FiT and Green Deal – confusing two separate but parallel policy goals.

Whitehall moves to make energy-efficiency a must for FiTs

Published:  20 January, 2012

LONDON: While all eyes were on the court case brought by campaigners angry at subsidies being cut before the consultation ended, the Builders Merchants' Federation was defending its members' interests to prevent solar supply and fit firms from by-passing the merchant sector.

According to BMF, the proposals pose a potential threat to merchants. The BMF is concerned that if the Government is not challenged over this, specialist solar PV supply and fit installers will morph into more general energy-efficiency businesses.

In a little-noticed section in the consultation document, BMF staff were alarmed at an idea to have energy-efficiency improvements done as a pre-requisite for applicants wishing to claim solar Feed-in-Tariffs. The intention is to make eligibility for the proposed new reduced levels of tariffs conditional on buildings meeting a specified minimum energy-efficiency requirement.

Specific measures or standards have not been a condition since FiTs were introduced. But the Government is now saying there are strong arguments for revisiting this as part of the current review. It wants to strengthen the role of FITs to help drive energy-efficiency improvements.

In its formal written response, the BMF told the Department of Energy and Climate Change (DECC) that the Government is mistaken if it thinks there are strong arguments to bolster the role of FiTs in this way. Ministers must understand that to do so risks confusing two separate but parallel policy goals:

* the generation of electricity from renewable energy – primarily for onsite use

* the improvement of the thermal performance of property

Prior to Christmas, the Department had two consultations running concurrently: the FiT review and the Green Deal exercise. Federation staff were astonished to learn DECC is considering linking the two policies. They have different objectives with clear goals and ambitions. And, one is paid for by energy companies buying green electricity, the other by ordinary citizens to cut bills.

The BMF maintains that improving thermal performance is about air tightness, and burning less oil or gas to heat rooms and water.

The overwhelming majority of properties do not use electricity for space heating purposes. The Federation says no connection between solar FITs and energy-saving improvements should be made by DECC under any circumstances.

The BMF sees two distinct threats to its members.

First, it is quite likely supply and fit installers already obtain solar PV equipment direct from manufacturers or wholesalers. Most have no proven loyalty to merchants, so the temptation will be to also go direct to the makers of energy-efficiency inputs – or buy from the DIY sheds.

Second, the boom in solar PV led to SME start-up businesses joining the installer market. Most of them will not be capable of tackling loft, cavity wall or solid wall insulation activity. The result will be that only medium and large-sized businesses – ie those capable of investing and adjusting their operations to offer a complete package – will be able trade cost-effectively.

The BMF foresees existing SMEs would struggle – or be forced out of the market – if the DECC proposal is adopted by ministers. At a time when politicians are desperate for jobs and growth, and trumpet their eagerness for a green economy, any business failures or job losses could turn out to be an unintended consequence.

BMF policy manager, Brett Amphlett, commented: "Merchants and their trade customers should resist muddled thinking in Whitehall if the idea to link FiTs to a building's energy performance is genuinely being examined.

"We seriously question where this idea came from, and who is putting it forward.  We are suspicious of DECC's intentions and question the motives behind this suggestion. The move can only be:

* a thinly-disguised attempt to shore up the fledgling Green Deal policy

* or a way to put people off applying for solar FiTs to ease the budgetary position

The Federation's position was supported by BMF member, the Grafton Group, which also submitted views during the solar FiT review period. But other trade associations that represent micro-generation and mineral wool insulation businesses have publically called for the link to be made.

DECC went to the Court of Appeal last Friday (13 January) in an attempt to overturn a High Court ruling. In December, Mr Justice Mitting decided that the Minister was "proposing to make an unlawful decision" in relation to changing the reference date from April to 12 December 2011. The judge added it would be unlawful for the Energy Secretary to carry out his plan to implement the cuts on a date that fell in the middle of a consultation period.

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