Solar Subsidies May Benefit the Middle Classes. But Is That Bad?

Solarcentury/CC BY-NC-SA 3.0

It's no secret that the introduction of feed-in tariffs has kick started a massive boom in solar installations in the UK. In fact, solar deployment grew 900% in just 18 months. Between generous subsidies and ferocious solar cost reductions, it has become increasingly obvious that feed in tariff rates would need to be cut.

Even the UK solar industry itself has been calling for a lower, more manageable tariff rate.

Solar Industry Fears Excessive Government Cuts
But as The Guardian reports, the fear is now that a hasty Government u-turn on feed-in tariffs will lead to excessive cuts that will damage long term investor confidence in one of the few industries that is growing in this dismal economy.

Do Subsidies Benefit the Already Well Off?
Among the most pervasive arguments being made by the anti-solar brigade is that feed-in tariffs represent a regressive tax that takes money from the poor and gives it to the middle classes. There is, of course, an element of truth to this fact. The tariffs are subsidized by a small surcharge on all energy bills, with money then being used to reward early adopters and generate demand for renewables as they make their way toward cost competitiveness.

Given the upfront costs of solar, many of those benefiting from the tariffs are indeed relatively well off. (My parents and my brother have recently installed solar, and they are not living on the poverty line.) But as the Guardian reports, many lower income households are also benefiting through innovative leasing schemes:

Mother-of-four Amanda Matthews, a customer of solar company Engensa living in Houghton Conquest, said: "The money we save will pay for basic stuff – food, clothes, holidays for our family. Long term we could not continue with energy bills the way they were. Going green is brilliant but this decision is really for us to live."

Engensa cited another example of one customer who was almost forced to move house because of high heating bills, but was able to stay put after taking up a deal to have free panels installed. Green of HomeSun said many of the company's customers were pensioners, for whom the £200 or £300 per year they saved was "critical".

Leaving aside discussion of whether solar is an efficient technology for the UK climate for now (although that is a very valid question), it strikes me that criticism of the tariffs based on their unfairness is grossly short sighted. The primary purpose of Feed in Tariffs and other subsidies is to kick-start an industry and help it compete on a level playing field.

Fossil Fuel Subsidies Benefited the Megarich
Nuclear and fossil fuels received massive government subsidies to get started, and often still receive state support, and one could argue that those subsidies often end up boosting corporate profits and executive pay, rather than bringing down energy bills. It seems to me that distributed financial support for a fledgling industry that offers money back directly to middle class consumers, who then go out and spend money in their local economy, is a progressive step forward, not back, when it comes to energy subsidies.

Sure, many of the recipients don't need government handouts. But neither do the executives of most major utilities either. We'd be better off holding utilities accountable for their outrageous price hikes, instead of complaining about the minute increases to energy bills caused by supporting solar and other crucial industries of the future.

Tags: Alternative Energy | Economics | Solar Power | United Kingdom

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