The Government has left consumers with a “sting in the tail” according to one industry leader after the unveiling of the latest set of Feed-in-Tariff rates for solar PV.
Ministers had initially planned to reduce the FIT rate to as low as 13.6p/kWh from July 1 but have instead settled on a new rate of 16p/kWh from August 1. There will be further decreases of up to 28% every three months but with the promise that these will not be implemented if the market slows down.
However, Ministers also announced plans to slash the lifetime of the FIT scheme from 25 years to 20 for new solar installations – which will significantly eat into the potential returns in the long-term.
David Hunt, a director with leading renewable energy company Eco Environments, said: “Yet again the Government stands accused of giving with one hand only to take away with the other.
“We are pleased that Ministers have listened to the deluge of complaints from the solar industry about the scale and speed of the cuts proposed in their consultation document earlier this year.
“But we are also disappointed that the Government still seems hell-bent on making life very difficult for the solar industry and the tens of thousands of jobs dependent on it as well as for consumers who are weighing up the pros and cons of investing in solar PV.
“While the return on investment remains attractive at around 6%, by reducing the FIT lifetime by five years consumers will earn approximately £20,000 less than they would have done if the 25 year term had been left in place. This is the sting in the tail that the industry and the consumer could have done without at a time when the market remains extremely fragile.”
Under the present FIT rate of 21p/kWh, the return on investment is more than 10 per cent and is index linked and tax free, fixed and guaranteed for 25 years.
David Hunt added: “We would urge anyone thinking about investing in solar PV to move quickly and get installed before the new August 1 deadline.
“Energy Minister Greg Barker described his announcement today as a new and exciting chapter for the solar industry, but I don’t think too many people working at the heart of our industry will see it in the same positive light.”
Howard Johns of the Cut Don't Kill campaign, added: “Some of the changes in response to our public campaigning are clearly welcome but the Minister's positive rhetoric about our sector also needs to also be set against the reality.
“After the last round of deep cuts, panel installation rates are flat-lining. A further cut of tariffs to 16p from August, with the prospect of more to come on 1 November is too far and too fast.
“Such is the plight of the industry that many will want to give this statement a big thumbs up today. But today’s statement does very little in the short-term to help put the government on course to reach its target of generating 22 GWp of solar electricity by 2020.
“Indeed the Minister told the Commons that these changes would result in levels of installation below last year's. But we need three times last year's installation level every year for 8 years to hit 22 GWp. That puts today's statement in perspective."
And Jeremy Leggett, chairman of Solarcentury, was more upbeat in his reaction to today's announcement.
He said: "Though investor confidence will remain uncertain given the proposed three-monthly degressions, the majority of the government’s policies may herald a new seriousness of intent on solar, and indicate that a meaningful solar industrial policy is now a real prospect for the UK.
“But, it is our responsibility to continue to challenge the government on solar progress until the day the technology becomes a key part of our energy mix.
“Solarcentury looks forward to helping fine-tune vital key points of detail from today’s announcement, and playing its part in charting the roadmap to 22GW of solar photovoltaics by 2020.
“We fully hope that, with collaboration on the scale the Minister expects, industry, government and consumers will together invest to exceed 22 GW. We can all make the UK a serious player within the world-changing solar industry that McKinsey and others envisage by the end of the decade.
“Investors, be they commercial or individual, can potentially be excited about the opportunities in the next years."
Green energy expert Andy Boroughs of Welshpool-based Organic Energy said the announcement had set out a framework for the Feed-in-Tariff but still no certainty for the industry.
He said: “What was always needed was for the Government to properly consult with the solar sector and develop a plan for the future. The reduction in the tariff today was expected and we welcome the delay in the deadline to August 1.
“However, there is still uncertainty for consumers when they consider what return they will get on their investment with plans to link the future reduction to uptake in installations.
“It is disappointing to see the FiT lifetime reduced to 20 years, but I accept that this brings it in line with other incentives.”
He added: “I believe the inclusion of solar power in the UK Renewable Energy Roadmap is the most important aspect of Mr Barker's announcement today. I criticised the report last year for failing to include the technology as one of the key renewable energy sources with the greatest potential to reduce the UK's dependence on gas and oil.
“This U-turn will help reassure the solar industry that the Government is committed not only to its future and the jobs which it is creating, but also to meeting the Government's targets on renewable energy.”
Andrew Lee, general manager at Sharp Solar, said“We welcome the government’s decision to work towards creating a more stable feed-in tariff for the solar industry which helps to bring much needed certainty to the sector.
“This is a chance for the industry as whole to turn a corner and work towards driving growth in the UK.
“The 16p rate still offers opportunities for both investors and homeowners to take advantage of a cost-effective form of renewable energy while also bringing stability to the market. We will continue to maintain a dialogue with the government to continue moving solar forward and instil confidence in the sector.
“It is important to realise that the solar industry can still play a pivotal role and be part of the low carbon economy in the UK, and we are pleased that the government recognises this and is working to create a better, more effective tariff system.”
And Juliet Davenport, CEO and founder of Good Energy, commented: “Good Energy supports a large number of social housing projects receiving the Feed-in Tariff so it’s good that their rates will now be better than expected.
“We’re also pleased to hear Greg Barker confirm that solar power has a vital role to play in the UK’s renewable energy mix, and that the government is now seeking to provide a clearer path forward.
“What is now crucial is that government gets the Renewables Obligation for larger scale solar right as well. Solar has a valuable part to play in a balanced renewable energy portfolio, because the sun is often shining when the wind isn't blowing, and vice-versa.”
Also welcoming today's, Friends of the Earth's Executive Director Andy Atkins said: "After a year and a half of crippling uncertainty, the sun is starting to shine again on the solar industry.
"Greg Barker's 2020 vision will allow solar firms to get back on their feet, protect jobs and plan for the future - but to avoid more fiascos any mechanism for setting subsidy payments must be managed independently of Government.
"The Energy Bill is a once-in-a-generation opportunity to create jobs and tackle high fuel bills by switching our electricity supplies to clean British energy - but current plans will leave the nation hooked on costly gas and risky nuclear power.
"Developing the nation's huge renewable energy potential will help drive us out of recession - the Government must make it easier for communities, schools and hospitals to plug into clean power."