Photo: doggy SchnauzerGovernment treasury departments don’t generally respond well to the idea that the environment matters, and here in the U.K. things are no different. Yesterday, Energy Minister Greg Barker announced proposals for a 50 percent reduction of the “feed-in tariff” — a program that guarantees homeowners an income for the power they produce from solar photovoltaics (PV). In doing so, he is widely viewed to have lost an argument with the Treasury about whether the government should keep its investment in domestic solar power at levels that support wide-scale adoption.
The original aim of the tariff, known as FIT, was to make solar energy attractive at both domestic and small commercial scale by giving investors confidence in getting a return within a reasonable timeframe.
It’s now all coming together as a classic British bodge, a story that begins with grandiose rhetoric and ends in penny-pinching muddle. The scheme — which only began in April 2010 — has been revised down three times in less than a year, with the change announced yesterday halving the contribution from 69 U.S. cents per kWh to just 34 cents — in just six weeks’ time, if the new proposals go ahead.
In essence, the program seems to have been a victim of its own success. Three times more applications have come forward than the government expected, and it seems the funding is being used up too quickly.
You might think this is a good thing — a plan to promote solar power has actually worked, and better than had been hoped. But it has clearly set alarm bells ringing in the Treasury, where investing in the green economy is deeply countercultural. Chancellor George Osborne began the charge at the Conservative party conference last month, downgrading the importance of climate change and giving his officials tacit permission to wield the knife on FITs without mercy. It was always the plan to “taper” the scheme, but yesterday’s announcement is more like falling off a cliff for many of the projects in the pipeline.
Various reasons for the drop-off have been put forward by the government Department of Energy and Climate Change (DECC). One is the falling costs of solar power installation, which now means solar panels could pay for themselves in as little as six or seven years. That’s now going to go back up to 14 years or so — putting solar systems safely back in the realm of fantasy for most British homeowners, and bringing into play a raft of social-justice questions. Another is that there’s a gold rush for solar power going on and “boom and bust must be avoided” — apparently by going straight to bust.
And the savings? The government estimates it will be reducing its investment through the FIT by three-quarters, to just $400 million in 2014. Because the scheme is paid for out of everyone’s energy bills, these savings are being framed in terms of the impact on those bills in 2020 — though I’m not sure anyone really has a clue what those are likely to be. The logic seems to be that it’s better to rely on imported energy than make your own if you want to keep the costs down — with the assumption that the U.K. will somehow remain immune to the energy-security issues worrying everyone else.
Needless to say, the solar PV industry is up in arms. Howard Johns of the industry’s “cut don’t kill” campaign claims this sort of cut will “kill the U.K. solar industry stone dead,” wiping out 4,000 companies and 25,000 jobs. Some argue that the only affordable schemes will now use cheap Chinese panels, cheap labor, and corner cutting, freezing out the more reputable businesses. Juliet Davenport of Good Energy pointed out that “DECC has cut the one scheme that gives households control over their rising energy bills — showing that the Treasury doesn’t have a real grip on the economics of the energy market.”
The twittersphere is buzzing too: “Going trick or treating?” asked @lizmale last night: “Why not trick someone into setting up green SME [small/medium enterprise] & treat them to policy u-turn that destroys their business.” She caught the mood and got dozens of retweets. Others using the #FITs hashtag had similar reactions.
It’s not just the hundreds of new solar businesses — many of which are apparently starting layoffs today — that are suffering. Lots of work by local authorities and “social landlords” — those who run housing for people who struggle to afford it in the private sector — is now holed beneath the waterline. And the community renewables sector, which was growing up to fill the gap between the government’s aspirations for green power and the inability of individual householders to afford them, is also hit hard.
Where I live in Oxfordshire, the Low Carbon Hub — a new social enterprise being set up to enable communities to invest together to put solar power on the roofs of public buildings like schools — was revising its business plan Tuesday morning. The investment case is now much harder to find, but Barbara Hammond, one of the directors of the new business, is surprisingly sanguine: “We need an announcement quickly from government about genuine community schemes being exempt from the additional cuts … We knew a further cut was coming and the case for it in terms of reduced costs of installation does hold some water. But the timing certainly makes life difficult, and if I were someone with a community project in the pipeline that now doesn’t work financially, I’m sure I would struggle to find anything good to say about this or encourage others to act.” Who said British understatement is dead?
Of course, these are just proposals and there is a consultation period, so we can all have our say. That said, the government has confirmed that the cut will be put in place 10 days before the consultation period ends. As Jeremy Leggett, CEO of Solar Century, tweeted yesterday: “So you ‘consult’ until 23rd Dec but cut off tariff from 12th? I guess you have a good lawyer?”
It’s all the more ironic as the announcement came the same day the government said it would spend $1.6 billion on job-creation schemes, including a new gas-fueled power station in Yorkshire. Threatening real new jobs in solar power to fund possible jobs in fossil-fueled power seems an odd trade-off if you are serious about ambitious carbon-reduction targets and creating the “greenest government ever.”
It’s hard not to see Britain’s target of 20 percent power from renewables by 2020 receding again. But perhaps that was never really the plan.