For the past few weeks all anyone in the UK solar industry has been talking about is feed-in tariff cuts and unexpected deadlines. In fact, since Government announced it would be reducing the incentive rates by more than 50% for household solar installations, almighty chaos has broken out. Friends of the Earth and two solar companies recently won their case against the unforeseen December 12 cut-off point – but is this really a “victory” for the UK solar industry, or have we been plonked between a rock and a hard place?
Having won the right to appeal against the UK Government’s December 12 deadline to install solar systems at the higher feed-in tariff rates, Friends of the Earth, Solarcentury and HomeSun on Tuesday began day one of two in the Royal High Court of Justice. The solar supporters put forward that by imposing an installation deadline weeks before the end of a consultation period must breach some form of legal guideline. On December 21, a High Court judge agreed with that claim, refusing the defence leave to appeal.
What industry hopes the ruling means
The whole point behind the days, weeks and months of lobbying and sleepless nights was to avoid a situation where the UK solar industry tripped over and never quite got back up. This was something none of us (and I believe this includes Government) wanted to see. In fact, the premise of the Our Solar Future campaign was to cut the feed-in tariff but without stopping industry in its tracks, or ‘Cut don’t Kill.’
Howard Johns, chair of Solar Trade Association and spokesman for the Cut Don’t Kill Campaign said: “This is not just about a vital high-tech industry fighting for its survival. Our message to Clegg and Cameron is that the solar industry makes economic, social and environmental sense. Destroying it makes no sense at all.”
At the time of the announcement many argued that hundreds, if not thousands, of jobs would be lost as a result of the six-week deadline (which was announced on October 31 to be implemented on December 12) alongside a great loss of profit and an inevitable boom and bust scenario.
“Such deep cuts to the tariff would kill the UK solar industry stone dead. We are happy to accept some cuts, but the Government must recognise that wiping out 4,000 companies and 25,000 jobs by cutting too deeply would be an appalling waste of economic potential. Our message to the Government is cut us, but don’t kill us,” continued Johns.
While Friends of the Earth’s executive director Andy Atkins said, “The Government's rushed plans to slash solar subsidies have pulled the plug on countless clean energy schemes and threatened thousands of jobs – we believe this is not just unfair, it’s unlawful.
“We agree falling installation costs mean solar payments should fall, but the speed and scale of these proposals will have a devastating impact on a thriving industry.”
These claims cannot be faulted. The Department of Energy and Climate Change (DECC) acted out of the blue, and gave the industry just six short weeks to complete all planned projects if they were to receive the higher FiT rates. At this point many were thrown into turmoil, having to work seven-day weeks (sometimes through the night) in order to complete the jobs and gather the return they were expecting. It was unfair, and it shouldn’t have happened.
However, on the flip side, something needed to change, and fast.
The government had set aside just £860 million for feed-in tariffs during the period 2010–2015; £360 million of which must be spent during the period 2014–15. Disturbingly, analysis by Feed-In Tariffs Ltd shows that systems already installed (which are well over 500MW for 2011 alone) will swallow 90% of the available four-year funding; representing a commitment of £773 million in tariff payments to April 2015 against Government’s ‘spending envelope’ of £860 million.
According to this analysis, for the remaining three years the rate of new installations must be cut by 95% to stay within budget. This is frightening when we consider that the recently proposed cuts were just over 50%.
“The government has been its own worst enemy,” said Feed-In Tariffs Ltd director Philip Wolfe. “By repeated tinkering with the feed-in tariffs it has created a series of stampedes in the run-up to deadlines in August, October and now December and these have simply brought forward the expenditure.”
So, what will actually happen?
Unfortunately, while this is a victory for the UK solar industry and a moment to go down in history, it may well be remembered for all the wrong reasons. The fact is, there is just not enough money left to fund the sheer amount of solar being installed at the higher rate. No one can argue with the fantastic amount of uptake we’ve seen since the FiT was brought in on April 1, 2010, but without the Treasury’s support, the future of the UK solar industry is hopeless – at least until we reach grid parity.
In reaction to the news, Ray Noble, one of the UK’s most well-known PV specialists, said: “It is good that DECC have been shown to have acted too hastily, as this was never good for the industry, but of course this also means that the plans DECC were developing for a glide path to 2ROCs by 2015 could now be in jeopardy as 43.3p/kWh may have to be paid out until mid February or even the end of March 2012. This new potential “gold rush” could use up the remaining DECC budget and result in 2ROCs being the only support for solar from April 2012 onwards. This is not good when we are trying to build a sustainable solar industry.”
And there lies the ugly truth.
While it was indeed a victory for the solar industry – which has not known if it’s coming or going since for the best part of two years, December 21 also marks the beginning of another period of great uncertainty. In the weeks leading up to the 12/12 deadline, hundreds of megawatts of solar was added to the MCS database, leading me to believe that yet another flood is on the horizon. We now need to work together with DECC to make sure any future changes to policy are made with industry's best interests in mind. We now need to leave events of the last 12 months in the past and repair this relationship – but the questions remains: are we already too late?
For more insights on the goings-on in the UK's solar industry, check out Solar Power Portal.