The Price of Solar - 6th November 2011

As the Euro crisis dominated the news my email in-box did register the concerns of constituents about it, but they were easily outnumbered by angry emails from other constituents who were about to install solar panels and, even angrier ones from the tradesmen who had hoped to do the installing. This anger was prompted by the announcement by the government that after 12 December it will halve the amount it pays to householders for each unit of electricity they generate from their newly installed solar panels. Those who are lucky enough to have installed them already, or get them in before the 12th December, will continue to benefit from the current higher price which was the basis on which they made their original investment decision.
Generous feed -in tariffs were part of the strategy to encourage people to use solar power to generate their own electricity and recoup the installation costs by selling the electricity back to the national grid at premium i.e. at an artificially high price.

The reason the Government cut that price last week was because the feed-in tariff scheme has a fixed budget of £860 million over the current planned period and because solar panels have been fast becoming so popular there was every prospect of the budget being exhausted. Anyone driving around the New Forest towns and villages can see that solar panels have been popping up on roofs everywhere. Take-up has soared – there were nearly double the number of new solar PV installations in September as in June. They have far exceeded the last government’s forecasts when it initially designed and implemented the scheme. This is partly because the feed-in tariff has been so generous, but also because the cost of installing the panels themselves has fallen dramatically (by almost one third and, arguably therefore, requiring less of an inducement). The new tariff levels that have just been announced reflect these developments and ensure the financial viability of the  scheme. Without these changes we would have been forced to shut down the scheme early as the budget would have been used up. This way the money will go further. We are imposing a 12 December deadline on installations in order to avoid a gold-rush between now and next April (when the feed-in tariff was originally scheduled for review). If we left it too long to implement the changes, it is likely that people would speed up their installations so as to enjoy the more generous tariff, swallowing up the budget as a result.

The government remains absolutely committed to driving forward decentralised energy technologies to enable more people to generate some of their own electricity in their businesses and homes. Even after this cut, solar PV will still have the highest subsidy of any renewable technology, at more than twice the level of offshore wind.

It is, of course, necessary to provide households with an incentive to invest in solar technology, but there needs to be a better balance. It is important to remember that the subsidy (in the form of the higher electricity price paid) comes from the rest of us through a surcharge on our electricity bills. Those householders who can put aside several thousand pounds to install solar panels are clearly going to be among the better off, the returns that they will be getting however, are paid by everyone including their neighbours who might be very much worse off.