Storm clouds gather over solar tariff cuts
PUBLISHED: 16:50 07 November 2011
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As the government prepares to slash "feed in tariff" incentives for solar energy, what will be the effect on East Anglia's micro-generators?
The creation of feed-in tariffs (FITs) was aimed at bringing power to the people – unlocking the potential for regular homes and businesses to generate their own supply of cheap energy from the sun.
It sparked an unprecedented boom in solar installations, ranging from photovoltaic (PV) panels on the roofs of houses and garages, all the way up to the vast “sun farms” which have grown almost unnoticed in Norfolk fields.
Thousands were lured by the promise of a 25-year deal which guaranteed a healthy return for every kilowatt generated – regardless of whether it was used for free or exported as surplus to the National Grid for further profit.
And as energy prices soared and the cost of installing the technology plummeted, the subsidy scheme became even more lucrative in the 18 months since its introduction.
It all seemed too good to be true. And so it proved this week when the government took urgent steps to bring the FIT budget under control.
The proposals now under consultation are to cut the rate for small schemes up to 4kW by more than half – from 43.3p to 21p/kWh. Reduced rates are also proposed for solar installations between 4kW and 250kW, while tariffs for larger-scale schemes up to 5MW had already been cut in August.
On Monday, energy minister Greg Barker said his priority was to put the solar industry on a firm footing “so that it doesn’t fall victim to boom and bust”.
The announcement prompted a last-gasp dash to install solar panels before the December 12 deadline, which will inevitably disappoint many of the budding micro-generators now racing against time to get their schemes installed and certified.
Many installers accept the deal had become too one-sided to be sustained – but are furious that the short five-week deadline will mean anyone with planning applications pending or equipment on order could lose out.
But while some domestic installers insist the new rates still give an attractive return for homes and businesses, the heavyweight investors behind large-scale solar farms said the proposals would “kill” similar developments in future.
Politicians at the Department of Energy and Climate Change (Decc) said that was partly the point – as FITs were intended to help homes and businesses, and not to fill farm fields with glinting cash cows.
Damian Baker is managing director of supplier RenEnergy, which is based at Blofield Heath.
“The first thing to say is that the return on investment is still very, very attractive,” he said. “It is much better than you would get from a bank or a building society.
“The problem is people have got used to seeing a higher rate of return which, as the government says, is unsustainable. But they have changed that tariff with a five-week deadline. We are a professionally-run and funded business, and you cannot run a business in that fashion with five weeks’ notice.
“While this change is needed, it is too much of a knee-jerk reaction and these very quick changes to policy are very difficult to plan for. But the key thing is that while a lot of people will say this is a dire situation, the reality is this is not going to be disastrous.”
At the other extreme of the generating spectrum lies the vast 25-acre sun farm at Carlton Farm in North Walsham, where 18,000 PV panels have been built on low-grade agricultural land, hidden from view alongside the A149.
Richard Atkins, the Norwich-based entrepreneur whose company PV Farms was behind the project, said plans for similar large projects had been stopped in their tracks.
“The cuts which have been made, both for the commercial and domestic systems, are going to kill 90pc of the UK market for the time being,” he said.
“The reality is that the minister was advised that a 30pc cut was realistic, but he has gone for 50pc. He has made some very dangerous assumptions and the industry will slow dramatically as a result. If you want to stimulate something, you have to be responsible about how you yank the throttle back.”
Mid Norfolk MP George Freeman, who is also parliamentary private secretary to the energy minister, said the FIT review had been a “difficult decision” for the Decc.
He said: “The problem with the FIT scheme as it was set up by the last government was that too much of the money was going to large scale schemes – whole fields of solar panels – rather than small generators, and because the subsidy was set too high, and the cost of technology has fallen so significantly (between 30 and 70pc) we believe it was wrong to be paying so much to subsidise big profits. I wouldn’t criticise anyone for exploiting the scheme as it was set up, but government has a duty to protect public funds.”