FAR FROM FIT AS A FIDDLE: Savage solar price cut helps consumers but threatens to kill off the UK industry altogether

Will the sun set on the UK's solar PV industry due to Government price cuts? Photo by Gail Shameza Rajgor

More households and small businesses will be able to install solar PV systems to generate electricity for their homes and businesses thanks to new prices, or feed-in tariffs (FITs), announced by Government.

That’s assuming there remains a thriving industry in the UK to provide it – the UK Solar Trade Association (STA) and others warn the new price policy will kill off the British industry entirely because it cuts back support significantly for larger scale solar PV projects (those projects bigger than 50 kW).

FITs for large projects have been slashed by 40-70%, while the prices set for small projects have remained unchanged. Government has got it “seriously wrong”, says STA Chairman, Howard Johns.

The revised policy kicks in from August and follows a fast track review of the Government’s support programme for large-scale solar PV (and for anaerobic digestion), announced in February. The FIT subsidy scheme had only been operating since April 2010 and had been an overwhelming success. And therein lies the crunch.

While 92% of the 27,000 FIT installations registered by March had been for domestic-scale applications, the remaining 8% was for massive large-scale industrial projects. These larger projects effectively ate up the bulk of the subsidy funding available.

“One large-scale solar installation could take the same amount of money from the FIT scheme as over a thousand households,” notes Richard Lloyd, Executive Director at consumer rights organization, Which?. The organization has been lobbying hard for a fairer deal on green energy for consumers.

“Feed-in tariffs are there to encourage households and communities to generate their own electricity, but the scheme was in danger of becoming a vehicle for consumers to subsidise green energy for big businesses,” says Lloyd.

While the STA and other industry organisations like the Renewable Energy Association (REA) warned the policy revision would drive big investors away and leave UK solar “strangled at birth”, Government listened to campaigners like Which? instead. “We’re pleased to see the Government reducing the tariffs for such [large] projects…and we’re glad the Government recognises that as consumers pay for the FIT scheme through their energy bills, consumers should get the benefits,” says Lloyd.

Government estimates that the impact of FIT on a domestic electricity bill will be £8.50 a year over the period 2011-2030. Meantime, the energy regulator Ofgem estimates all UK environmental levies (Carbon Emissions Reduction Target scheme, Community Energy Saving Programme, Renewables Obligation, EU Energy Trading Scheme and the FIT), cost every domestic customer £84 a year (2009 estimate).

“The new tariffs will ensure a sustained growth path for the solar industry while protecting the money for householders, small businesses and communities,” says Energy and Climate Change Minister Greg Barker. Without urgent action, the FIT scheme would have been overwhelmed within a very short period of time, says the Department of Energy and Climate Change (DECC).

Every 5 MW large-scale solar scheme would incur a cost of approximately £1.3 million a year. This means that 20 such schemes would incur an annual cost of around £26 million, money that could support PV installations for over 25,000 households, says DECC.

“To be fair to the electricity consumer, Government must be prepared to intervene to reduce tariffs when justified, and the industry must accept this needs to happen,” says REA’s Chief Executive Gaynor Hartnell. But like the STA, she believes the Government has got it wrong on two fronts.

Yes, prices should be cut “on account of panel costs falling significantly”, a phenomenon expected to continue so that PV should need no subsidy before the end of the decade, Hartnell says. But “the logical approach would have been a 25% price cut across the board, irrespective of size”.

“Government should increase the size of the Feed-in Tariff budget [at the same time] and encourage a healthy PV industry to establish in the UK,” she adds. Instead, larger-scale PV has “been demonised, when it is the most cost-effective approach”.

The STA adds that it is not just big business that will perhaps be unable to afford solar PV anymore. Plans for installations at leisure centres, supermarkets and schools are now in jeopardy and applications will be “severely limited”.

Plus plans for major manufacturing investments could be scrapped because “many investors and project developers are walking away badly burned”, says Johns.  The alternative funding option for larger projects – available under the Renewables Obligation – is no good either because the support under this is also too low to prevent a collapse of the solar PV industry, the STA says.

“Crushing solar makes zero economic sense for UK plcs because it will lose us major manufacturing opportunities, jobs and global competitiveness,” Johns says. “It also risks locking us in to more expensive energy options in future.”

Johns has called on the Prime Minister, David Cameron, to “intervene to prevent this calamity”. Otherwise, the UK will lose out to countries like China, Japan and Germany, which are promoting solar aggressively. It remains to be seen exactly what, if anything, Mr. Cameron will do.

New Rates For Large-Scale Solar PV
Project Size

Total Installed Capacity (TIC)
Feed-In Tariff

As of 1st August 2011
>50 kW – ≤ 150 kW 19.0p/ kWh
>150 kW – ≤ 250 kW 15.0p/ kWh
250 kW – 5 MW TIC and stand-alone installations 8.5p/ kWh

Source: DECC

New prices for anaerobic digestion (AD) have also been announced, as part of the Government review. They’ve been raised slightly for projects up to 500 kW and will stay the same for bigger plants. The revision will have little effect in increasing the uptake of AD, suggests the industry however.

Click here to see more published articles on renewables, climate change policy, and green building by Gail Rajgor. To get the very latest UK and global news on renewable energy or find out more about new policy and market developments and applications, check out Renewable Energy Focus, one of the print and online publications I regularly write for.

About Gail Shameza Rajgor

Gail Rajgor is a business journalist and editor specialising in global energy and environment issues. Her current clients include Energy Demand (Editor) and Renewable Energy Focus (Editorial Consultant and Renewables Analyst). With a career spanning the last 20 years, previous positions include Managing Editor of Renewable Energy Focus and Senior Editor of Windpower Monthly, while her freelance clients have included Renews, PV Insider, Wind Energy Update, and Tidal Today alongside general business magazines including Risk Specialist and Director. She has also produced her own magazine, Sustainable Energy Developments, in the past. Today, in addition to her freelance editorial roles, Gail is also a professional photographer running her own company Rage With A Smile Photography.
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