News: November 2011

The government’s plans to slash the Feed-In Tariff could stop the growth of the burgeoning solar market in its tracks, the UK-GBC has warned, putting many planned solar installations at risk and denting confidence in the government’s commitment to low carbon growth.

Climate change and energy minister Greg Barker has announced that reduced subsidies for domestic solar electricity production have been proposed as part of an urgent effort to keep the FITs scheme budget under control and reflect the plummeting costs of the technology.

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.

“My priority is to put the solar industry on a firm footing so that it can remain a successful and prosperous part of the green economy, and so that it doesn’t fall victim to boom and bust," said Barker.

“The plummeting costs of solar mean we’ve got no option but to act so that we stay within budget and not threaten the whole viability of the FITs scheme.”

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 on or before 12 December will receive the current rates for 25 years.

In response to the announcement, John Alker, director of policy and communications at the UK Green Building Council, commented: “While the Feed-In Tariffs are starting to have the desired effect and reducing the cost of installing solar panels, the planned cuts to the FIT are a blow to the solar market.

“The depth of the proposed cut coupled with the speed with which this change will be rolled out means that many proposed solar schemes will be scrapped before they have even started. The success of the FITs scheme so far shows the potential for the UK to create green energy and green jobs – both of which could be jeopardised by today’s decision.”

There was further mixed reaction to the news. Andrew Holmes, managing director of the Climate Energy Group said: “It’s disappointing that Feed-in-Tariff payments have been reduced, as for many these payments are the incentive that’s needed to invest in renewable technologies.

“Despite these changes, homeowners should not ignore the many benefits that solar PV offers, including tax-free income from FiT payments, albeit now reduced, and the generation of free electricity, both of which will help to reduce fuel bills considerably.

“And, as some experts estimate that household bills could rise by as much as £300 a year over the next eight years if we continue to rely on traditional fuels, alternative energy, such as solar, is now more important than ever.”

Gary Summers, CEO of the Alumet Group (incorporating EOS Energy), urged consumers not to panic. The current Midlands Entrepreneur of the Year said: “It's no big surprise that the tariffs have been reduced, we had been preparing for the new rates to be in place from next April, however we now have just 6 weeks to put our plans in place instead of 6 months.”

Summers added: "I believe that the government has acted correctly in cutting the tariff to a sustainable level, it’s just the timescale that has taken the industry by surprise.”

Even with the new rates it is still a good time to invest in solar PV, believes Summers, estimating the pay back period is still only 10 years, which could come down further with rising electricity prices. He emphasised that consumers needed to keep sight of the bigger agenda of fuel poverty and carbon reduction.

SIG Energy Management’s managing director Neil Donald hoped the proposed 55% cut to Feed in Tariff, while drastic, would encourage homeowners to adopt a ‘whole house’ approach to energy.

“The financial incentives offered for solar PV installations through the Feed-in Tariff have encouraged homeowners and providers to forgo other energy-efficiency measures in favour of the more financially attractive option of PV,” commented Donald.

“Although the cuts proposed have the potential to damage the growth of the PV industry, at least in the short term, they will hopefully encourage homeowners and the industry in general to take a more holistic view of carbon reduction.”

More information on Feed-In Tariffs can be found on the DECC website:
http://www.decc.gov.uk/en/content/cms/meeting_energy/renewable_ener/feedin_tariff/feedin_tariff.aspx