Solar cuts setback
Double blow won’t stop Government solar cuts, but no need for industry panic
The Government’s cuts to feed-in-tariff payments to solar energy received two blows this week, first in the form of a High Court decision deeming the cuts “legally flawed”, and then in Parliament from a highly-critical select committee report. However, this is only likely to delay cuts to the solar feed-in-tariff.
Friends of the Earth, along with solar energy companies Solarcentury and HomeSun, this week won their legal challenge against the Government’s plan to cut feed-in-tariff payments to solar schemes started after 12 December 2011 from 43.3p to 21p paid per kWh of energy generated. They cited in particular the Government’s decision to backdate the change in the tariff to 11 days before the consultation ended.
The High Court ruled that implementing the cuts retroactively to the middle of the consultation period would be unlawful.
Andy Atkins, Friends of the Earth's Executive Director, said, “These botched and illegal plans have cast a huge shadow over the solar industry, jeopardising thousands of jobs. We hope this ruling will prevent ministers rushing through damaging changes to clean energy subsidies - giving solar firms a much-needed confidence boost.”
The Department of Energy and Climate Change has confirmed it will now seek an urgent appeal hearing, but in any case this is likely only to result in a temporary respite: the Government will simply delay the implementation and re-consult.
Climate Change Minister Greg Barker said: “We disagree with the Court’s decision. We will be seeking an appeal and hope to secure a hearing as soon as possible. Regardless of today’s outcome, the current high tariffs for solar PV are not sustainable and changes need to be made in order to protect the budget which is funded by consumers through their energy bills.”
Adding to Environment Secretary Chris Huhne’s woes, a scathing joint report from the House of Commons Climate Change and Environmental Audit committees slammed the Government for mishandling the cuts.
Tim Yeo MP, Chairman of the committee, said: "There is no question that solar subsidies needed to be urgently reduced, but the Government has handled this clumsily. Ministers should have spotted the solar gold rush much earlier. That way subsidy levels could have been reduced in a more orderly way without delivering such a shock to the industry."
The MPs slammed the Government for harming investor confidence in the solar industry. This damage would not have occurred, they concluded, if Ministers and civil servants had recognised the unsustainable rate of the expansion of solar installations at an earlier date, learned from the experience of other EU countries, and planned an orderly and phased review of tariff rates.
Minister Greg Barker blamed the last Labour Government for setting up the FiT scheme badly. The Permanent Secretary of the Department of Energy and Climate Change admitted that they had caved to pressure from the industry calling on them to increase the rates and wait longer before reducing them, rather than learning from the experience of other countries and making sure that the FiT remains affordable, supports the industry, and reflects installation costs.
Even though an eventual reduction in FiT rates remains inevitable, it is undeniable that the Government have badly bungled the implementation.
Don’t Panic.
Headlines about “the sun going down on the solar industry” are more related to the irresistibility of the pun rather than a real existential crisis.
Big developers are still very interested in the solar PV market, despite the tariff cut. John Frankiewicz, divisional CEO at Willmott Dixon Capital Works, one of the UK’s largest developers, said: “While there was disappointment about the plans to reduce the FIT, the technology is becoming cheaper to install and remains an excellent way to provide low cost energy from a renewable source. The savings in the cost of energy are still substantial and while the payback times are longer and investment returns smaller, we will look at how to adjust our business model so that we can continue using PV for sectors like elderly care.”
Germany is hailed as having used feed in tariffs to support an outstanding solar industry, and British policymakers are likely to use this episode to learn from German experience. German payments are flexible, but currently stand between 17.94 and 24.43 ˘ per kWh fed into the grid. After the Government’s proposed changes in the UK, the FiT will be a maximum of 21p per kWh – approximately 24˘. This is down from the current maximum of 43.3p, but not dissimilar to Germany, which has over 17,000MW of solar PV installed, a figure expected to continue growing.
The solar industry itself is realistic about the tariff. As the chairman of Solarcentury explained, they were looking for clarity more than anything else: “The whole point of Feed in Tariffs is to build the market. It’s like seed capital. It’s not a hand-out. The support has to be clear, and it should step down gradually according to predictable rules. That is the way to use this type of market support and build a viable market. DECC already knows this and I hope they now understand that we cannot work in a market which is subject to whimsical and back-dated decisions.”
The Green New Deal Deal represents another opportunity for solar companies, as it will allow homes and businesses to pay for solar energy and heating by offsetting the savings against their energy bills.
And solar equipment is becoming more affordable: the average cost of a domestic PV installation has fallen 30% since April 2010 due to a drop in the wholesale price of crystalline silicon cells and modules, and can be expected to fall further as the technology and industry matures.
