The last year hasn’t been a happy one for the British economy: GDP fell by 0.2 per cent in the final quarter of 2011; unemployment rose to a 17-year high; and government debt recently reached a record £1 trillion.
One sector, however, has been bathing in the broad sunlit uplands of growth. In 2010 there were 450 solar businesses, employing around 3,000 people; by the end of last year, there were almost 4,000, employing more than 25,000 people. In September alone, some 16,000 households had solar panels installed – twice as many as in June – as everyone from farmers to vicars to Mick Jagger (plus thousands of other canny home owners with £12,000 to spare) scrambled to take advantage of generous government subsidies.
It was, said Lord Marland, an energy minister, in a House of Lords debate this week about halving the subsidies, “one of the most ridiculous schemes ever dreamed up”.
The Government’s case is that the taxpayer is paying through the nose to subsidise inefficient technology at the expense of other renewable technologies. The solar industry argues that the Government has acted unlawfully, putting thousands of jobs at risk and stifling a promising industry at birth.
The feed-in tariff (FIT) scheme was introduced, appropriately for its detractors, on April 1, 2010. Under the scheme, householders could install solar panels on their roofs – at around £12,000 – and receive a high rate, guaranteed for 25 years, from energy companies for the electricity generated, while simultaneously saving on their energy costs (the average installation generates just over half a home’s energy needs).
According to the Energy Saving Trust, the average household could expect to be almost £1,200 a year better off by selling electricity to the grid at a rate of 43.3p per kilowatt hour (six times more than the energy companies pay for their own electricity).
Inevitably, the generous scheme ran out of control – there were more than three times as many solar installations as predicted. The Department of Energy and Climate Change estimated that, if the subsidies continued at the same rate, £100 could be added to everyone’s electricity bills by 2020. Meanwhile, the average cost of a solar panel had fallen by a third. Last October, the Government decided that this jamboree had to stop.
They went about it in a remarkably cack-handed way, however, announcing a halving of the tariff to 21p on December 12 – 11 days before a consultation period finished. A high court judge found this legally flawed, following a challenge by Friends of the Earth and two solar firms. On January 25, the Court of Appeal upheld his decision. Chris Huhne, the former Energy Secretary, was said to be considering a further appeal, to the Supreme Court, just before he resigned to spend more of his own time in the courts.
This has left the solar industry in limbo, as customers have variously rushed to take advantage of offers before they vanish or stood back to see what happens next. Now that the Government has lost its appeal, there is a further window until March 3 before the feed-in tariff is reduced. Anyone installing a system before then can join existing solar owners in benefiting from the 41p rate.
“It went ballistic before Christmas,” says Andy Tanner, chief executive of Plug Into the Sun, a firm that’s been operating in Penzance for seven years. “Then it was as dead as a doornail. Now it’s gone ballistic again. However, we’re on tenterhooks for February 9.”
That is the date when the Government announces the results of its consultation, including a scantily reported proposal to pay feed-in tariffs only to homes with an energy performance certificate of grade C or above. “That would rule out some 80 per cent of our customers,” says Tanner.
Toby Darbyshire, chief executive of Engensa, which is based in London and made a profit of £2 million on a turnover of £15 million in its first year of trading, has a list of 400 potential customers wondering whether or not to install solar panels.
“There’s a huge amount of uncertainty in the industry at the moment,” he says. “There is real anger about the sledgehammer way this has happened.”
The industry’s beef is not so much with the tariff cut – Engensa had even been lobbying the Government to reduce it, to make the industry more viable in the long term – as with the timing. “It’s left the industry high and dry,” says Derry Newman, chief executive of Solarcentury, one of the firms that took the Government to court. Solarcentury has had to scrap 12 new jobs, each of which had attracted more than 60 applicants. Investor confidence has evaporated, leading the company to cancel a social housing project in Wales. While the hysterical predictions in December of 25,000 job losses haven’t (yet) turned out to be true, some firms have gone bust. “Lots are just hanging on,” says Newman. “The small guys with large bank loans, who don’t have the cash-flow to pay them back.”
Of course, many of us without solar power – but still subsidising it – will wonder just how sympathetic we’re supposed to be. Even with a reduced feed-in tariff, those who can afford the installations will still make more than £600 a year. We’ll still be helping them to recoup their initial investment, albeit in 18 years, instead of 10. As Lord Marland put it this week: “It is already going to cost the consumer £7 billion for £400 million of net present value. This is on a product where you need the electricity when the sun doesn’t shine. It is going to produce 1.1 per cent of our electricity supply, and it doesn’t target the needy and the consumers.”
The response of the solar industry is: bear with us a little longer. According to the Solar Future campaign, costs will come down so much over the next decade that new solar capacity will not have to be subsidised. The total subsidy, it estimates, over the next 30 years will be a maximum of £9 per household.
Anyway, says Darbyshire, what’s so wrong with subsidies – especially when Britain has a target of reducing its carbon emissions by 80 per cent by 2050. “We subsidise the North Sea oilfields,” he says. “All feed-in tariffs do is represent a shift from old subsidies to new ones. And if a new industry came along in 20 years, I’d say, invest in that too. It’s like not investing in computers in the 1970s because it was cheaper to add up with your fingers.”
