In Government Support of Renewables, Predictability is as Important as Subsidies


Yesterday I posted a rant on why the market's negative reaction to the Arab Spring suggested our economy is in serious need of reform. VBoring left a comment arguing that the market was not reacting against democracy, but rather uncertainty.

It was, I think, a valid criticism.

That's what makes the ongoing fight over UK renewables subsidies so pertinent. The solar industry won a major victory when hasty government cuts to Feed-in Tariffs (FiTs) were declared illegal in the High Court. But the Government is appealing, and now an entire industry is sitting around waiting to understand exactly what level of cuts will be applied, and what installations they will apply to. Business Green reports that Climate Change Minister Greg Barker has now made efforts to clear up that uncertainty:

We continue to stand by our original proposal," he said, referring to the plan to halve solar incentives for installations completed after December 12 last year. "However, I know that the uncertainty while we await the court's decision is difficult for the industry."

He added that to tackle this uncertainty and limit risks to the scheme's budget in the event that the government's appeal proves unsuccessful and the court orders a return to the previous feed-in tariff level of 43p/kWh, the government will lay draft licence modifications before parliament that would allow tariffs to be cut from April 1 for all installations completed on or after March 3.

The move to clearly set out the Government's intentions was welcomed by solar industry insiders and environmental groups, albeit begrudgingly. Seb Berry, Head of Public Affairs for Solarcentury had this to say:

"The Government is taking an important step today to restore some certainty to the PV market in the short-term, but it is no more than that. The elephant in the room for all FIT technologies, not just PV, remains the Government's decision to impose an unrealistic cap on the FIT scheme in 2010. Until that fundamental issue is addressed by the "greenest Government ever" what we have today is no more than a temporary albeit welcome step forwards."

Meanwhile Germany has been lowering its Feed-In Tariffs by as much as 15%, but it has been doing so predictably and with fair warning. The result is a thriving industry, and an economy where 51% of all renewables are owned by citizens, not utilities. (Who says Government intervention is about limiting our freedoms?)

As a fledgling industry with the power to improve our lives, renewable energy—like coal, oil, automobiles and the internet before it—deserves our collective support. But how we structure that support is almost as important as the level of support we give. Let's make sure that the clean energy industry can plan for the future.

In Government Support of Renewables, Predictability is as Important as Subsidies
Environmentalists often focus on how much support is given to renewables. What's almost as important is the longevity and predictability of that support.

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