Having heard rumblings of the proposed subsidy cuts to the UK solar industry, global solar manufacturers are watching us. Government subsidies for solar will fall a staggering 64% from 8 February 2016.
For Britain, the subsidy cuts will have a major impact on the solar market. We will undoubtedly see some of the smaller players lose out under mounting financial pressure. Whilst at the same time, global solar giants will look to move operations from the UK – a step that will impact the economy and result in significant job losses. However, we are also likely to see an increase in innovation as companies seek to drive sales through a competitive edge.
However, the UK isn’t the first country to face such cuts. Looking across Europe, government intervention has been used, and removed, to increase efficiency and create jobs for the solar industry in many countries. For example, when looking at the German solar market, 2013 saw the introduction of restrictive government policies which took solar installations from over 7GWs of PV capacity in 2010, 2011 and 2012 down to 3.14GW and 1.89GW in 2013 and 2014 respectively. As a result, experts estimated 50% of industry jobs were lost across manufacturers, installers and distribution companies.
Similarly to Germany, the Italian solar market also boomed with government intervention which enabled the installation of 9,300MW in 2011 and 3,700MW in 2012. However, following cuts in 2013, solar installations fell to 1,600MW in 2013, then sank to under 400MW in 2014. The same catastrophic job losses within the industry occurred – roughly 70% of solar jobs vanished across the country. In both examples, a gradual reduction of the respective tariffs in a timely manner could have ensured that natural uptake of PV overtook the need for subsidies.
However, such cuts are not a global trend. In stark contrast to Europe, earlier this year China confirmed its target for 2015 PV installation is 15GW of newly installed capacity. Coupled to its PV manufacturing base, this will mean more than 1.6 million people will be employed in the sector.
Whilst cutting UK solar subsidies will clearly have a major impact on the industry, we cannot rely on them forever. Cutting subsidies by 64% in one fell swoop will have a drastic and almost immediate impact on the business of solar for the UK. If the cuts come into play, the market will undoubtedly pause and we are likely to see the same results as in Germany and Italy as far as deployment and for that matter employment in the sector is concerned.
What surprises the manufacturers most is the understanding that within only 3 – 4 years a sensible tapering out of subsidies would mean the best loved renewable technology stays on the market, keeping a much needed, competitive energy source within the UK. Instead of one extreme cut, smaller reductions and a clear roadmap as to their end would better serve the market and ensure solar’s survival.
This will be the biggest challenge the UK solar energy market has had to face in years, but we might be able to draw on lessons learnt from other markets who have gone through a similar transformation to understand what lies ahead. However any cuts are hard to face and we undoubtedly have a tough few months ahead.