John Meadows, Schott Solar
John Meadows, managing director at Schott Solar, calls on the solar PV sector to meet the challenges created by the tariff reduction head on and embrace the proposed link between FITs and energy efficiency
There can be no doubt that the introduction of the Feed-in Tariff (FIT) has had a remarkable effect in the number of domestic solar PV installations since the scheme began in April 2010. According to Ofgem since April 2010 until now, approximately 150,000 have been conducted, outperforming all expectations. Our own business – supplying a range of PV modules to installers and distributors – increased tenfold in that period.
With this has come a significant reduction in module prices and the shear number of installers, distributors and wholesalers have also driven the total installation costs down, due to increased competition. Plus, the UK has benefitted from a global reduction in PV costs – the introduction of the FIT coincided with increased demand in other countries, such as Italy and Germany.
In fact, the average installation costs have fallen by around 40% since the FIT was introduced. Two years ago, we calculated that a customer would pay approximately £5000 per kWp for a PV installation; now, the price has fallen to around £3000.
So against this, the 50%+ decrease in the tariff rate proposed in the consultation, while excessive, seems more understandable. In fact, you could say that the feed in tariff has done exactly what it was designed to do: to push prices down and extend the PV market. Therefore in my opinion it does make sense to reduce the tariff. It is also worth noting that the funds to pay the tariff come from the electricity companies, which in turn raise it by levying us, the consumers. So if the FIT was unrealistically high, consumers would ultimately pay the price.
But the proposed speed of change is undoubtedly a huge blow to an industry that has been making considerable headway in engaging the public with on-site renewables. As a result of the current uncertainty many potential customers have decided to postpone their decision and as a result a lot of small installation companies have seen their work dry up and have been particularly badly hit. The inevitable redundancies and business failures that may follow will be a drain on the public purse, and one the government should arguably take into account.
In December the high court ruled that the government’s decision to effectively impose cuts to FITs before the end of the consultation period was unlawful. Now we’re waiting for the outcome of a legal challenge to the ruling and, unfortunately, this lack of a clear time scale places the situation in even more uncertainty.
If the government wins, I think that the proposed 21p tariff is a sustainable level, allowing the market to survive and move forward. But if the legal challenge forces the government into a re-think, whilst there might be a short-term boost in demand, my fear is that the entire FIT scheme could then be compromised. So my hope is that we see a reduction generally in line with that proposed in the original consultation.
Going forward, solar PV can still offer an attractive and commercially viable proposition, but the focus will have to shift to long-term energy usage and conservation. When looking at the detail to the revisions, the Government will now propose mandatory energy efficiency measures be set in place prior to PV installation – another positive step in changing behaviour regarding energy usage and conservation.
The implementation of a ‘whole-house’ approach would ensure homeowners, and particularly those in fuel poverty, explore all energy saving methods to the building fabric, which will ultimately help to maximise efficiencies from renewables in the long run.
In the long run, cutting the tariff is a step in the right direction with many in the industry fully committed to continuing to grow the sector through product innovation and increased competition. In effect, due to the considerable global demand for solar PV systems, we foresee that over time the total installation costs will continue to fall in price, meaning customers and installers will both benefit from the scheme now and in the future and will still continue to obtain guarantee index linked, tax free payments for 25 years.”
Alan Aldridge, Riomay Renewable Energies
Alan Aldridge, managing director at Riomay Renewable Energies and a council member of the Solar Trade Association, says the government’s plans will shrink the PV market into extinction – leaving us all worse off and committed to building more nuclear power stations
The news this week that DECC has allocated an additional £197m to the over-spent Feed in Tariffs (FiTs) budget seems like a fantastic development for the industry. The new tariffs announced in December – cutting the rate for domestic installations under 4kW from 43.3p to 21p per kWh – can still offer customers a viable return on investment for PV systems. While these will certainly slow down growth in the market, at least there will still be a market.
However, this reallocation of £197m previously earmarked by the Renewables Obligation (RO) could be a pointless gesture by DECC if it continues with its proposed requirement for EPCs (energy performance certificates).
What makes absolutely no sense at all and what will kill the PV industry outright is the proposed requirement that all domestic properties will also need to achieve an EPC at grade C or above to be eligible for the tariff rate. From 1 April, if a property fails to meet the EPC level C the rate will be cut even deeper to 9p/kWh. This EPC restriction is seen by many as a simple and effective way of cutting demand for solar installations by over 80%, as less than 20% of UK housing stock meets this energy criteria.
Linking the FiTs to an EPC is madness. Firstly the EPC is orientated to heat rather than electrical energy but more importantly, why should an energy inefficient house be penalised for wanting to self-generate electricity? Surely this is still far better than this same house continuing to use excessive fossil fuels.
We should also be very concerned about the Government’s plan to effectively ‘kill off’ many community PV systems in social housing or care homes by imposing multiple system-owner regulation. This means that if more than one system is owned – as would often be the case in social housing – the tariff is reduced by a further 20%. This is tragic for anyone living in fuel poverty who was hoping for a community PV system to ‘ease the burden’.
Neither do these changes to the FiTs make any economic sense. We have seen the renewable energy industry experience significant growth over the last couple of years. And in doing so it has provided over £230m in revenues for the Treasury via the National Insurance contributions of employees and corporation tax, as well as generating around 25,000 jobs. If the new tariff remains, the Treasury will lose this money and have the burden of shelling out for the benefits many of these employees might have to claim without a job.
Some sceptics may raise concerns about the burden of the Feed in Tariff on utility bill payers. However, renewable energy currently adds less than 8p per utility bill payer per month. To put this into context, energy bills continue to rise month on month with the last 12 months seeing an increase of around 19%, averaging out at £ 14.50 a month or for the average household.
Solar costs continue to come down with photovoltaic panels now almost half the price they were last year and inverters down at least 20%. In this context, it’s clear that the government shouldn’t be reckless with the funds available, and a cut to the tariff was always on the cards. But we’re in danger of forgetting the bigger picture: the energy that isn’t provided from solar and other renewable sources will probably be nuclear.
If we continue our consumption of traditional energy, more nuclear power stations need to be built, which of course, will be funded by The Treasury and taxpayers. It can only be a false economy to stall a flourishing renewable energy market in its infancy when and when we know the numbers will stack up and the costs of traditional energy will hang around our necks in the future.
