredited to the FiT scheme. Despite rapid growth under the scheme until 2016, only 56MW of capacity accredited in Q118 across 5,820 installations. Slower growth is due to deployment caps and lower tariff rates introduced in 2016, and has equated to a slower rise in FiT costs than we have previously experienced.
But we still expect costs for Q218 to rise by more than 10% on the same quarter last year (Q117). Why? Well greater capacity levels are still driving costs up, but falling demand trends have perhaps been a larger driver behind rising FiT costs on a £/MWh basis recently.
Cornwall Insight will continue to track capacity, load factors and demand for the next FiT quarter. To find out more about upcoming five-year FiT forecast, published quarterly, please contact t.dixon@cornwall-insight.com or s.leaver@cornwall-insight.com.