The Department of Energy and Climate Change’s impact assessment accompanying today’s feed-in tariff announcement has revealed that it expects there to be 5.2GW less solar deployed by 2020 and as many as 18,700 jobs to be lost in the industry.
The government’s decision – to reduce rates from 12.03p/kWh to 4.39p/kWh as of 8 February 2016 – has increased the rate from that initially proposed in August, but the department’s own analysis has predicted substantial implications for the UK solar sector.
An accompanying impact assessment revealed headline figures of 5.2GW less solar capacity than would’ve been deployed had the rates been left as they were. This will result in generation 5.4GWh less than would’ve otherwise occurred.
This equates to approximately 900,000 fewer installations between 2016 and 2019. Such a downturn in deployment looks set to have an equally significant impact on employment with DECC now expecting between 9,700 and 18,700 jobs to be lost.
DECC’s argument is that it is unsustainable for the solar industry to support so many jobs and that it cannot expect billpayer levies to subsidise that employment, however job losses has been a contentious point throughout the consultation process.
Both energy secretary Amber Rudd and energy minister Andrea Leadsom have repeatedly asserted that the government could not estimate job losses due to the complex nature of the industry, however analysis conducted by the Solar Trade Association estimate that as many as 36,000 jobs could go as a result of the projected cuts.
Central to the impact assessment is analysis of the much maligned dataset upon which the consultation was formed, written up by Parsons Brinkerhoff and Ricardo Energy and Climate. One particular section related to estimates of self consumption showed that while consultation responses put estimated self generation at between 23-46% with a median rate of 36%, Parsons Brinkerhoff estimated self consumption to fall between 33-80% based on just four data points.
The department settled on a self-consumption rate of 45% – the higher range of estimates – in order, it said, to promote the deployment of installations which would make the most out of energy generated on-site.
There were, however, some silver linings included within the impact assessment. It had been expected that the government’s decision to introduce a higher rate of VAT on solar panels as per June’s ruling at the European Court of Justice would feed into the response, but this appears not to be the case.
“HMRC have also launched a consultation on removing VAT relief on solar panels. The outcome and implementation of these proposals are currently unclear and tariffs have therefore been set assuming no changes,” the impact assessment states.
That the tariffs have been set assuming no changes would suggest that rates could be amended should the new 20% VAT rate come into effect, which looks almost certain to be the case in August next year.
There is also a suggestion that the feed-in tariff could be extended beyond its current projected end date of April 2019. “While there is currently intended to be no generation tariff for new-build plants after the end of 2018/19, the scheme may continue, with one option being a scheme that offers an export tariff only,” the assessment states.
By 2019 panel prices could have fallen to such an extent – particularly so if the minimum import price has been repealed – that such a tariff could be all that’s required to stimulate continued deployment.