Cautious feed-in-tariffs for promoting PV generation in the UK residential sector Isaac Dyner, Monica Castaneda, Julian Aristizabal, Sebastian Zapata, Judith Cherni Universidad Jorge Tadeo Lozano Imperial College London September 2018

Background Environmental policy in electricity Environmental and electricity goals PV costs are declining FIT is being reduced

Source: Department for Business Energy & Industrial Strategy (2017b) Fig. 1. Cumulative installation of FIT projects in UK, categorised by incentives. Source: Department for Business Energy & Industrial Strategy (2017b) Tariffs (p/kWh) Tariff January 2016 (<4kW) Tariff February to March 2016 (<10kW) Percental change from January to February 2016 (%) Higher rate 12.03 4.39 -64% Middle rate 10.83 3.95 Lower rate 5.73 0.87 (0.87-5.73)/5.73*100%= -85% Table 1. FIT tariff rates. Source: own elaboration with data from Ofgem (2016a).  

Research questions What is the impact of FIT policy on the adoption of PV systems with and without battery support? What is the impact of the reduction of FIT rates on utility and solar-company revenues? How the adoption of new business models may compensate the traditional utility for the loss of electricity sales due to the PV diffusion in the residential sector?

FIT B1 Customers’ PV adoption Electricity consumption from grid R3 + B1 Customers’ PV adoption FIT Electricity consumption from grid + R3 Traditional Utility business Vs DG business   + Battery adoption -

Validation Fig. 2. Cumulative installed capacity (≤4kW) vs. simulation results of cumulative installed capacity. Source: authors and Department for Business Energy & Industrial Strategy (2017c)

Results (1) Fig. 3. PV adoption (includes PV systems with and without batteries) under distinct levels of FIT rates. Fig. 4. PV households with batteries under distinct levels of FIT rates. Fig. 5. Monthly electricity utility sales under distinct levels of FIT rates. Fig. 6. Benefits of solar companies’ distinct levels of FIT rates

Conclusions The penetration of PVs is slowing down due to FIT reduction - as already experience elsewhere (Karneyeva & Wüstenhagen, 2017) - though PV is reaching grid parity. Reductions of FIT rates promote the adoption of batteries. This may jeopardise the achievement of energy targets. Solar company revenues may benefit from FIT reductions for sales of PV-battery systems, under grid parity conditions New business models under low FIT rates: (i) solar companies selling PV-battery systems and (ii) electric vehicles.

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