UK industry wins latest solar salvo

Rachel Parkes and David Hopwood

A solar industry campaign to slow down government-planned cuts to solar subsidies in the UK has won a significant legal victory, but what does this mean for the industry?

The UK High Court gave permission to Friends of the Earth and the solar companies Solarcentury and HomeSun, to challenge Government plans to slash subsidies for solar electricity in the UK.

The hearing took place on 20 and 21 December, and the campaigners got what they wanted: High Court judge Mr Justice Mitting said that Government attempts to push through cuts on projects registered before the end of the consultation period on the proposals amounted to a breach of consultation rules.

However, ministers remained defiant, confirming they would seek another hearing on the subject, with DECC lawyers planning to lodge an application to appeal by 4 January: “We disagree with the Court’s decision. We will be seeking an appeal and hope to secure a hearing as soon as possible,” said Greg Barker, minister for climate change and one of the most outspoken critics of the feed-in tariff.

Feed-in tariff cuts

The Government’s programme of cuts to solar subsidies have caused widespread anger and uncertainty in the solar industry, which had previously enjoyed feed-in tariff support of up to 43.3p/kWh, funded by a levy on consumer energy bills.

Prompted by the Government’s Comprehensive Spending Review in 2010, DECC announced in October its plans to reduce the highest rate to 21p/kWh and slash 10% from the expected cost of the feed-in tariff, imposing a spending cap of £867 million to April 2015.

But due an unexpectedly high take up of the feed-in tariff from enthusiastic consumers, driven in part by a lack of certainty of how long the feed-in tariff will actually last, there is now estimated to be only 25% left of the budget, which means that solar installations will have to drop by up to 95% over the next four years to stay within budget, effectively reducing installations to a trickle.

Solar installers insist they are open to a reduction in the feed-in tariff rate, but have campaigned hard against the speed and ferocity of the cuts. Earlier this year Spain suddenly pulled the plug on its generous tariff, prompting the country’s solar bubble to burst and forcing factories to close - a scenario UK solar companies are anxious to avoid.

And some in the industry appear worried about where we go from here. According to Gaynor Hartnell of the Renewable Energy Association, “Whilst no-one in the renewables industry was comfortable with the manner in which the latest PV tariff review was carried out, the implications of this decision could be very bad for those technologies benefitting from the feed in tariff. The Government will appeal, but if the tariffs do get reinstated, the rush that we’d seen before 12 December will presumably resume. The majority of our members felt that the tariffs should have come down, and we called for a 25% reduction in March this year. This may put the longer-term future of the small-scale feed in tariff in jeopardy, when what we need most is clarity stability".

She added the the industry had been "engaging with Ministers on getting PV on a stable trajectory to the end of this parliament"...but that everything now was "uncertain.”

Even Homesun's Daniel Green conceded that the orginal tariff was too high: “We have always said that a reduction of around 35% to 40% would be OK,” he  told Renewable Energy Focus. “The Government should stick to its original 1 April timing for a new feed-in tariff. If the Government now follows the correct legal process and gives the solar industry time to change along with new FIT rates then there shouldn’t be bubbles.”

Cautionary tale

Paula Mints, director of energy at consultancy Navigant and an expert in the dynamics of the PV market, said: “the biggest threat to a thriving market for solar is retroactive or sudden and often inexplicable changes to the original programs that lead to a lack of investor confidence. The UK changed its rules almost immediately which lead to investor doubt.”

She added: “In the end, you have to set these instruments up properly - an almost insurmountable task- police them carefully, and not scare off investors with sudden and inexplicable changes.”

The UK appears therefore to be a cautionary tale of how not to develop a PV incentive programme.

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Photovoltaics (PV)  •  Policy, investment and markets  •  Solar electricity