Wednesday, 2 November 2011

Solar Sundown

Many council and free solar schemes have checked into the Sundown Motel

A few weeks ago, and somewhat inexplicably,Winchester City Council in Hampshire cancelled its plans to install solar panels on their municipal buildings as they said that they did not stack up financially and that the prices they got back from their tender were not what they were expecting. To any informed outside observer this must have been nonsense. Up and down the country Councils had been pursuing schemes to install panels on their own buildings and council houses having done the maths and concluded their proposals were self financing. Possibly Winchester knew something the rest of us didn’t about the FIT cuts that were coming over the horizon.

The implications of the Governments rushed review of the Feed In Tariff rates for solar photovoltaics are significant and in many ways tragic. In Leeds the City Council had innovative plans to use the Feed In Tariff incomes from installations on Council houses to help finance free insulation for private homes. That great idea would now appear to be a total dead duck. In Kirklees we have/had a thousand house solar PV programme some of which are in the Newsome Ward. I’ve asked the Council’s Leader Councillor Khan and the Chief Executive to see what can be done to accelerate installations ahead of the cut. It’s going to be difficult and I anticipate a lot of weekend working to get PV systems commissioned and working ahead of the deadline.

So why are government making this cut? Well the first thing to say is that this is not public money we are talking about so this is not saving you and me tax. We do however all pay for the feed in tariff through a levy on our fuel bills along with a number of charges which subsidise nuclear and renewable programmes. The FIT element of this is reckoned to cost the average household around 30 pence per year or less than 1 penny/week. As the FIT is the result of public policy however it is counted in the governments Public Sector Borrowing Requirement and so Treasury has put a cap on it OR as Climate Change Minister Greg Barker refers to it ‘a budget’. Given the very low cost of the tariff the cap is obviously set very low demonstrating a very limited ambition by government for the solar sector. Government’s argument is that the capital costs for installing PV have dropped dramatically and therefore the FIT should drop. While this is true it is only half the story. Government are ignoring the fact that demand for PV has been generated by the level of FIT that has in turn helped generate the economies of scale that have enabled prices to come down. So if you reduce the FIT rate then capital costs are likely to start rising significantly. There is probably a reasoned argument for a limited FIT reduction but not one of over 50% that will put companies out of business and make thousands unemployed.

The cuts to the FIT rates take effect on the 12th of December yet the consultation on the review of feed in tariffs is due to close on the 23rd of December. So Merry Christmas everybody! This is just one of the reasons that solar companies are pursuing legal routes to challenge government over this abomination of a consultation. The other reason is that right now there will be many millions of pounds worth of solar panels and inverters on the high seas already bought and paid for by British companies on the understanding of a return based on current FIT rates. Some of these solar panels will have been destined for Council projects such as those planned for Kirklees, Leeds and York but NOT Hampshire.

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