After much speculation, the UK Government has announced plans to cut the Feed-in-Tariffs (FiTs) by 50% for new solar installations, as part of their review consultation into the sustainability of the incentive scheme. The cut will see the current feed in tariff of 43.3p/kWh being reduced to 21p/kWh for solar installations of less than 4kW from the 1st April 2012, and will affect all new installation on or after the 12th December 2011.
For home owners who are looking to build a sustainable home or install solar panels to their current property, the advice is to ensure that their eligibility date provided by the electricity supplier has been submitted and accepted by the 11th December or earlier in order to receive the higher Feed-in-Tariff rates.
Despite this cut off point, the Department of Energy and Climate Change (DECC) claims that the proposal is still under consultation until the end of the year and many campaigners and environmental groups argue that it is unlawful to introduce the lower tariffs on the 12th December, when the consultation period and review actually closes two weeks later.
The green incentive scheme will be reviewed every 5 years, with the first review due in 2012, but the Government could face a legal challenge over the proposed cuts. Craig Bennett, policy campaign director at Friends of the Earth warns “ministers must amend their proposals and extend the deadline for solar tariff payments, or face a judicial review”.
How This Affects the Solar Industry
The news comes as a blow to the rapidly growing solar industry, which has seen significant expansion and a number of jobs created in the last few years with an estimated 25,000 people now employed in the sector. Caroline Lucas, MP and Green Party leader says that “the reckless decision to slash Feed-in-Tariffs for solar by half poses a serious risk to the UK’s burgeoning solar PV industry… (in a) jobs-rich sector” of the economy.
The 12th December deadline has led to many schools, businesses and housing associations abandoning plans to introduce <#66#>energy saving photovoltaic systems<#> and a coalition of solar energy companies, politicians and housing associations have called for David Cameron to intervene on the matter.
Climate change minister Greg Barker argues that his “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… (ensuring) that we stay within budget and not threaten the whole viability of the FiTs scheme”. Costs of solar panel installations he argues, have fallen by up to 70%. An industry Impact Assessment, however suggests installation costs for the smallest installations since the Feed-in-Tariff scheme was launched have only fallen by 30% and these installations now face cuts of 50% under the new proposed tariff.
The assessment by the DECC, which also warns that average domestic energy bills will increase by almost £26 by 2020 if the government makes no changes to the solar Feed-in-Tariff scheme, says that halving the Feed-in-Tariff would actually limit the rise in annual energy bills by 2020 by £2.60 to £3.20.
Delaying the proposed cuts until April 2012 would only add between 10p to £1.60 on annual energy bills according to the DECC’s findings and could provide valuable time for solar energy companies to clear their workbook and stock. A total of 90,000 people have so far signed up to the Feed-in-Tariff scheme and the popularity of the incentive scheme has more than exceeded initial expectations. The return on investment has been particularly high for anyone who has taken up the tariff, which is guaranteed for 25 years and should still provide householders with a 4.5% ROI.
Home owners are now rushing to sign up to the existing higher tariff before the cuts are introduced on the 11th December, but many are likely to be disappointed with many solar panel installers and providers fully booked and no longer taking on new installations until 2012.
About the Author
This guest article was written by Sally Greenacre of Intelligent Energy Solutions.