The planned halving of the solar subsidy from 12 December has been greeted with a mixed reception, following months of boom solar panel makers and installers now risk losing thousands of jobs.
Climate Change and Energy Minister Greg Barker announced the need for intervention to protect the Feed-in Tariff scheme (FiTs) and reduce the tariff rate, subject to consultation, after a recent surge in households installing solar PV has threatened to break the budget.
PwC in their recent analysis of the UK solar photovoltaic (PV) market
found that solar capacity grew six fold in the UK between April 2010 and August 2011, with installations in August 2011 alone being equal to the total solar PV capacity installed in the decade to April 2010.
Commenting on the proposed changes to the FiT, Daniel Guttmann, director of Renewables and Clean Tech at PwC
said: 'A cut was unavoidable given the rate of installations, module price declines and the capped FiT funding envelope. 50 per cent is a deep cut and it will slow the market significantly for a period of time.
'These changes will cause a shake-out in the industry where those that can be more efficient, and have diversified into other technologies or business areas have the potential to grow. Many smaller operators are likely to struggle and go under. This will be a tough time for the industry, but it may be that this makes it more sustainable and competitive in the longer term.'
The research also found that without a change to the current FiT rates the spending envelope (the amount available for FiT payments to 2015) would run out in 2013, long before its intended end in 2015. Other findings suggested that cuts of up to 50 per cent in the current rates may not be enough to maintain the 'spending envelope' of £867m to 2015.
The number of qualified solar PV installers is five times the level it was two years ago. Pending future FiT cuts, installed capacity in the medium term is likely to reach c950 - 1300MW by 2015 which is similar to France in 2010. Overall, the report found that the UK solar PV market is unlikely to achieve the level of growth that many had forecast, however the renewables target of 2.68GW of solar PV installed by 2020 still remains achievable.
SIG Energy Management
’s managing director Neil Donald hopes the proposed cut in the FiT will encourage homeowners to adopt a ‘whole house’ approach to energy. He said: 'The proposed cuts determine that buildings that do not meet energy efficiency requirements will receive a lower rate still. This has clearly been established to actively encourage homeowners, landlords and solution providers to take a more holistic, 'whole house' approach to energy efficiency – something that should be welcomed by the industry.
'The Feed in Tariff has been instrumental in stimulating the growth of the industry, and there is no doubt that these cuts are a bitter blow for those who solely provide PV installation services. What the industry needs to see from the government now is a clear explanation of how, if at all, the Green Deal will serve to plug this funding gap. If this clarification is not provided, then the government is jeopardising future investment in this burgeoning and potentially vital UK industry.'
Kevin Frea from the Solar Co-op
said projects at nine schools and halls across Gloucestershire will not go ahead if the Government proceeds with plans to halve the money investors get back from the 'feed-in tariff'. The only project that will go ahead in his area will be one at the City Works in Barton, where planning permission is already in place, and some investment had already been secured.
Mr Frea told the Gloucestershire Echo
: 'I've just been playing around with the figures and, based on the new rates, it just doesn't work. I've spent the past year putting together projects at places like Tewkesbury School and we were due to launch a share offer at the end of last week, but then we started hearing rumours about this announcement.'
He added: 'The consultation deadline is actually after that December 12 deadline. This is a decision which has already been made, and basically, we're stuffed.'
The National Association of Professional Inspectors and Testers (NAPIT)
has given its support for the government's renewable energy commitment, however it is opposed to the deadline eligibility date of December 12 and has announced plans to lobby the government on behalf of their membership, so as to allay the deadline fears and widespread confusion of installers and their customers who have been cancelling orders.
Although the organisation agrees that energy efficiency needs should be integral to the FiT scheme, it is also concerned about one of the government’s proposed eligibility requirements which demands a band C energy rating. The organisation has said that this requirement 'practically excludes half of the UK housing stock built before 1950 which would otherwise benefit most from these energy efficiency improvements.'
NAPIT’s chief executive officer John Andrews said: 'Reactions have been fiery but I must remind people that within the same structure, Germany still enjoy a 3 to 1 return on their investments. I urge all those affected by this announcement not to panic about what is still a good deal for PV offering attractive returns which remain comparable to those in place for other renewable technologies.'
Graham Russell, Viessmann
's managing director, is supportive of the need for lower FiT. He said: 'It is good to see that the UK will be looking at tariff monitoring and adjustment methods employed in Germany, where there is a longer history of renewable energy incentivisation. Future programmes must also deter the limited amount of mis-selling and insufficiently-trained installers that has been evident in the solar PV story so far, due to the high rewards on offer.'
However, Mr Russell also raised concerns about the energy performance rating: 'Requiring homeowners to bring their properties up to Level C of the Energy Performance Certificate (EPC) in order to qualify for the new FiT is a difficult ask: 88 per cent of UK homes are currently below the Level C standard. This will result in a significant drop in demand for solar PV, and therefore the proportion of UK electricity produced via microgeneration, and this does not help the government achieve its 2020 emissions reduction targets. We anticipate, and hope that, the consultation phase will focus on arguments for a reduction to Level D, a band for which, amusingly, solar PV is cited as one of the improvement suggestions! This will open the availability to 50 percent of UK homes.'
Kevin Collins, managing director of CB Renewables
, said: 'We would urge the Government to rethink its decision and give the solar PV industry a fighting chance – with the tariff being slashed it feels like they have promised us the world and then pulled the rug from under our feet.
'Many SMEs have moved into solar technology on the back of the promised Feed In Tariff rate and have invested tens of thousands of pounds in their business – us included. Consumers were attracted by the payback time of eight to ten years, which could now be extended by another 10 years.This will lead to many people simply deciding that solar PV is no longer a worthwhile investment. The announcement is a real bombshell for the solar industry and the businesses who have invested time and money on the back of the Government’s promises.'
Chris Hopkins, managing director of solar installer Ploughcroft
, has urged the industry not to panic. He said: 'We always knew the rate would be reduced as the solar industry boomed, but we did not expect it to be halved. All of the current news seems to be destructive, and this will only destroy consumer’s confidence in the solar market. We need to look at the positives that come from this announcement – and there are many. With production and manufacturing costs coming down in price over the last 12 months, and a typical installation now only taking one day instead of two, then it stands to reason that the 41p FiT rate was unsustainable for the long-term. Although a cut to 21p per kWh is a big drop, look back to April 2010 when the FiT was first announced. If technology and installation costs have halved, then it stands to reason that the government would half the tariff.
'Companies that entered the solar industry purely to join in the solar gold rush are unethical and unsustainable. The current FiT makes it too good to be true for them, and the proposed lower FiT rate will mean they cease to exist. Long-term, this is good for the industry as we need companies who are committed to the renewable cause.'