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YouGen responds to government consultation on solar Feed-in Tariffs

Posted by Gabby Mallett on 26 October 2015 at 2:45 pm

Consultation on a review of the Feed-in Tariffs scheme

Response on behalf of YouGen

YouGen is a website which attracts over 550,000 users each year. The site provides information and advice on renewables and energy efficiency measures. It also provides a well-used recommendation service to enable householders to find a local trusted tradesman.

We would like to comment on this consultation and begin by saying that we felt it was particularly inaccessible as a consultation. It was difficult for SME installers to access as there was too much to read, too much covered and too many questions to answer. The Parsons Bickerhoff analysis was particularly dense and really could only be fully appreciated by those with some significant statistical understanding.

That said, we would like to submit the following consultation response. We limit this to the PV aspects as we believe this is particularly relevant at present with the demise of a number of large, and long established, companies who have invested substantially in their Photovoltaics activities not expecting a movement of the goal posts.

Whilst funding in this area has had a history of ‘here today and gone tomorrow’, witness Clear Skies, LCBP and now FiTs, there had been an assumption that once the degression process had been brought in this would be something that installers could work with. Knowing that a tariff will reduce on a quarterly basis is not a problem for installers. However, having the scheme scrapped or the tariff reduced to virtually nothing, is.

We feel that any incentive scheme should be:

  • Time-limited, as this provides the opportunity to review the scheme periodically, and address any market failures.
  • Cost-effective from the Government’s perspective and not be too much of a burden to taxpayers and energy bill payers generally.

It should provide secure and certain levels and have an element of longevity. It should be noted that we particularly supported the degression process and the pre-accreditation process for community schemes.

Constant change and the ‘flip-flopping’ of policies makes for an insecure, uncertain and overly complex landscape, with damaging consequences to what is a strategically important sector. This has already been exemplified by the recent demise of a number of companies, as mentioned above.

We believe that the Government’s proposed revised tariffs would produce quite small savings for consumers; the Energy Saving Trust estimates that it will be only £6 per year by 2020 – a figure recently confirmed by Andrea Leadsom to Parliament. For this reason, we believe that there is no need to cut the tariffs so drastically.

We have noted that Parsons Brickenhoff have not been able to solicit sufficient questionnaire responses to enable a fair comparison of costs of installations, particularly for small-scale PV.

Our research shows that an average 3kWp system would cost around £6,000 to £6,500.  Even at this level the ‘profit’ on a system will be less than £500. PB’s research puts the amount at considerably less than this and some 13% less than RECC when using the median figure and 17% less when using the mean, per kWp.

They note that their results are ‘weighted to reflect potential developer gaming’, yet do not explain how much ‘gaming’ they have found. The prices quoted in the PB research would, for the majority of companies, mean installing at a loss. By using incorrect data here they have changed the economics of the questions and affected all calculations in the document. It should also be noted that a lack of correct data does mean that much of their findings cannot be seen as statistically significant. Whereas EST and YouGen have both accessed current data from actual quotes.

Whilst we appreciate that the solar sector should compete with other forms of energy - without subsidy – eventually, we do not believe that the sector is currently able to ‘stand on its own two feet’. Hitherto, the industry has been working steadily towards achieving grid parity by 2020 - but moving the goalposts in the way the Government is proposing would be very disruptive and the sector would be hit hard, allowing little time for planning and restructuring.

The Energy Saving Trust has calculated the financial effect of the Government’s proposed reduced tariffs. Under the current tariff levels, installing a 4kWp solar PV system costs around £6,740 and should produce a revenue (including both FiT and bill savings) of around £13,800 (over 25 years). This provides a 10-year payback. However, if the same 4kWp system were installed under the new proposed tariff, the lifetime income from the panels (FiT and bill saving) would drop to £5,900. This means that even after 25 years, the system owner would still be £840 out of pocket. As mentioned, we believe a system cost might be as much as this for a 3kWp system. A 4kWp system might be more and therefore the ‘loss’ to the homeowner would be greater.

Cuts of such severity will have an adverse impact on innovation, installation companies, community projects, investment, jobs and overall confidence in the sector. Two recent studies estimate that up to 20,000 or 27,000 jobs could be lost as a result of the Government’s proposals. The effects have already begun to materialise, with four PV installers having closed in a matter of a few weeks – The Mark Group, Climate Energy, Southern Solar and Zep Solar UK. In addition, twenty-five small PV businesses reckon that hundreds more jobs will be lost if the Government's proposed reductions go ahead.

Community groups will be hit particularly hard by this reduction in tariffs. They often use the income from a PV project to provide a longer-term revenue to fund energy efficiency measures elsewhere. This will not be possible at the new rates suggested. Community PV also helps to highlight the concept of providing renewable energy. This, in turn, leads members of the community to begin to talk about energy more generally and potentially to make savings. PV is an awareness-raising tool and can generate other savings: this cannot be overlooked.

One suggestion to limit the current costs of FiTs would be to place more emphasis on encouraging consumers to install integrated solutions – ie: energy efficiency measures either before or at the same time as going for FiTs. This is the best way of reducing energy consumption and cutting carbon emissions, and could be achieved through the linking of incentives to a guaranteed high-energy efficiency standard of the house – for example, either a SAP rating or a higher minimum EPC rating, and possibly weighted to the building’s age and its built form. In this way the FiT available for an installation could rise with the energy efficiency of a property.

We also note from the consultation that, whilst the current degression might represent anticipated reductions in technology cost, there does not appear to be a method to prevent regression should costs rise. Although this might be considered unlikely, it should be considered as a possibility.

Overall, it appears that this consultation is based on a need to cut future costs, rather than a genuine wish to encourage renewable energy and meet our carbon reduction commitments in the future. The review is short-sighted in as much as it acknowledges that the FiT incentive has been a very successful programme, but then proposes dramatic cuts which will inevitably have profound effects on future of PV in the UK.  A longer-term, less knee-jerk, staged degression is required.

Prepared by Gabby Mallett

Director – YouGen

Photo: SuperHomes

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