Government Proposed FIT Subsidy Cuts

The recent announcement on proposed subsidy cuts from Energy and Climate Change Secretary Amber Rudd forms part of a consultation process. Whilst she praised previous subsidy support for significantly driving down the cost of renewables, Ms Rudd added:

“As costs continue to fall it becomes easier for parts of the renewables industry to survive without subsidies. We’re taking action to protect consumers, whilst protecting existing investment”.

All the proposed changes appear to have done so far is heap uncertainty on to the development of both ground-mount and rooftop mounted solar PV projects.

Many companies in the still nascent UK solar PV industry are understandably very concerned by the proposals being made. Those companies that have previous experience of Government involvement in our industry know all too well that although they appear to be part of a consultation process, the intentions of the Government are pretty clear-cut – they intend to cut back on spending in the renewable energy industry.

Many concerned parties are questioning the timing of the announcement immediately after the House of Commons has risen for the summer recess, as proper parliamentary scrutiny cannot now take place until after the deadline for the consultation process passes.

The measures announced will raise more questions for potential investors in low carbon, renewable technologies, many of whom are already struggling to finance projects after a series of knee-jerk policy changes. These latest changes only undermine current levels of certainty for the lowest cost renewable technologies and inevitably fail to provide any indication of the future investment potential.

The main impact for consumers and the PV industry as a whole will also be one of confidence. The economics of solar PV are already strong, but there is still the need for Government incentives to remain in place for one or two more years in order to get to the Holy Grail of energy parity. This is where the cost of electricity generated by PV is equal to or less than that of conventional energy.

Solar PV is already cheaper than most other forms of renewable energy and can be deployed almost immediately. Announcements like this only confuse the message associated with the technology. In 2011 consumer research showed that the majority of the public were of the opinion that solar PV support (namely the Feed-in Tariff) had been switched off by the Government, when in fact that conditions soon after provided similar rates of return for smaller capital outlay.

It is hard to say at this stage what the impact will be on the industry as a whole. Solar PV equipment costs had already fallen significantly and frankly global influences on the price of PV make anything the UK does insignificant in terms of policy change.

The most significant impact will be that the UK will once again fall behind its peers in the deployment of renewable energy and the development of a green economy. Valuable skills will either be mothballed or lost to the industry until a more progressive less short-sighted administration returns to power, something we know is not likely to happen for at least five years.

The Solar Trade Association is in the process of outlining a number of steps that need to be taken in order to ensure the PV industry becomes self-sufficient after subsidies digress and eventually end.

The potential conflict between the PV industry and the UK government however lies with the politics of power. The predicted savings of around £10 per a year on each customer bill is surely a price that most UK power consumers would be willing to pay for the benefits of a cleaner, more independent energy structure? We can only hope that the consultation process actually involves consultation and that common sense prevails.

Ian Draisey

Ian Draisey

 

 

An opinion piece from Ian Draisey, Managing Director, BayWa r.e. Solar Systems Ltd.

 

 

About BayWa r.e Solar Systems Ltd BayWa r.e. Solar Systems Ltd is one of the UK's leading wholesale suppliers to the solar PV installer network. Head-quartered in Machynlleth, mid-Wales and operating across the UK and Ireland, BayWa r.e. is an approved ISO 9001:2008 company for the procurement and supply of high quality products for solar PV applications. As part of the German BayWa r.e. renewable energy GmbH group of companies, we offer competitive pricing with direct access to Europe-wide stocks of high quality, high profile solar PV brands and products.

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