The Energy and Climate Change and Environmental Audit committees have today published their report into the Government’s handling of the proposed cuts to the feed-in tariff for solar photovoltaic technology.
The report lambasts Ministers and officials for not identifying problems within the scheme and acting earlier to avoid the speed and scale of cuts that the Government proposed. The report states that the scale and pace of changes now proposed constituted a “shock” for the industry, undermining investor confidence and threatening the stable and predictable commercial environment that is needed to facilitate the investment in renewables that the country needs.
The paper states that: “This damage would not have occurred if the Government had recognised the unsustainable rate of the expansion of solar installations at an earlier date, something which ought to have been identified by Ministers and officials sooner than it appears to have been.”
Following the High Court ruling that branded the Government’s handling of feed-in tariff cuts as “legally flawed”, committee members also take issue with the consultation period put forward by the Government, stating: “The use of a reference date for new installations to qualify for the existing tariffs that precedes the end of the consultation smacks of retrospective regulation, which undermines confidence in the Government’s management of other energy policies.”
The committees stressed that the feed-in tariff scheme urgently needs a mechanism to review and adjust degression rates in an orderly and timely way. The system must allow for “more regular and predictable review.” The MP’s paper once more launched a scathing attack on DECC’s failure to identify the need to control FiT commitments until too late, stating: “It is disappointing that a year after DECC floated a trigger mechanism for addressing rising take-up of FiTs, it has not materialised. The current panicky response to the upsurge in solar installations in 2011 might not have been needed if DECC had actually developed such a trigger mechanism.”
The joint inquiry also took issue with the Impact Assessment supplied by DECC that was used as the sole evidence to support such fast and deep cuts to the tariff. The report states in no uncertain terms that: “The Impact Assessment did not include the full range of pertinent factors that should have been taken into account in deciding the policy” and “The analysis of the impact on jobs in the Impact Assessment is seriously inadequate.”
Perhaps most damningly the report concludes that the Impact Assessment was: “produced and subsequently used to justify a policy decision that had already been made. A retrospective snapshot Impact Assessment cannot take the place of systematic, timely data gathering which should have alerted DECC to this problem much earlier.”
The report closely explores the rationale behind linking the solar FiT rate to energy efficiency measures. It questions the logic behind linking energy efficiency measures to electricity generation measures, as energy efficiency measures relate to the reduction of heating costs that would only be relevant to those using electrical heating systems. The committees warn of the “fatal impact” of enforcing an energy efficiency requirement option on the industry, stating: “We assume that part of DECC's reason for proposing such high [energy efficiency] requirements is to dampen down FiT activity deliberately.”
The report also scrutinised the spending cap that the FiT scheme operates under. The committees believe that the decision to include FiTs within the Government’s spending framework should only have been taken after a thorough environmental appraisal was undertaken, assessing the potential consequences for renewable energy generation, for the then fledgling solar industry and for consumers, who need consistent policy from Government to engender long-term low-carbon behaviour change.
The inquiry reveals that systems already installed up to November 27, 2011 would absorb 90% of the four-year solar PV cap.
The report states that: “It is not clear, however, how the Treasury can decide the limits of the scheme’s affordability for energy consumers or the wider economy because it has produced no analysis on this.”
The committees also recognise that the Government’s decision may also be pre-emptive. The Office for National Statistics (ONS) is yet to classify levy-funded schemes, as it considers the outcome of decisions at a European level. The report calls on Government to set out how a decision by the ONS not to classify feed-in tariffs within public spending would impact on the case for its proposed FiT changes, and whether this would allow a loosening of the overall levy-spending cap.
Finally, the report calls on Government to include full analysis on the impact on jobs, future investment in renewables, tax receipts, energy efficiency and wider economic impacts when it publishes its response to the current consultation.
In response to the report, Jeremy Leggett, Chairman of Solarcentury said: “When DECC dropped its bombshell on October 31, we said that the shock announcement was unfair, retrospective and damaging to investment in PV and other renewables.
“It's very pleasing to see that the select committees have voiced similar concerns, adding considerable political pressure on the Government to ensure that such a shambles is never repeated in the future.”
The full report can be found here.