By David Owen, Founder and CEO of Solar Media Ltd.
The Government, led by the Department of Energy and Climate Change (DECC) and Greg Barker, has consistently pushed the message that in these desperate fiscal times our best hopes lie in creating a sustainable solar industry in the UK. Baring this in mind, I wonder is it all rhetoric, or will the Minister actually deliver on his promises?
Since the Parliamentary Under Secretary of State for Energy and Climate Change, Greg Barker, stood up in front of 1,300 members of the PV industry at Solar Power UK in Birmingham and gave a speech that would forever alter the solar landscape in the UK, we have been on a bumpy ride.
The feed-in tariff (FiT) budget (see my blog from October on the size of the budget issue) was overspent meaning that emergency action needed to be taken in order to force solar deployment down to maintain a more sustainable growth curve.
We were told that solar must now become part of the Green Deal, that tariffs would be cut, that regular digression would be established so that employees in solar could build a career for the future.
All this was seemingly couched in the normal political slanging of the failure of Labour to initiate a successful scheme with longevity in the first place. In true political style it was all the fault of the previous administration and it was this administration that would put the solar industry back on track for the good of all. In effect we were told that we were entering a difficult period for solar in the UK where the market would contract, jobs would be lost but we would emerge stronger for it.
It is the solar recession we have to have.
A short primer to bring everyone up to speed
Phase 1 of the consultation was released by DECC on the October 31. A 21p FiT for sub 4kW systems and a reference date of December 12 2011 to get the existing tariff of 43.1p was implemented. For more of my thoughts on this, see my blog on how the industry will survive under this regime.
For many in industry, this was news was a low blow. In fact, Friends of the Earth and Solarcentury launched Judicial Reviews against the December 12 reference date. These were dismissed earlier this week but are being appealed. However, any appeal will not be able to move the reference date in time.
Caroline Flint MP, Shadow Environment Minister, joined the Our Solar Future Cut Don’t Kill campaign against the cuts and impending deadline, and arranged an opposition day debate on the FiT for solar PV. This debate was preceded by a mass lobby of parliament which was attended by 500 members of the solar industry.
Unfortunately the debate was used primarily to try and score political points by both sides and had little direct effect.
Just weeks later, the Environmental Audit Committee held a hearing which helped keep the pressure on Government to reconsider the deadline for installations at the current band.
Yet, despite this backlash (including yet another rumour in the Financial Times claiming that Huhne was considering a u-turn) ultimately, there has been no movement on the 12/12 deadline, nor do I think there ever will be.
Installations in the UK market had risen to 12,000 the week ending the November 6 before declining slightly last week, ending the November 26.
Government’s position
Phase 2 of the consultation has not yet been released, but, when complete will change the FiT Scheme forever.
The budget is definitely overspent based on the installations of PV vs. the projections (yes I know the projections were wrong). Therefore the DECC, driven by the Minister Greg Barker, called the emergency review of the FiT in order to preserve the budget for as long as possible and thereby put the solar industry on to a more sustainable footing for the future.
The FiT system inherited from Labour was not created properly therefore there is little the current administration can do to rectify the runaway train that has become solar PV installations – except call emergency reviews. (Government does not accept that the REA asked for a 25% across the board reduction in tariffs when the first fast track review for large scale solar was introduced).
Solar is an important part of the energy mix as far as decentralised energy and behaviour change are concerned but it is not part of the renewable energy strategy for the UK to hit its obligatory EU 2020 targets.
DECC remains committed to introducing a transparent digression structure for PV FiTs based on the German capacity model (reviews every six months with three months warning given before each new reference date).
PV should not be installed on a house that has not had even basic energy efficiency measures completed. This is why there will be a link going forward between receiving the FiT for PV systems and the energy efficiency rating of the house (EPC).
Customers deploying PV should, on average, be getting a 5 percent return. If it is greater that this than energy users are not getting value for money in funding the scheme.
In general, Phase 2 of the review will provide clarity and certainty for the solar market.
The fact is that the FiT was not and will not be designed as a job creation or fuel poverty mitigation measure and is therefore not treated as such when the success of the programme is assessed.
What are the positives and what does the future hold?
PV component costs have fallen by 50 percent in 2011 and will fall by at least another 20 percent in 2012. This makes 21p a very achievable tariff for most installers to generate a reasonable return.
Government has listened, and is listening to the industry concerns over lack of clarity from April 12012 and signs from industry insiders highlight that Phase 2 of the consultation is being brought forward to take place soon. In fact, models for digression are already being discussed in DECC.
Although the budget is stretched and could have restricted the scheme completely in 2012, DECC has admitted that it has already moved money from other areas of the Levies Control Framework (an action advocated strongly by Dave Sowden at the Micropower Council) to fund the deficit in available FiT funding for 2011. This sets a precedent going forward that Government is willing to move budgets to keep the scheme going in the future.
Greg Barker, during the Environmental Audit Committee, indicated that he believed the true value of the export tariff was closer to 7p per kW/h, offering almost double what it is worth at present. At the same hearing Simon Virley, Director General of Energy Markets and Infrastructure Group at DECC, was captured on record saying that the export tariff does not form part of the FiT budget. This means DECC could have leeway in its budget by increasing the obligatory export tariff to its true value.
Phase 2 of the consultation will also address the need for a community tariff that will incentivise the social part of the market. It will also look at the timing and application of the EPC requirement. I was assured by John Costyn, Team Leader at DECC, during the Solar Power UK conference in Birmingham this October (straight after the minister’s speech), that this could well become a relative measure rather than an absolute one. This would mean that the market would not be restricted as much as some people think or even as badly as indicated in the impact assessment.
With energy prices rising and PV costs falling the inflection point where generation from PV becomes as cheap as fossil fuel based generators from the grid is getting closer. Some predict this will occur three to four years from now.
Next year will mark the return of large-scale field-based solar driven by the cost dynamics of the technology. One global analyst I spoke to said that PV at scale will actually be cheaper than offshore wind by the end of 2012 in the UK. This is truly remarkable and will force Government to take PV more seriously going forward.
So is it all rhetoric or reality?
When phase 2 of DECC’s consultation on the PV FiT is released (hopefully this month) we will know just how seriously the Minister and DECC take their own rhetoric about putting solar on a secure footing for the future.
If the EPC requirement remains fixed at a C level then we know that Government is more interested in limiting the market for PV rather then working towards what is a genuine concern for low carbon transition.
If the proposed FiT rate after April 1 2012 is 9p then we know Government is not interested in putting in top-up funding to help get PV toward grid parity in the UK.
If the community tariff is not enough to encourage social housing to get back into the market then we again see DECC’s lack of ambition for solar manifest itself and its paralysing fear of the budget.
These are the indicators to watch for and I, like you, await with bated breath to see what will happen. The only thing I know for a fact is that we will have a solar industry in the UK and that as the International Energy Agency makes clear solar will become an increasingly important source of energy for the UK. What Government does in the next weeks will determine whether or not solar will also help the UK economy out of recession in the short term.
Edited by Emma Hughes
