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Solar boom and bust: feed-in tariff RIP?

Posted by Howard Johns on 25 August 2011 at 9:05 am

Here we are in the midst of the UK “solar boom” and already this marvellous success story is being dismantled in front of our eyes.

Speak to most of the new marketing-focused solar PV companies out there and PV is still the best investment ever. They are right, it is good at this moment for domestic customers. But they make no mention, and perhaps have no understanding of, the dire situation that faces the UK PV market in the coming months.

If you look at the news on PV it is still dominated with massive deals being signed to deliver millions of pounds worth of PV over the next six months – with apparently no thought to how all these multi-million pound schemes will secure funding with the new capped feed-in tariff (FIT) budget. The cash will simply not be there to fund all these projects.

But surely it’s not that bad – so why FIT RIP? In its very essence a feed-in tariff MUST NOT have budgetary caps in place – that’s one of the golden rules. Schemes with budgetary caps will always end up with stop-start support (a la LCBP grants), and robbing one sector to pay another, and “hitting the wall moments” where the funds run out.

One sector in the UK PV world has just hit the wall – it is called 50kW to 5MW – or as government officials labeled it “super-size” solar. The rhetoric was all about investors hoovering up all the cash at the expense of everyone else, and it seems that most of the public and a large slice of the industry bought that idea with virtually no question. But if you talk to the people operating in the 50kW and up arena the reality was different: some investors yes, but also lots of communities, businesses, farmers, families, individuals and even the government itself, have have all been stopped in their tracks. Much personal investment and goodwill has been lost here as people up and down the country have had their exciting plans destroyed.

I am not saying that the feed-in tariff for PV should have unlimited resources, but the original scheme had levers to control cost – called “degression”. If DECC was worried about the impact on bills then it should have used them. Originally the feed-in tariff was removed from the normal budget setting procedure due to the way that the cash is raised – by a levy on bills, and its unexpected inclusion on the UK balance sheet is essentially where the problem started.

No one seems to know why this happened or who made the decision. So instead of an early review of the feed-in tariff to reflect the cost reductions that have occurred in the industry, we have had the “fast track review”, followed by a second review happening now on some rules they missed and get ready for more uncertainty because we are soon to launch into the full review of the scheme. Oh joy! 

The Solar Trade Association (STA) has been working hard in the last few months to try and change opinion on solar PV and to try salvage the situation. We have launched the Our Solar Future campaign, released a solar revolution strategy for the UK, and commissioned a report from Ernst & Young verifying our analysis.

We have had some success – a Guardian headline where Greg Barker admitted he had got it wrong on solar. But getting Greg Barker on side is not enough it seems. Budgets are controlled by the Treasury.

The cost of a sustainable feed-in tariff over the course of this parliament would be about £3 per household per year – a coffee a year each! But the cost is only half the story. The Treasury, which essentially is controlling this, is also preventing the massive economic benefits created for every £ spent on the FIT. What other sector in the UK can boast that it created 10,000 jobs in the last year, to name just one aspect?

We really need to work on getting the Treasury to understand all the positives as well as just the base cost. It may be our only hope of building the sustainable PV industry that the UK needs.

Photo by Liz West

About the author: Howard Johns is the founder and MD of Southern Solar Ltd and a director of the Solar Trade Association.

If you have a question about anything in the above blog, please ask it in the comments section below.

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Comments

2 comments - read them below or add one

Ecosource Solutions

Ecosource SolutionsComment left on: 6 October 2011 at 8:16 pm

Great post and solemn reading as to which Treasury bean counter is looking at the smaller picture and not the bigger one I wonder?

We do need the Treasury to understand the positives - couldn't have put it better, if we can help in anyway, we'd be happy to.

Byron

Exeter Solar Panel Installer - Ecosource Solutions 

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Alban Thurston

Alban ThurstonComment left on: 30 August 2011 at 5:01 pm

Excellent post, Howard.  Which minister or Treasury mandarin has ever answered your question, explaining why HM Treasury did the equivalent of slamming FiTs into reverse gear, when legislation already made other controls available, including degression? As the current manager of DECC's  FiT review told a conference in June, the Office of National Statistics was wheeled in, to rubber-stamp the miniscule, previously uncapped levy on conventional electricity as a 'tax'. Hers was an explanation on how the Coalition castrated FiTs. ministers have never given a convincing reason why. They’re too busy, covering up this indefensible panic & idiocy from HM Treasury, applauded doubtless by Big Nuke & the Smokey Six.

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