UK Solar Industry on the Ropes, Battling Dramatic Government Cuts

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When I posted on rumors that the UK government was planning over 50% cuts to solar feed-in tariffs, I argued that the age-old complaint that feed-in tariffs benefit the middle classes was both inaccurate, as many lower income households benefit through solar leasing, and irrelevant, as energy subsidies have always benefited somebody—and usually it's the corporate elite. By putting money into households across the country, wealthy or not, I argued that these subsidies will help stimulate the economy way beyond the solar industry.

But, much to my surprise, my arguments don't seem to have reached the ears of decision makers in Whitehall. As The Guardian reports, the UK Government has confirmed rumors that it plans to cut feed-in tariffs by more than half because they proved too popular:

The department of energy and climate change admitted its expectations had been far too low, with three times as much solar installed as it had projected, with over 100,000 installations so far.

The cut will almost double the payback period for householders, meaning someone installing £10-12,000 solar panels will only be in credit after 18 years rather than 10. The rate will be reduced from 43.3p per kWh of solar electricity to just 21p, cutting returns from around 7% to 4%.

Given the stupendous 900% rise in solar installations in the past 18 months, coupled with the solar industry's ferocious cost reductions, there are very few who would argue that some kind of cut in tariffs was not on the cards. Even the industry itself was calling for substantial, but sustainable, cuts long before this latest announcement.

The trouble, say solar insiders, is that the rapid, deep cuts now being planned are a classic case of boom and bust economics created by Government flip-flopping. Now the industry has launched the Cut Don't Kill campaign, arguing for a more measured, manageable approach. Howard Johns, of the Cut Don’t Kill campaign, said:

“Such deep cuts to the tariff would kill the UK solar industry stone dead. We are happy to accept some cuts, but the Government must recognise that wiping out 4,000 companies and 25,000 jobs by cutting too deeply would be an appalling waste of economic potential. Our message to the Government is cut us, but don’t kill us – we want a sustainable cut that would allow us to survive and deliver the green growth that David Cameron said he was committed to.”

“The Government has a choice – either they can cut like this and make an entire industry go bust, or they can work with us to properly plan the phasing out of the tariff bit by bit, which will produce a flourishing industry that won’t need any subsidy or support.”

Whether this is an honest case of the Government trying to manage higher than average take up or, as Jeremy Leggett of Solarcentury suggested during our live chat, a case of utilities and fossil fuel interests threatening to chop a competitor's legs off will depend on your perspective.

But either way, given that solar will reach grid parity in many places by 2015, it seems unlikely that it will kill solar as a technology or a global industry—merely delay it, and hobble a domestic market at a time when it was one of the few bright spots in a dismal, fossil fuel-driven dinosaur of an economy.

It's a sad day for Britain.

Tags: Activism | Economics | Electricity | Renewable Energy | Solar Power | United Kingdom