Sunday, February 26, 2012

Sun continues to set on feed-in tariffs as plans for cuts are laid out

Sun continues to set on feed-in tariffs as plans for cuts are laid out

17 February 2012

Solar feed-in tariffs have been the environmental hot topic these past few months, but on February 9 the final terms were set in stone.

The new system that governs feed-in tariffs was apparently necessary because of the reduction in cost in installation but also due to the surprisingly large amount of people that were getting solar panelling. In reality the Government created an easily utilised system that would give a huge number of people jobs in the middle of a job crisis. So it’s not so surprising that so many people took up the job and quickly made the process more efficient to maximise profit, while also selling it very effectively, if not always honestly.

Ed Davey, the new Energy and Climate Change Secretary, claimed that the reforms were necessary due to “the uncontrolled surge of solar photovoltaic (PV) installations in the latter part of last year, driven by rapidly falling costs, placed a huge strain on the FITs budget”.

It’s been a long painful journey for the mass amounts of PV workers created by the heavily subsidised industry, but finally they have a realistic view of what their future might be.
The immediate changes to take place are:
  • Tariff rates of 21p/kWh are to take effect from April 1 2012 for the standard domestic panels (≤4kWh) under 25. All applications for solar panelling after March 3 will be placed into this FIT bracket but will receive the original FIT rate up until April 1.
  • Properties that apply for the feed in tariff after the April 1 will also need to meet a D standard on the Energy Performance Certificate ratings. Apparently 50 per cent of people fit into this area more than the original estimation, those below a D grade will have to either raise their status or apply for a lower tariff based on their rating.
  • Multi installation rules will also come at the beginning of April. Anyone with more than 25 panels including private citizens and organisations will be given only 80 per cent of whatever the current FIT rate is.
Proposals to make sure that the system is sustainable in the future (consultation2A) primarily due to continually reducing installation costs along with the possibility of increased demand are as follows.
  • Tariffs for the ≤4kW panels will lower to a range of around 13.6p to 16.5p per kWh after July 2012, these will then decrees gradually over time based on estimated cost reductions and an annual review.
  • Solar PV will receive a 5 per cent reduction in October of 2012 and then a further 10 per cent reduction every 6 months. If the installation ratio goes to 125 per cent of predicted installations they will also activate a contingency mechanism that will bring forward some reductions on tariffs. This could lead to two changes a month to the tariff rate in worst case scenarios.
  • If you where to buy you solar panelling on the first of April it would supposedly decrees from 21p to then 12.9 in October and then down to 7.7p by April 2015.
There’s no denying that feed-in tariffs have become considerably less attractive to the consumer. While they were originally a very simple idea, their popularity, combined with both the solar industry and the average citizen recognising a good deal when they see one, has essentially put the fear of God into the Government as they watch their idea drain huge amounts of money with very little political gain.

Ministers seem painfully aware that given the inefficiency of solar panels especially in the English climate, they will have a hard time claiming kudos for the programme despite the cost. This is only made harder by the Government defending the lowering of the tariff by pointing out the ineffectiveness of solar panels, even saying that it was not appropriate for them to spend so much of the energy budget on something that accounts for just 1 per cent of the energy supplied in the UK. How he could have estimated that figure given the amazing take off of solar panels and the continued progress that would have been made is not forthcoming.

It’s clear that the Government have backtracked on this subject, first it’s worth paying out large amounts for solar panelling then when its popular they have to cut the amount returned in half. ‘Rent-a-roof’ operators will lose huge amounts of business after being lured into an industry that was made so attractive they could not resist. Now they have invested in training and the tools required, there is a big chance many will need to sell out or go bankrupt.

How ministers can justify cutting the tariffs in half due to lowering costs of installation which have only gone down by 8 per cent is beyond most mathematicians. However, making a financial mistake that could have seen taxpayers shelling out billions for a scheme they thought would be ignored is not surprising and should probably be accepted as another bout of short-sightedness from the Government.


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