The government has today launched a consultation into its proposals to slash Feed-in Tariffs (FITs) on small scale solar installations by over 50%.
The proposals, which were leaked in advance at the weekend, would introduce a new tariff for schemes up to 4kW in size of 21p/kWh – down from the current 43.3p/kWh. Reduced rates are also proposed for schemes between 4kW and 250kW, to ensure those schemes receive a consistent rate of return.
This comes only a few months after the subsidy was drastically reduced for large scale solar farms.
“Urgent action is needed to put the solar industry on a steadier, clearer and sustainable growth path, avoid boom and bust and protect the wider FITs...Reduced subsidies for domestic solar electricity production have been proposed as part of an urgent effort to keep the FITs scheme budget under control and reflect the plummeting costs of the technology.”
The Guardian reports that the cut is likely to nearly double the payback period for householders, meaning someone installing solar panels costing up to £12,000 will only be in credit after 18 years rather than 10 years under the current rates.
This has angered the solar industry and supporters of renewable energy, and threatens free solar schemes which might have helped alleviate fuel poverty – an issue in urgent need of tackling given the stratospheric rise in heating costs – especially in social housing.
The Guardian quotes Daniel Green, of the solar installer HomeSun, saying people without the money to invest £10,000 or more upfront in roof panels would be hardest hit, as suppliers would no longer find it worth their while to install solar panels for them.
But consultancy PwC argued that the deep fast cuts proposed by the government were better than the risk of a bubble which would lead to over capacity in the short-term, followed by cuts later, which would mean sharper job losses.
DECC admitted its expectations had been far too low, with three times as much solar installed as it had projected, with over 100,000 installations so far.
The government says the tariffs are broadly comparable to those offered in Germany, the global market leader in solar energy, which has also recently reduced its subsidy.
The consultation also proposes:
· A new energy efficiency requirement that would mean from 1 April 2012 a property would have to reach a certain level of energy efficiency to receive the proposed new tariff rates. This could include reaching an Energy Performance Certificate level of C or taking up all the measures potentially eligible for Green Deal finance, depending on the outcome of the consultation.
· New multi-installation tariff rates for aggregated solar PV schemes, i.e. where a single individual or organisation owns or receives FITs payments from more than one PV installation, located on different sites.
The FITs question provokes a great deal of controversy and strong opinions both for and against the subsidy – just check out the rants in the comments section of the Guardian piece for an example.
The consultation closes on 23 December 2011.