Friday, January 20, 2012

Britain's solar capacity shot up 10-fold last year, defying Energy Secretary Chris Huhne's effort to roll back subsidies for the industry and prevent the sort of booms experienced in Germany and Italy.

Solar panels with at least 761.9 megawatts in capacity were installed in 2011 compared with 76.8 megawatts the prior year, according to figures on the website of U.K.'s energy regulator Ofgem. About two-thirds of the capacity and 95 percent of the projects were installed on homes.

Huhne twice last year moved to rein in support granted in April 2010 in the form of feed-in tariffs, which guarantee premium rates for electricity from solar power. Companies including EON AG, Tesco Plc and Carillion Plc's Eaga rushed to tap the market, supported by fund managers such as Foresight Group LLP and Octopus Investments Ltd.

“It's been a very busy and successful year for the solar industry,” Howard Johns, chairman of the Solar Trade Association and managing director of installer Southern Solar Ltd., said by e-mail today. “But now most of the industry is at a standstill with the uncertainty caused by the government.”

The price of panels today is less than half of where it was when the subsidy program began, making more installations economical and sustaining 25,000 jobs.

Subsidy Restraint

Huhne's ministry responded in March 2011 with an emergency review of its support measures that cut rates as much as 71 percent for commercial-scale plants. Developers then turned their attention to smaller rooftop projects, prompting the government in October to propose cuts for those facilities as well. Industry groups sued the government last month to slow the latest round of cuts.

The boom outpaced the government's forecast. More than 230,000 solar plants have registered to qualify for tariffs since the program started, according to Ofgem. Half of the 761.9 megawatts in capacity installed last year was registered in November and December alone, the latest weekly data show.

These figures compare with the Department of Energy and Climate Change's projections for 284 megawatts by April 2013 and 832 megawatts by April 2015.

Only 32 megawatts of solar installations were operating at the end of 2009 before the tariff came into effect. Today, the number may top 1.1 gigawatts, according to Bloomberg New Energy Finance figures, which take into account installations not yet registered with Ofgem.

Those facilities may cost about 373 million pounds ($572 million) a year in subsidies, exceeding the government's cap for the subsidy, the London-based researcher estimates. Support for the industry is paid for by consumers though higher bills.


“It is somewhat embarrassing for an austerity-focused government,” said Jenny Chase, lead solar analyst at New Energy Finance.

The program, which also includes other low-carbon technologies for projects with 5 megawatts or less, has a spending limit of 867 million pounds by April 2015. In December, DECC said that a further 197 million pounds from the renewable obligation system that supports renewable projects of all sizes was also available for the tariffs.

“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,” Climate Change Minister Greg Barker said in a statement on Dec. 22.

Germany and Italy

European countries such as Italy and France reduced tariffs last year before schedule to adapt incentives to crashing panel prices. Meanwhile, Germany marched ahead without any spending cap to install a record 7,500 megawatts last year, or about 10 times British levels. Italy has a spending cap of 6 billion euros to 7 billion euros ($7.6 billion to $8.9 billion) a year.

The surge in installations, coupled with continued declines in panel prices, led the government in October to propose cutting in half rates paid for small projects starting Dec. 12, four months before scheduled.

A court deemed the decision to cut rates before a consultation on the matter was completed “unlawful” and ordered a judicial review. A government appeal is likely to be heard tomorrow, so it's unclear when the subsidy reductions will take effect.

The U.K. solar industry is waiting to learn the new tariff levels and the date when they will come into force.

“The situation is still far from clear, and industry players would be wise to sit tight until a new reference date is set,” said Clare King, a London-based renewable energy lawyer at the law firm Osborne Clarke. “The lack of certainty is going to make it difficult for solar companies, homeowners and investors to plan for the future.”


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