Solar Feed-in tariffs – should they be cut?
If you bought something under certain terms and conditions, wouldn’t you be annoyed if those terms changed for the worse before your purchase materialised? That’s exactly what’s happened with the Feed-in tariff.
Last month, Friends of the Earth and solar companies Solarcentury and HomeSun took the government to court.
Why? They claimed that government plans to slash the amount of money paid to householders who produce electricity at home – through a scheme called the Feed-in tariff (FIT) – weren’t given a fair consultation.
Today, the government may find out if it has won the right to appeal against a High Court ruling on its plans to cut the Feed-in tariff for solar panels in half. Since we are all paying for the scheme through our electricity bills, is the government right to cut the rates?
FIT is under pressure
Since FIT was introduced in 2010 the rates have been generous. Someone who paid around £12,000 to install a solar photovoltaic system could earn their money back in around 10 years.
Thanks to this generous rate, about 100,000 homes had solar PV installed by the end of last year, putting strain on the scheme’s budget.
Changes to FIT were expected from April 2012 but last October the government announced that it wanted to halve the amount people could earn unless their panels were installed before 12 December 2011. Not only was this much sooner than expected, it was also 11 days before the end of the consultation.
The impact on bills
Everybody pays for the scheme, so Which? agrees with the need to cut costs to ensure that the future impact on bills is not too great. The government reckons that if it took no action, by 2014-15 FIT would be costing consumers £980 million a year. This would add around £26 (2010 prices) to annual domestic electricity bills in 2020.
It argues that its proposal for the cuts will restrict FIT costs to between £250-280 million in 2014-15, reducing the impact on domestic electricity bills by around £23 (2010 prices) in 2020.
But we think that the proposals gave consumers and installers too little notice and leave many – who are awaiting installation of their systems – facing far lower returns than they originally thought they’d receive.
Too many missing out
And this is particularly unfair on consumers who had signed contracts and paid deposits before the date of the government’s announcement. We have called on government to give these people the higher rate. Our calculations (not taking into account rising electricity costs and inflation) suggest that the proposed new tariff might return just over 1% a year over 25 years.
Which? member Mr Wilson signed up to a contract for nine solar panels in August 2011. Because of a dispute with his solar company who installed only seven panels, his panels are still not connected and, should the 12 December 2011 deadline stand, he will have missed the higher rate of FIT.
And then there are the job losses that will happen as a result of these cuts. The Solar Trade Association estimates that 42% of jobs will be lost in the sector.
The government’s proposals were challenged in a judicial review in the High Court. The judge ruled that the proposals were unlawful. The government is now seeking to appeal the decision. In the meantime consumers and the industry are in limbo until it is known what happens next, and whether the 12 December date still stands.
Do you think the rate of FIT for solar panels should be reduced? Do you think that rushing changes through like this could undermine your confidence in other energy schemes such as the Green Deal?
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