SOURCE: http://www.telegraph.co.uk/comment/9059878/Solar-power-incentives-lose-their-shine.html
One sector, however, has been bathing in the broad sunlit uplands of growth. In 2010 there were 450 solar businesses, employing around 3,000 people; by the end of last year, there were almost 4,000, employing more than 25,000 people. In September alone, some 16,000 households had solar panels installed – twice as many as in June – as everyone from farmers to vicars to Mick Jagger (plus thousands of other canny home owners with £12,000 to spare) scrambled to take advantage of generous government subsidies.
It was, said Lord Marland, an energy minister, in a House of Lords debate this week about halving the subsidies, “one of the most ridiculous schemes ever dreamed up”.
The Government’s case is that the taxpayer is paying through the nose to subsidise inefficient technology at the expense of other renewable technologies. The solar industry argues that the Government has acted unlawfully, putting thousands of jobs at risk and stifling a promising industry at birth.
The feed-in tariff (FIT) scheme was introduced, appropriately for its detractors, on April 1, 2010. Under the scheme, householders could install solar panels on their roofs – at around £12,000 – and receive a high rate, guaranteed for 25 years, from energy companies for the electricity generated, while simultaneously saving on their energy costs (the average installation generates just over half a home’s energy needs).
According to the Energy Saving Trust, the average household could expect to be almost £1,200 a year better off by selling electricity to the grid at a rate of 43.3p per kilowatt hour (six times more than the energy companies pay for their own electricity).
Inevitably, the generous scheme ran out of control – there were more than three times as many solar installations as predicted. The Department of Energy and Climate Change estimated that, if the subsidies continued at the same rate, £100 could be added to everyone’s electricity bills by 2020. Meanwhile, the average cost of a solar panel had fallen by a third. Last October, the Government decided that this jamboree had to stop.
They went about it in a remarkably cack-handed way, however, announcing a halving of the tariff to 21p on December 12 – 11 days before a consultation period finished. A high court judge found this legally flawed, following a challenge by Friends of the Earth and two solar firms. On January 25, the Court of Appeal upheld his decision. Chris Huhne, the former Energy Secretary, was said to be considering a further appeal, to the Supreme Court, just before he resigned to spend more of his own time in the courts.
This has left the solar industry in limbo, as customers have variously rushed to take advantage of offers before they vanish or stood back to see what happens next. Now that the Government has lost its appeal, there is a further window until March 3 before the feed-in tariff is reduced. Anyone installing a system before then can join existing solar owners in benefiting from the 41p rate.
“It went ballistic before Christmas,” says Andy Tanner, chief executive of Plug Into the Sun, a firm that’s been operating in Penzance for seven years. “Then it was as dead as a doornail. Now it’s gone ballistic again. However, we’re on tenterhooks for February 9.”
That is the date when the Government announces the results of its consultation, including a scantily reported proposal to pay feed-in tariffs only to homes with an energy performance certificate of grade C or above. “That would rule out some 80 per cent of our customers,” says Tanner.
Toby Darbyshire, chief executive of Engensa, which is based in London and made a profit of £2 million on a turnover of £15 million in its first year of trading, has a list of 400 potential customers wondering whether or not to install solar panels.
“There’s a huge amount of uncertainty in the industry at the moment,” he says. “There is real anger about the sledgehammer way this has happened.”
The industry’s beef is not so much with the tariff cut – Engensa had even been lobbying the Government to reduce it, to make the industry more viable in the long term – as with the timing. “It’s left the industry high and dry,” says Derry Newman, chief executive of Solarcentury, one of the firms that took the Government to court. Solarcentury has had to scrap 12 new jobs, each of which had attracted more than 60 applicants. Investor confidence has evaporated, leading the company to cancel a social housing project in Wales. While the hysterical predictions in December of 25,000 job losses haven’t (yet) turned out to be true, some firms have gone bust. “Lots are just hanging on,” says Newman. “The small guys with large bank loans, who don’t have the cash-flow to pay them back.”
Of course, many of us without solar power – but still subsidising it – will wonder just how sympathetic we’re supposed to be. Even with a reduced feed-in tariff, those who can afford the installations will still make more than £600 a year. We’ll still be helping them to recoup their initial investment, albeit in 18 years, instead of 10. As Lord Marland put it this week: “It is already going to cost the consumer £7 billion for £400 million of net present value. This is on a product where you need the electricity when the sun doesn’t shine. It is going to produce 1.1 per cent of our electricity supply, and it doesn’t target the needy and the consumers.”
The response of the solar industry is: bear with us a little longer. According to the Solar Future campaign, costs will come down so much over the next decade that new solar capacity will not have to be subsidised. The total subsidy, it estimates, over the next 30 years will be a maximum of £9 per household.
Anyway, says Darbyshire, what’s so wrong with subsidies – especially when Britain has a target of reducing its carbon emissions by 80 per cent by 2050. “We subsidise the North Sea oilfields,” he says. “All feed-in tariffs do is represent a shift from old subsidies to new ones. And if a new industry came along in 20 years, I’d say, invest in that too. It’s like not investing in computers in the 1970s because it was cheaper to add up with your fingers.”
SOURCE: http://www.telegraph.co.uk/comment/9059878/Solar-power-incentives-lose-their-shine.html
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