Discussion of whether demand for solar will hold up have been very topical recently. There’s clear evidence of strong growth in demand in the US. . We’ve also pointed out that demand remains bright in Asia . However, the outlook in Europe remains shaky. Consequently, we’ve taken a good look at the consequences of the recent cut in the government’s Feed In Tarriff in the UK. Last week we spoke to Ploughcroft’s Chris Hopkins , who told Clean Energy Intel that the best of the British solar industry would survive the UK’s cut in the Feed-In-Tariff.
This week, Clean Energy Intel’s Edie Lush reached out to Jeremy Leggett, one of the UK’s leading entrepreneurial lights. He’s founder and Chairman of Solarcentury, the UK’s largest solar solutions company, and SolarAid, a charity set up with Solarcentury profits.
Taking the opposite view to Hopkins, Leggett is unrepentant in his view that the cut in the FIT is a blow to Britain. We caught up with him over an email interview. Here’s a few highlights from our conversation.
CEI: Critics say that the Feed In Tariff is an expensive luxury the UK can’t afford when times are tough. Why don’t you agree?
JL: I agree with the UK’s Secretary of State for Energy and Climate Change Chris Huhne’s comments earlier this year. In his 7th February Written statement he said:
“Decentralised renewables are vital to green growth and the FITs scheme has proved highly successful at stimulating growth, driving innovation, creating jobs and cutting carbon.” That makes it all the more tragic then that within 9 months of making that statement he is rushing through changes that threaten 3,000 companies and 39,000 jobs. Far from being an “expensive luxury,” solar PV is one of the few genuine growth sectors in the flat-lining UK economy.
There have been many numbers thrown around by UK Ministers in recent weeks. All of them have been speculative and based on assumptions that are from la-la land. The one number they haven’t given us is the actual cost of the feed-in tariff scheme to date. The day after last week’s parliamentary debate, the Minister of State for Climate Change Greg Barker confirmed in a Parliamentary written answer that the cost of the scheme to an average UK household in year 1 was just 21 pence.
While this number will rise, the numbers being thrown around by politicians as to what the cost to the public will be are ridiculous. We were told by Ministers in last week’s debate that unless the cuts were made from 12th December this would add up to an extra £80 to domestic bills in 2020. But this number is plucked out of thin air. It is nowhere to be found in the Impact Assessment.
CEI: But aren’t the new UK tariffs just the same as Germany’s. What are you complaining about?
JL: One of the greatest myths put forward by UK politicians in recent weeks is that all they are doing is reducing UK tariffs to those in Germany. First, it is an absurd comparison. Germany has had feed-in tariffs in place for ten years, rather than the 18 months we’ve enjoyed in the UK. Exactly 10 years ago in 2001 the German 100,000 solar roof programme delivered 76 MWp of installed PV. That is more than was installed under the UK feed-in tariff last year. Last year the UK PV market was less than 1% the size of Germany. So politicians are comparing apples with oranges.
Second, even if it wasn’t absurd to compare prices in the world’s largest and most mature PV market with one of the youngest, Ministers are just incorrect to say that our tariffs will be the same as Germany.
In fact the revised German tariffs from January will be significantly higher at all scales of PV (apart from domestic on individual homes). For example a school installation of 60 kWp in Germany will receive 20.3p/kWh compared to just 12.9p in the UK. The German rates for installations larger than 250 kWp are double those in the UK.
CEI: We pointed out recently that since the UK’s Feed In Tariff was implemented, PV prices have come down sharply. Surely the FIT needs to be reduced to take account of that
JL: Yes of course. The Government’s Impact Assessment estimates the average price fall in the UK market since the start of the feed-in tariff to be 30-40% depending on the scale of PV installation. We agree with that. What a great success story for the Government and for this industry.
Price cuts of 30-40% should have been the basis of a constructive dialogue with the Department of Energy & Climate Change (DECC) about a sensible and predictable cut to FITs from April 2012.
As far as we know, solar PV is the only renewable energy technology telling Government “please cut our level of support significantly.” The issue is about the scale and the timing of that cut just 18 months into the scheme.
CEI: PV is so expensive that even after these cuts surely it will still be the most heavily subsidized technology? Surely you agree with that?
JL: This is another example of Ministers deliberately misleading us. Under the new Tariffs please note domestic solar is now much cheaper than micro and small wind and the same price as hydro. Above 50kW it is cheaper than anaerobic digestion. The recently announced subsidy of 22.5p/kWh for marine technologies is well over double the current feed-in tariff level of 8.5p for large-scale solar.
So it is puzzling in the extreme that Ministers persist with the public claim that from 12th December solar will be the most heavily subsidised renewable energy technology.
Solar’s price will continue to fall en route to grid parity in the UK, if the industry is given a stable investment framework and a basic level of political support. Numerous reports now agree, subject to a stable glide-path, solar could deliver a subsidy-free green energy revolution not long after this Parliament (EPIA, E&Y, STA).
CEI: Isn’t the Government just forcing you to go through some pain for a more certain and predictable future?
JL: It’s very clear reading the Government’s Impact Assessment that DECC has no interest in working with us to deliver a growing UK industry. Indeed, the numbers in the Impact Assessment make it clear that the Government is prepared to see a 95% cut in PV installations which would take us back to pre feed-in tariff cottage industry days. We regard this strategy as industrial and commercial sabotage.
New analysis by strategic energy consultants Element Energy, commissioned by Friends of the Earth and the Cut Don’t Kill campaign has revealed that the Government’s planned cut to the Solar PV Feed-in Tariff will destroy up to 29,000 jobs and cause the Treasury to lose up to £230 million a year in tax income. The research highlights the remarkable fact that this cut will cause the Government to lose sizeable amounts of money through reduced income taxes and National Insurance. Campaigners have described the cut as “utterly counterproductive”.
The estimated current income for the Treasury from employment taxes and VAT alone from the Solar PV sector is £275m – a figure which is even higher once corporation tax and indirect spending are taken into account. The proposal to cut the Feed-in Tariff from 43.3p per kiloWatt hour to 21p per kWh has been billed by Climate Change Minister Greg Barker as a money-saving measure, but Element’s new analysis demonstrates that in fact it would be a costly loss to the Government through reduced tax revenues.