THE outlook for solar energy subsidy in the UK has been obscured since the UK Government confirmed in October that feed-in tariffs (FITs) for solar photovoltaic (PV) technology would be cut, nearly doubling the payback period for householders.
Last month the High Court ruled in favour of Friends of the Earth and two solar companies, finding that the Westminster Government’s consultation on the solar FIT breached rules governing consultation and was unlawful.
Then the Energy and Climate Change and Environmental Audit committees added fuel to the fire, reporting that the scale and pace of the proposed cuts were a “shock” for the PV industry and threatened the stability and predictability needed for investment in renewables.
Climate Change Minister Greg Barker promptly pledged to appeal immediately against the judges’ ruling, adding: “Regardless of (the) outcome, the current high tariffs for solar PV are not sustainable and changes need to be made in order to protect the budget, which is funded by consumers through their energy bills.”
On Friday, the Court of Appeal will hear the government’s challenge to the High Court ruling.
Considering the coalition’s declared intention of bringing the economy under control, few see Mr Barker or his colleagues backing down, and it seems safe to assume we’re heading for major cutbacks in solar subsidy if not this month, then certainly in the very near future. The industry keenly awaits the results. But does that undermine investment on solar? I don’t believe so.
The falling cost of capturing the sun’s energy, against a background of rising fossil-fuel prices, has made investment in this technology far more attractive than was originally anticipated – though some in the industry claim the warning signs of subsidy cuts were always there.
Householders, investors and suppliers have rushed into the technology. Faced with growing costs and a worsening economic climate, and wanting to avoid the industry falling victim to “boom and bust”, Mr Barker has halved solar power subsidies.
The changes will affect not just the solar industry but also commercial and residential owner-occupiers who are looking to reduce their carbon footprint or as part of their endeavours to advance sustainability.
As the High Court action confirmed, investors are concerned by the scale of the cuts combined with their sporadic timings. Yet many will sympathise with measures to rein in spending and ensure fund are available to meet the other renewable installations.
In our view, solar remains a very attractive means of maximising energy resources and coping with the uncertainty that surrounds the price of fossil fuels especially for projects less than 10kW. We should accept that changes are happening – then ask how we can ensure people understand the benefits of solar and maximise their returns.
While the payback for solar investment is longer, our calculations show the returns will be good with bank rates presently so low.
One school of thought is that the cost of the equipment will naturally decrease as the level of the FIT was keeping it buoyant.
Fiona Samson is a chartered surveyor specialising in energy and rural matters at the Elgin office of CKD Galbraith