DECC takes one month to do nothing

The UK solar industry’s worst fears have today been realised as Government ploughs ahead with its proposed feed-in tariff cuts. Paying absolutely no attention to industry’s kicking and screaming, the Department of Energy and Climate Change (DECC) has kept to its original plan and imposed ridiculously reduced rates of as little as 8.5p per kilowatt hour.

As you all know, the fast-track review was launched on March 18. At this time Government revealed that it was to cut the feed-in tariff for PV systems larger than 50kW as it believed these projects would take funding away from the smaller installations. Industry was then given until May 6 to respond to the tariffs, which it did in force.

Since then, the UK solar industry has been sitting on the edge of its seat while Government consulted on the tariff rates, to decide whether the cuts would actually go ahead as planned.

Throughout this timeframe, industry has been fighting tooth and nail to change the results.

Campaign in vain

During the consultation period all of the likely solar suspects rallied together in a bid to push back against the proposed rates. The Solar Trade Association (STA), Renewable Energy Association (REA) and the We Support Solar teams all did their bit to not only fight the decision, but also to demonstrate what Government needs to do in order to provide a future for large-scale solar, while at the same time keeping within budgetary restraints.

It seemed like the STA had finally got through when Barker suddenly changed his tune on the back of its Alternative Solar Revolution Strategy, published at the end of last week. Just days ago the Climate Change Minister was quoted as saying,

"Historically, the Department of Energy and Climate Change has underestimated the contribution that solar can make," Barker said. "But solar is now going through an extraordinary stage of development… it's capable of scaling up and competing with the big boys. It's not just for enthusiasts. It has potential to be a significant source of energy.

"While I wouldn't necessarily concur with all the specific recommendations of the [STA] report, there is one clear message that I do agree with: that solar has far more potential than has previously been thought."

This brought great hope to the fallen faces of the UK solar market. But sadly, this was nothing more than a red herring. To answer the question posed in yesterday’s blog, yes, Barker’s u-turn was too little, too late.

Construction concentration

While the various industry associations were trying their best to change Government’s mind, others were all too familiar with the way things happen in this country. Dozens of developers who had planned large-scale projects have been working through the night to try and get them completed before the August 1 deadline, as they simply didn’t believe that Government would change its mind.

Though it seems that some may actually make it on time, others will not be so lucky.

So, what does all this mean?

As expected, the results today have caused uproar in the industry. Ray Noble, PV Specialist said, “This was not a Consultation! No changes were made at all to the Government proposal as set out for Consultation. The problem that needed to be addressed is that the Government made a huge mistake in the CSR budget, allowing for only for single domestic installations, and they hoped and prayed that the Consultation would come up with a way to dig them out of the hole, which was an impossible task.”

“As a result the tariffs that the Government have set are too low, in a deliberate attempt to kill off the growth in the industry.”

Unfortunately for us, Noble’s comments are spot on.

The sad truth is that this means we are unlikely to see many large-scale solar parks up-and-running in the UK unless Government comes up with an alternative incentive structure for them. Many projects will be abandoned in the coming weeks, while countless numbers of investors – both private and public – will lose out on hundreds of thousands of pounds.

This decision damages not only those with pots of money to spend on large-scale solar parks, which the Government was so afraid of supporting, but also those with their lives on the line. Many schemes around the country are now at risk, including those in communities, who had come up with innovative ways to distribute the feed-in tariff payments and give back to the surrounding area, schools who had planned to teach children about the importance of renewable energy in the most visible way possible and local authorities, who were working to beat fuel poverty in their constituency.

STA Chairman Howard Johns also talks about the impact on the country’s plc:

“The Coalition Government have got it seriously wrong on solar and given recent statements in the press DECC Ministers are waking up to this. But Treasury have crippled DECC's ability to respond to major developments in solar and DECC itself hasn't got to grips with this technology. 

"Ironically crushing solar makes zero economic sense for UK plc because it will lose us major manufacturing opportunities, jobs and global competitiveness.  It also risks locking us in to more expensive energy options in future.  It is inexplicable that the Treasury can be allowed to damage energy and industrial policy by taking decisions without taking into account the bigger picture. The Prime Minister urgently needs to intervene to prevent this calamity," he continued.

“Solar Trade Association will take every available opportunity to work constructively with DECC. But solar is now in a mess.  Many investors and project developers are walking away badly burned and current Renewables Obligation support for solar is too low to prevent collapse. We want to meet with Ministers to find a way forward as a matter of urgency."

The REA’s Chief Executive Gaynor Hartnell outlined Government’s failure to assess the industry as an entirety, highlighting that by cutting the tariff for larger installations, it threatens to damage the industry as a whole.

 “We don’t support this. The logical approach would have been a 25% reduction across the board, irrespective of size.  This is on account of panel costs falling significantly, a phenomenon expected to continue so that PV should need no subsidy before the end of the decade,” she explained.

 “We think Government should increase the size of the feed-in tariff budget and encourage a healthy PV industry to establish in the UK.  But to be fair to the electricity consumer, Government must be prepared to intervene to reduce tariffs when justified, and the industry must accept this needs to happen.

 “The handling of this whole affair has been poor.  Larger-scale PV has been demonised, when it is the most cost-effective approach.  Midway through this decade we’re expecting its cost to be on a par with offshore wind,” concluded Hartnell.

At present the tariff for systems up to 50kWp remain untouched, yet some are dubious about how these will be affected in the coming months. “Based on my knowledge of the large number of projects being installed at present, the total CSR budget will be exhausted by mid 2012 – then what happens?” asks Noble.

“If only they had got the CSR Budget right on day one the Government would have been singing the praises of the enormous growth in the solar industry and the green jobs market. Come on Mr Cameron do the right thing, correct the CSR error, rather than kill the industry,” he concludes.

The rates that will apply for all installations with an eligibility date on or after August 1, 2011:

>50 kW – 150 kW TIC = 19.0p/ kWh
>150 kW – 250 kW TIC = 15.0p/ kWh
>250 kW – 5 MW TIC and stand-alone installations 8.5p/ kWh

The eligibility date is defined as the date as regards a particular Eligible Installation from which eligibility for FiT Payments commences which shall be the later of the date: a) as applicable, of (i) receipt by the Authority of a FiT Generator’s written request for ROO-FiT Accreditation in a form acceptable to the Authority; or (ii) receipt by a FiT Licensee of a FiT Generator’s written request for MCS-certified Registration; b) on which the Eligible Installation is Commissioned; or c) of Implementation.