Solar sector slams halving of FITs

31st October 2011


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IEMA

The UK's solar sector has lambasted government proposals that would see feed-in-tariff (FIT) subsidies for new small-scale solar installations halved by Christmas.

Described as a “smack in the teeth” for the UK’s solar industry, the proposed tariffs will cut government payments to the smallest domestic and commercial solar photovoltaic installations by more than 50% and reduce payments for 50kW-250kW projects by a third.

While the reduced tariffs won’t take effect until 1 April 2012, under DECC’s proposals all eligible projects installed from 12 December this year will be switched to the lower payments when they are introduced.

Energy minister Greg Barker said the cuts were necessary to ensure the scheme did not exceed its spending cap.

“The plummeting costs of solar mean we’ve got no option but to act so that we stay within budget and not threaten the whole viability of the FITs scheme,” he said.


“Although I fully realise that adjusting to the new lower tariffs will be a big challenge for many firms, it won’t come as a surprise to many in the solar industry who’ve themselves acknowledged the big fall in costs and the big increase in their rate of return over the past year.”

Representatives from the solar industry have reacted to the announcement by acknowledging that some reductions to the FIT were necessary, but have strongly criticised the depth of the cuts and the effective six-week notice period.

“The combination of the 50% cut and the timing of its introduction is a double-edged smack in the teeth,” said Alex Lockton, managing director of solar panel supplier Freesource Energy.

“There’s a lot the industry could have done to cope with this level of cut if we had been given more time to adjust our business models. Six weeks is too aggressive and the timing is a real nightmare with jobs on the line and Christmas looming.”

Paul Reeve, head of environment at the Electrical Contractors' Association, argued that a more appropriate response would have been to set the tariffs for the smallest arrays at 30p per kWh rather than the 21p proposed.

“We are pleased to see that the smallest installations continue to have the best incentives, but government must stop making snap reductions to any of the FITs,” he said.

“The net result of today’s announcements is that while the best installers aim to ‘keep calm and carry on’ there will be major, and as yet uncalculated, impacts in the overall industry.”

Howard Johns, chair of the Solar Trade Association, said: “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.”

The proposals form part of DECC’s first consultation on the comprehensive review of the FIT scheme. The consultation, which closes on 23 December, also proposes a new requirement demanding properties reach a certain level of energy efficiency to receive the tariff rates and separate lower rates for schemes where an individual or organisation receives FIT payments from more than one installation, located on different sites. The proposed new multi-installation tariffs would be set at 80% of the standard tariffs.

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