The previous Labour Government was memorably accused of failing to fix the roof while the sun shone. The solar industry might be thinking the same of the present government, which the Prime Minister asserted would be “the greenest ever”.
Recent government announcements show that support for some renewable energies, such as offshore wind, wave and anaerobic digestion, is being maintained. In contrast, that for solar photovoltaic is being cut drastically, which was expected, and being cut precipitately, which few expected. The feed-in tariff for small domestic solar PV installations is to be cut by more than half from 12 December.
In announcing this decision, energy minister, Greg Barker, said that “Boom and bust for solar must be avoided”. This is a phrase we have heard before and Barker must be hoping that it doesn’t come to haunt him as it did Gordon Brown.
The growth in solar PV has been dramatic. The generating capacity of solar photovoltaic installations has increased dramatically from 23 MW in 2008 to more than 400 MW from 100,000 individual installations by September this year. Yet it needs to be remembered that despite this dramatic growth solar PV accounted for just half of one percent of the electricity generated by renewable means. That is a tiny proportion of our electricity needs, yet the growth of the solar PV sector has all but exhausted the budget for feed-in tariffs.
The Government claims by cutting the feed-in tariff it will save households £23 on their annual electricity bill by 2020. It also says that industry costs are falling. The cost of an installation in April this year was £13,000, but now it is down to £9,000. Under these circumstances there is no longer a need for such a generous subsidy.
The trouble for the solar PV industry is that, at least up to now, it makes such a small contribution to total electricity generation. This means that were it to collapse, the impact on supply would be negligible. But political considerations are also counting against it. Ministers will be acutely aware of the need to address consumers’ bills, especially for energy. They will have asked themselves why upwards of 20 million households should pay extra on their electricity bills for the benefit of just over 100,000 households who are able to put up around £10,000 to install solar panels on their roofs.
Last week the British Photovoltaic Association held a reception in the House of Commons. Greg Barker was a, perhaps diplomatic, no-show. In his absence, the Department for Energy and Climate Change sent a senior official to deliver a pretty blunt message to the industry that the party is over. He said that the problem is that the rate of installation is unsustainable. In October alone there was a new peak of 4,216 installations with 15 MW capacity.
As he so deftly put it: “This is a problem in a fiscally constrained environment.” And although the Government is consulting, he said that the industry needs to plan on the basis that the “decisions” outlined in the consultation will go ahead.
Some figures in the industry are threatening legal action over the Government’s decision. This will not surprise ministers and they seem determined to press ahead regardless, confident that they will prevail. But the industry needs to do more than just shout “No!” Legal action is not a substitute for coherent, thought-through and practical policy proposals. The solar industry needs to look beyond open-ended generous subsidies and find other policy proposals that can support the solar industry’s growth. That is the best way to avoid bust following boom.