Study finds UK solar cuts could cost government £100 million

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Analysis conducted by the UK's Renewable Energy Association has claimed that government proposals to cut the feed-in tariff by up to 87% could end up costing the UK almost £100 million (US$153.6 million) in lost tax revenue and additional welfare payments.

The proposals will significantly cap the number of domestic rooftop installations allowed – if the cap isn’t already exhausted by an expected rush to install until 1 January 2016 – with an estimated 15,000 jobs lost as a result.

REA analysis has estimated this to result in a net loss to the taxpayer of £94 million from lost tax and National Insurance revenue, as well as welfare payments. The REA also insists this is a conservative estimate given other forecast that as many as 25,000 jobs will be lost from the sector.

The Department for Energy and Climate Change attracted considerable criticism for failing to include job losses in its impact assessment, claiming it would be impossible to quantify the impact without seeking input from the industry itself first.

This point was further enforced yesterday when energy minister Andrea Leadsom responded to a question raised by Dulwich and West Norwood MP Helen Hayes, who sought clarification on what assessment DECC had made on the impact the proposals would have on British SMEs.

In a response issued last Friday Leadsom said the impact on businesses would “depend on the options taken forward after the review”, indicating that the department would father more information as part of the ongoing consultation.  

Frank Gordon, senior policy analyst at the REA, added that the proposals also damage the scope for energy storage support – technology which the government is on the record of supporting.

“Storage and renewables together will aid local communities to make independent decisions around their energy supplies and save money. Cutting government support now jeopardises this innovative future,” Gordon said.

On Tuesday morning, Lord Deben, chairman of the UK's Committee on Climate Change (CCC), said that the purpose of subsidies was to “help new ways of solving old problems in markets controlled by big companies” and questioned whether or not removing or severely cutting subsidy support would help drive innovation.

His sentiments fly completely against comments made by DECC permanent secretary Stephen Lovegrove before parliament’s summer recess when he suggested that industries often innovated when subsidy support was removed as they looked to still compete.

PV Tech's sister site Solar Power Portal is currently surveying UK solar installers to see where their priorities lie following the proposals to help inform our coverage of new sectors such as renewable heat, energy efficiency and storage. The survey, which will take just two minutes to complete, can be found here.

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