Greg Barker is misunderstood. He has come under heavy criticism from those within and without the solar industry in the UK and I can see why. It is never easy to be the hatchet man when there is a tight budget in the offing and it is even more difficult to know deep down that the system (political and economic) you are forced to work with is far from ideal and constantly places you between a rock and a hard place.
In essence the Minister is damned if he does and damned if he doesn’t. That is of course what the Impact Assessment put out by DECC this week suggests and is certainly the line Greg and his advisors took in the industry meeting held yesterday morning.
The picture was painted by the Minister and his aides. Like it or not there is a finite budget of £860 million for FiT spending by the end of the 2014/2015 year. This equates to a budget of £350 million spent on FiTs in the last year of the programme and that number is cumulative (i.e. includes all payments on FiTs from the years preceding 2014/15).
Treasury governs the size of this budget because all energy users pay for the FiT as a levy on bills. All the Minister can do is play with the budget that he has to achieve the DECC objectives.
Sarah Chambers, a newly appointed civil servant, seemed to be controlling much of the discussion yesterday at the DECC. She (and therefore DECC) believe that 4,000 installs are being carried out a week at the moment and that for every week – at the higher tariff rate – it takes £4 million per year off the budgeted figure above. i.e. two weeks equates to £8 million multiplied by three for the number of years remaining to 2015 meaning that £24 million comes off the £860 million.
When you look at the past two years installations the “take-up” of the subsidy is alarming and being driven by high returns on investment from the generous FiT rate and the heavily reduced cost base of PV products.
The Minister and his team recognise that a bubble has been created and that there is no easy way to burst a bubble. They are aware of the difficulties being created by the December 12 deadline but feel that they have to act now or risk having little or no budget left to subsidise the FiT reliant industries, of which PV is one, after April 2012.
I believe that the Minister, backing up and referring to his speech at Solar Power UK, is genuinely sincere in wanting to see the solar industry in a sustainable position for the future. Negative comments from the meeting have been covered elsewhere in the press but there were a number of positives to come out of yesterday’s meeting that back up my personal view of the Minister’s resolve to support solar PV going forward.
- Phase 2 of the consultation which was due to be announced before Christmas is likely to be brought forward to take place sooner. This was called for by many of us in the room to give a clear indication to the market that there will be an industry subsidy set at a sustainable level and more importantly a budget to back this up in 2012.
- Greg Barker will help industry to produce a more robust evidence base for future digressions. The Minister agreed to a monthly meeting from now on with the industry working group and to set up an additional working group looking at the real costs of components by involving key manufacturers in the discussion. This evolved from a discussion where certain members of the roundtable called into question Government’s overall ambition for solar in the UK. This was taken on board by the Minister and his staff.
- He outlined plans for Phase 2 to look at refining the structure of the FiT framework to allow the DECC to more effectively encourage installations that he saw had a higher value. The Minister referenced community schemes and mentioned schools in particular. He called the current framework a blunt instrument.
- The most important change, in my opinion, was around the willingness to try and move DECC budgets around to facilitate the continued sustainable growth of the solar PV segment. In particular to deal with this year’s growth they have brought money forward from future years of the scheme and are looking at using other under spent areas in future years. When asked the question, “Would the Minister go back to treasury to seek permission to ‘top up’ the FiT budget to keep the scheme going?” the Minister showed a willingness to do this after the tariff rates had been reduced substantially to give the 5% targeted ROI for the end user. He stated unequivocally that there would be no motion to extend funding for the scheme while the ROI remained significantly above 10% which is the case on the current tariff levels.
- He acknowledged that aggregated schemes would probably disappear and did not seem disappointed by this. For social aggregated schemes however there is hope in Phase 2 of the consultation which will look at an added community tariff, linked to point 3 above.
- The Minister took the point that retail grid parity was much closer than initially thought by the DECC because of the rapid price declines. He is now calling for evidence of this to use in wider lobbying within Government.
While many involved in the industry roundtable were disappointed that there was little or no concession made to the timeframe of the December 12 deadline, I can honestly say that I believe that Greg Barker and his team are beginning to understand how important PV could be in the energy mix.
Those who are serious about a sustainable solar industry should view yesterday’s meeting as a net positive. It is clear that we have some extraordinary pain to go through over the next six weeks and that there will be losses, in some cases substantial, of jobs, revenue and businesses. However those who can emerge at the other end will be stronger for it and be part of a much more sustainable industry that will play a larger role in the UK’s energy mix.
The industry roundtable took place at DECC’s offices on November 9, 2011. Around 20 people, seen to represent the industry, were invited by Greg Barker to participate. Our author of this blog is one of them and we are awaiting clearance to reveal their identity.
