Thursday, March 1, 2012

Cuts to UK Solar FiTs Could Prove Deadly

On October 31st 2011, Greg Barker, Minister of State at DECC, announced a controversial proposal to halve the feed-in tariff (FiT) rates for solar installations in each band up to 50kW, with smaller cuts in the bands from 50kW to 250kW. These cuts to FiTs are jeopardizing the UK solar industry. A FiT is a policy mechanism designed to accelerate investment in renewable energy technologies. It achieves this by offering long-term contracts to renewable energy producers, typically based on the cost of generation of each technology. Cuts to homeowners solar power could prove deadly to the fledgling UK industry in addition to threatening tens of thousands of jobs.

According to an October 2011 press release, Climate Change and Energy Minister Greg Barker said "Urgent action is needed to put the solar industry on a steadier, clearer and sustainable growth path, avoid boom and bust and protect the wider Feed-in Tariff scheme (FITs),"

Reduced subsidies for domestic solar electricity are an effort to keep the budget under control and reflect the plummeting costs of the technology (the cost of an average domestic PV installation has fallen by at least 30% since the start of the scheme – from around £13,000 in April 2010 to £9,000 now).

The proposals, subject to consultation, would introduce a new tariff for schemes up to 4kW in size of 21p/kWh – down from the current 43.3p/kWh. Reduced rates are also proposed for schemes between 4kW and 250kW, to ensure those schemes receive a consistent rate of return.

According to a recent report, global accountancy firm Ernst and Young indicate that the UK solar sector put in a strong performance in 2011. Much of the 762MW capacity was installed to take advantage of the current feed-in tariff (FiT) programme before subsidies fall.

The surge in households installing solar PV has threatened to break the budget. There were over 16,000 new solar PV installations in September 2011 alone – nearly double the number installed in June. And nearly three times as much solar PV as projected has so far been installed with over 100,000 separate installations with over 400MW of capacity.

The new proposed tariffs would apply to all new solar PV installations with an eligibility date on or after 12 December 2011. Such installations would receive the current tariff before moving to the lower tariffs on 1 April 2012. Consumers who already receive FITs will see their existing payments unchanged, and those with an eligibility date before 12 December will receive the current rates for 25 years.

The tariffs are broadly comparable to those offered in Germany, which has also recently reduced its tariffs.

The businesses accepted that the falling cost of solar photovoltaic panels should be reflected in falling subsidies, but the industry said cutting support by over 50% in the next six weeks would devastate the number of installations on homes, schools and small businesses.

The proposed solar cuts – the third such change in less than a year – undermined confidence across the green energy industry.

"Such deep cuts would kill the UK solar industry stone dead," said Howard Johns, of the solar industry's Cut Don't Kill campaign and also the managing director of Southern Solar. "Wiping out 4,000 companies and 25,000 jobs by cutting too deeply would be an appalling waste of economic potential. Our message to [the] government is cut us, but don't kill us. We want a sustainable cut that would allow us to survive and deliver the green growth that David Cameron said he was committed to."

Luciana Berger MP, the shadow climate change minister, said: "we are already hearing from solar companies about cancelled orders and redundancies. This is yet another sign that this Tory-led government has turned its back on the green growth agenda. The real choice is not between being green or economic growth but between acting and not acting. If we act to tackle climate change we can create thousands of jobs and get our economy moving again."

© 2012, Richard Matthews. All rights reserved.

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