UK Market Update: Feed-in Tariff Review

2 March 2011

Earlier this month, the United Kingdom Energy Secretary announced a comprehensive review of the Feed-In Tariff (FIT) scheme following growing evidence that large scale solar farms could soak up money intended to help homes, communities and small businesses generate their own electricity.

The comprehensive FIT review will assess all aspects of the scheme including tariff levels, administration and eligibility of technologies, with tariffs remaining unchanged until April 2012 (unless the review reveals a need for greater urgency).  Previously the tariffs were not expected to change until April 2013 at the earliest.  The outcome of the review may be as late as the end of the year but the market expectation in the UK is that information will be released before the parliamentary recess in July. 

While this review is causing some uncertainty, according to Windflow’s UK distributor, VG Energy Limited, “the market anticipates the review will not substantially change the FIT terms as they relate to wind generation”. This market belief is based on the review being accelerated due to the unexpected use of the FIT by large scale solar arrays. The policy targets for new generation from wind turbines are yet to be achieved, and accordingly this element of FIT should remain largely unaffected.

Based on this belief, Windflow and VG Energy are continuing to work together to achieve initial sales.  In anticipation they are progressing the various contractual and financial arrangements needed to confirm orders, while continuing to expand and progress the existing pipeline of prospective orders.  An example of this progress is that the first Windflow 500 turbine was granted planning permission in South Lanarkshire in December.

The CEO of Windflow, Geoff Henderson, reports that “the prospects for orders from the United Kingdom have increased since the date of the Prospectus. However, the enormous interest arising from the FIT has overwhelmed the resources available to councils and power companies, resulting in delays to the processing of planning applications and line surveys.  Combined with the effect of the FIT review, the upshot is that the first UK orders for Windflow 500 Turbines may be delayed until after June 2011.”

The following table provides an update to the information provided in Windflow’s November prospectus.

Windflow Technology has received significant numbers of UK enquiries for its product since before April 2010 when the UK government announced a substantial FIT for wind projects, particularly at the 100 – 500 kW size, which can earn turbine owners $200,000 - $350,000 per year for 20 years.  In early November, the company won the UK Market Entry competition organized by UK Trade and Investment on the basis of its business plan to provide an IEC certified mid-size turbine to this market. 

Windflow’s November 2010 Windflow Prospectus cited prospective demand for wind turbines in the UK arising from the attractive Feed-in Tariffs (FITs) available to the owners of wind turbines installed prior to April 2013.

Christchurch-based Windflow has come through the recent earthquake in good shape and expects minimal disruption to the supply of turbines to complete the Te Rere Hau wind farm.

For further information:

Sheralee MacDonald
Marketing Manager
Windflow Technology
Ph 64 3 365 8960