Solar subsidy cuts spark job fears

A 2011 photograph of workmen installing solar panels on homes in Delabole near Bodmin (Simon Burt/PA Wire)

The Government today unveiled plans for further cuts to solar subsidies, sparking concerns over the future of the industry and thousands of clean-tech jobs.

Energy Minister Greg Barker claimed the reforms to payments for small-scale solar would mean a bigger scheme that could deliver an "extraordinarily ambitious" 22GW of panels - the equivalent of 3.3 million installations for homes and businesses.

He insisted the changes would mean that the payments tracked the falling costs of solar technology, delivering value for money for consumers who pay for the scheme on energy bills and preventing another "bubble" in the industry.

But campaigners said the proposals to cut subsidies further, announced as the Government said it was pressing ahead with plans to halve the payments, would leave the solar industry "dead in a ditch", putting thousands of jobs at risk.

Ministers have previously warned the falling costs of technology made the payments too generous, causing too rapid a take-up of solar panels.

As a result, the feed-in tariffs scheme, which pays householders, organisations and businesses for electricity from small-scale renewables, has spiralled over budget.

Today the Department of Energy and Climate Change revealed the popularity of solar panels meant the £1 billion budget for the current spending period had been blown, and £1.7 billion was already committed to payments.

Mr Barker said the changes were about creating a scheme "for the many", which would deliver better value for consumers who pay for the subsidies on their bills and put solar on course to be a competitive alternative to fossil fuels.

He said the solar industry should "get real" over subsidies, adding: "I fully expect the industry to expand this year, and continue to expand, but on a sustainable basis not in short bursts of temporary workers."

He warned: "Never again must we have a fixed-price tariff that allows a bubble to grow."

Instead of letting the industry set its prices according to the subsidies, the new regime will track the falling costs of solar technology, he said.

Under the proposals, the already-planned halving of solar payments for new installations from March - or from last December if the Government wins a Supreme Court challenge over the issue - will be followed by further cuts in July.

Subsequent reductions which reflect falls in solar costs will be brought in every six months.

Decc estimates that the new system will deliver 620,000 new installations up until 2015 for £500 million, far less than the £1.7 billion cost of the 250,000 solar projects already installed.

Mr Barker said: "Our new plans will see almost two-and-a-half times more installations than originally projected by 2015 which is good news for the sustainable growth of the industry.

"We are proposing a more predictable and transparent scheme as the costs of technologies fall, ensuring a long-term, predictable rate of return that will closely track changes in prices and deployment."

But Howard Johns, spokesman for the Cut Don't Kill coalition of solar businesses and environmental campaigners, said: "The Government's initial cut to the tariff was brutal, and this further cut will be utterly devastating for the UK solar sector.

"The hard facts are that a cut on this scale will leave the solar industry dead in a ditch, destroying tens of thousands of jobs and cutting off a green, high-tech British industry just as it starts to flourish.

"In their rhetoric, ministers claim to want a renewable future, but they are destroying the very businesses that can make that future happen.

"This whole proposal has been rushed and chaotic, and while ministers try to force it through arbitrarily, hard-working people are losing their livelihoods."

Decc said improvements had been made to the proposals for the subsidies in the future, including lowering the level of energy efficiency housing must have to qualify for payments, as the previous tougher proposals were "impractical".

And officials would be examining whether community and housing association projects should be exempt from a reduced rate for schemes which claim the tariffs for a series of installations.

The reduced rate aims to take account of the lower costs of bigger projects and curb excess profits made by companies who install panels on people's homes and then claim the payments while the householders see a reduction in bills.

Under the new plans unveiled today the rate will apply only to schemes with 25 or more sets of solar panels.

The Department also said the overspend on the budget will be met by money from underspending on large-scale renewable subsidies, for example for offshore wind.

Mr Barker, responding to a move this week by Conservative colleagues urging David Cameron to cut subsidies for onshore wind power, said while there were concerns about turbines in some locations, the Tories were enthusiastic about solar and decentralised energy.

But while a new consultation on other types of small-scale renewable, also published today, proposes raising the payments for micro-combined heat and power boilers, it also sets out plans to cut small-scale wind and hydro scheme payments.

Green MP Caroline Lucas said the new Lib Dem Energy Secretary Ed Davey should have delayed the solar policy change and got it right, warning that the proposals could see tariffs reduced as often as every two months.

"But today's announcement once again leaves the industry reeling, with tariff cuts going far deeper than the falling costs of installation warrant.

"While the Government sounds ambitious in its aims, the actual policy looks weak - with ministers giving themselves the option of changing the tariff every two months.

"The one thing that business needs is certainty, yet these Government cuts are being made so fast that it is destabilising the industry. The proposed tariff cuts also go deeper than the falling costs of installation should warrant."

PA