Nov 15, 2011 - While the UK government is determined to keep the incentives scheme for solar power within budget, solar companies in the country face a trial that many say not all will survive.
by Mariyana Yaneva
Just when photovoltaic installations started to pick up, the UK government announced it is bringing forward a deadline on feed-in tariffs and slashing the tariffs by 50% afterwards, all with the aim of ensuring the popular scheme does not exceed the GBP 867 million (USD 1.4bn/EUR 1bn) spending cap.
And so, anyone who registers PV panels before December 12 will initially receive the current GBP 0.43 per kWh rate but the incentive will then drop to GBP 0.21 per kWh from April 1, 2012.
The installations which are completed between December 12, 2011 and April 1, 2012 will get the new tariff of GBP 0.21, but won't have to conform to any energy efficiency measures, while installations connecting after April 1, 2012 will have to meet stringent energy efficiency requirements.
Ministers have indicated they want only homes that have an energy performance certificate rating of C or better. This will automatically increase costs, adding energy auditing and possible additional investments to meet criteria, ruling out many homes, as it will be prohibitively expensive.
A spokeswoman for the Department of Energy and Climate Change said the feed-in tariff cut is implemented to protect consumers from footing the bill for excessive subsidies: "The government stands by its pledge to be the greenest government ever. We are taking action to ensure that the Fits scheme stays within budget, and to put the solar industry on a steadier, clearer and sustainable growth path, avoiding boom and bust."
But is "bust" going to be avoided really.
With the price of installations falling at least 20% since April this year when the incentives scheme was introduced, the industry was prepared for a subsidy cut in April 2012 but not as early as this December.
Environmental group Friends of the Earth has warned that it may start legal action against the government unless plans are scrapped to cut the level of subsidies. "The government is breaking the law with its plans to fast-track a solar industry kill-off – as well as jeopardising thousands of jobs and countless clean energy projects across the country," said Craig Bennett, policy and campaigns director at FoE.
Jeremy Leggett of Solarcentury described the prospect of cuts to incentives of 50% as an "existential threat" to the future of the industry.
At the same time, Gabriel Wondrausch from SunGift Solar, said investors will still be able to get an average 5-7% return under the new rules if they switch to cheaper Chinese panels. His estimates even beat the government's claim that the return is now 4.5%.
However, he predicts the changes will lead to a return to pre-feed-in tariff days, which saw only the keenest green-minded making the investment – particularly if the government goes ahead with its plan to impose the energy performance requirement, which will rule out most potential buyers if they have to spend an additional GBP 5,000 on a new boiler and building insulation.
"The cuts the government have cited are socially regressive," said Daniel Green, CEO of HomeSun. "Only the super wealthy with an eco-conscience will be able to wait now for a breakeven of 14 years on a solar investment."
And while the government maintains that the new rates of return will still prove attractive as they exceed the returns available from many other savings options, the industry has warned that they are too low to attract private finance and that free solar and social housing schemes will be closed as a result.
The UK Renewable Energy Association and Solar Trade Association released the results of a survey of 139 UK solar companies on the probable impact of the proposed cuts to feed-in tariffs for solar photovoltaic generation. The organisations state that the cuts may result in employment levels falling by 42% in the UK's solar industry, and that 33% of UK PV companies could close.
It looks like it would be a real survival of the toughest.
(GBP 1 = USD 1.590/EUR 1.167)
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