A cut too far on solar feed-in tariffs? The government has proposed reduced sub ...

A cut too far on solar feed-in tariffs? The government has proposed reduced subsidies for domestic solar electricity production as part of an urgent effort to keep the feed-in tariffs (FiTs) scheme budget under control, and to reflect the plummeting costs of the technology. Indeed the cuts will help to put the solar industry on a steadier, clearer and sustainable growth path, avoid boom and bust for the industry and protect the wider FiT scheme, said Energy Minister Greg Barker. Or they could put large parts of the solar energy industry out of business, according to industry bodies such as the Microgeneration Council. The proposals, which are subject to consultation, would introduce a new tariff for schemes up to 4 kW in size of 21 p/kWh - down from the current 43.3 p/kWh. Reduced rates are also proposed for schemes between 4 kW and 250 kW. Climate Change and Energy Minister Greg Barker said: ‘The plummeting costs of solar mean we’ve got no option but to act so that we stay within budget and not threaten the whole viability of the FiTs scheme. Although I fully realise that adjusting to the new lower tariffs will be a big challenge for many firms, it won’t come as a surprise to many in the solar industry who’ve themselves acknowledged the big fall in costs and the big increase in their rate of return over the past year.’ The cost of an average domestic PV installation has fallen by at least 30% since the start of the scheme - from around £13,000 in April 2010 to £9,000 now, according to the Department of Energy and Climate Change (DECC). There is a finite funding allocation for the FiTs scheme so as to limit the impact on energy consumers, who pay for the scheme through their bills, adds DECC, and a recent surge in households installing solar PV has threatened to break the budget. There were over 16,000 new solar PV installations in September alone - nearly double the number installed in June. And nearly three times as much solar PV as projected has so far been installed, with over 100,000 separate installations and over 400 MW of capacity. The new proposed tariffs would apply to all new solar PV installations with an eligibility date on or after 12 December 2011. Consumers who already receive FiTs will see their existing payments unchanged. The proposed new tariffs will offer a rate of return of around 4.5% to 5% index linked and tax free (for domestic installations) for well-situated solar PV - broadly comparable to that intended when the scheme was set up, says DECC. The tariffs are broadly comparable to those offered in Germany, which has also recently reduced its tariffs. The consultation also proposes a new energy efficiency requirement that would mean from 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. However, the microgeneration industry says it is reeling from the severity and speed of the government’s proposed cuts to the FiT for solar PV. Dave Sowden, Chief Executive of the Micropower Council, said: ‘Within four hours of these proposals being announced, we received our first phone call of a company starting a statutory consultation with staff over impending redundancies. Cuts to reflect the success of the FiT in reducing the industry’s costs are necessary, expected, and the industry is ready for them. But these proposals go much too far.’ The Renewable Energy Association was less critical, but suggested that the proposed changes may cut employment in the PV sector by 40% and have unfairly large impact on the social housing sector.