Government slashes subsidy for solar power

Published:  01 November, 2011

LONDON: The government dampened the booming solar panel installation market with plans to slash subsidies by more than half. The move is a blow to the many contractors that have set up specialist installation businesses to take advantage of surging demand from local authorities and housing associations.

UK Climate Change and Energy Minister Greg Barker today confirmed feed-in tariffs for solar power would be cut from 43.3p/kWh to 21p/kWh.

He said that the government had to take action because of skyrocketing demand. There will also be reduced tariffs for schemes of between 4 kWh and 250 kWh, while from April next year any property applying for a FIT will have to meet a minimum energy efficiency requirement.

"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," Mr Barker said.

"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."

The cost of a typical photovoltaic installation has fallen from around £13 000 last April to £9 000.

Thousands of UK jobs will be at risk as a result of the subsidy cut says Michelle Davies, partner and head of the Clean Energy and Sustainability Group at international law firm Eversheds. "The reduced tariff kills the solar industry in the UK. But more than that, the approach taken by The Department of Energy and Climate Change (DECC) has the potential to fire a hurtful blow to the renewables industry in general by undermining investor confidence," he says.

"How certain can developers of other technologies be that they will be treated any differently if there is a perception at some point in the future that they too are receiving too much by way of subsidy?" he asks.

"It may well be the case that the tariff was set too high, but it needs to be dealt with in a way which does not prejudice funds already committed. DECC has given developers and investors 6 weeks to attain accreditation but many projects are operating within delivery timetables (for panels) of 8 weeks, thereby removing the ability entirely for them to protect sums already invested. Not one of DECC's best moves."

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