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Solar Feed-in tariffs – should they be cut?

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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?

Comments
Profile photo of Hannah Jolliffe
Admin

According to Friends of the Earth, judges have reserved their judgement at today’s hearing, so there’s no outcome on the government’s right to appeal today. We’ll keep you informed of any changes in these comments though.

Profile photo of wavechange
Admin

This has been handled very badly but we must bear in mind that everyone who does not have these solar panels is subsidising those who do. Many of these people are struggling with their fuel costs.

I think we need some compromise and better planning in the future.

Profile photo of david satchell
Admin

What a big scam the whole thing is. Solar panels are a lifestyle purchase, not an investment.

Why should anybody who can’t or doesn’t want these monstrosities have to pay those who saw an opportunity to profit from a scheme that was never intended to create one in the way it has, with panel owners receiving many times the value of what each unit of electricity can then be sold on for. After taking into account the subsidies for installation as well, this goes to show that solar is too expensive at present to be financially viable. What business model would ever provide for buying something in at many times what it could be sold on for. There would only be one outcome – insolvency. We have enough financial problems in this country as it is without the governement and electricity companies having to finance such a scheme. Go ahead and install solar panels if you want and enjoy the benefit of your own very expensively generated electricity, but why should I help you make a big profit for having chosen to do so. You don’t help me pay for anything I buy. The surplus should be bought at market rate – any units sold will still be generating an income for the panel owner.

Whilst I have sympathy for anyone losing their job, especially with the job market as it is, I am self-employed and employ other people and have to run my business profitably. Having to pay inflated electricity costs so that panel owners can profit from their purchase does not make it any easier. Many of these jobs are in sales in companies which have sprung up to take advantage of what is quite simply a salesman’s dream come true – Which?’s own investagition has shown how dishonest some of these companies are – they deserve to be closed down. It would also make it easier to get hold of an electrician to do some ‘ordinary’ electric work.

Like it or not, electricity is never going to be cost effectively when produced by millions of small scale suppliers. Electricty is the future but we need to think seriously about how we are going to produce it. How ‘green’ is the production and installation of all those small scale solar installations? The answer is not very – that’s why they need such massive subsidies to make them attractive.

Profile photo of wavechange
Admin

I think I made the point that electricity should be bought and sold at the same rate, in an earlier Conversation, so we are agreed on that, David.

I reckon that anyone prepared to install solar panels deserves to be congratulated and perhaps offered a grant, in the same way that other grants are made for energy saving initiatives. Solar panels don’t enhance the appearance of buildings, but calling them monstrosities is perhaps a bit over the top. When they are built into the roof on new buildings and become more widespread, they will be accepted better, in the same way that satellite dishes are.

We need to do something to increase our electricity supply to meet the demands of our rising population. You are right about the inefficiency of lots of small home installations of solar panels but I cannot immediately see a practical alternative. I am most impressed by the way that a friend has become very interested in energy use after installing solar panels. By making best use of the free electricity and changing lifestyle the amount of electricity he uses has been cut dramatically.

Profile photo of dave newcastle
Admin

Can someone explain how it is that the Government has been keen to develop wind farms but has not been keen on developing solar farms preferring instead to leave it to individual households to invest in miniture versions of the latter.Solar farms on open, shade free land, south facing hillsides and on the roofs of suitable commercial and industrial premises could provide solar power to be shared by everyone, not just those lucky folk who have south facing unshaded house roofs The construction of solar farms could also create a lot of jobs..Could it be that the government has hidden information and knows that solar power is not economically viable? This matter needs to be brought out into the open.

Admin

Everyone except John Prescot knew the Fit in Tariff was too high at the start and we should have followed Germany in a smaller in rate but having no limit on the kwp you could fit on your roof.

The reduction in the feed in tariff has simple removed production jobs from the UK (Sharp / BP) so forcing installers to look for cheaper overseas panels.

There has been a immediate 30% reduction in panel prices which has allowed companies to still offer a 12% return for 25 years using the 21p tariff rate.. The better installation companies will survive but jobs will go in the smaller independant companies which have wasted good money training their installers.

PV Solar is still a very viable product and should be considered by all in public and private sectors in meeting our EU directives in providing the Renewables power sources. The Feed in Tariff was there to encourage people to take a long term approach to Energy generation. The government has just returned to short term thinking.. Not good for my childrens future!

Profile photo of Sylvia Baron
Admin

Hello.

There has been some update yesterday. DECC announced its FIT contingency plan, while we are still waiting to hear the Court of Appeal decision as to whether DECC can appeal or not. DECC has announced that whatever happens, systems with an ‘eligibility date’ of 3 March 2012 would get the lower tariff of 21 p/kWh from 1 April 2012. This means:

– if DECC wins the appeal it intend  to stand by its proposals made in October 2011, which would mean that only systems installed and registered before 12 December 2011 will receive the higher rate of 43.3 p/kWh after 1 April 2012. Systems installed and registered after 12 December 2011 would get the new lower rate of 21 p/kWh after 1 April 2012.

– if it looses its appeal solar panels with an ‘eligibility date’ on or after 3 March 2012 will receive a feed-in tariff of 21 p/kWh from 1 April 2012. Meaning that PV systems installed and registered before 3 March 2012 should get the higher rate of FIT of 43.3 p/kWh. But this will only happen if the Government loses, and is subject to any further appeal.

The eventual outcome is still not known. Nor is it known when the decision will be made. Consumers and the industry are still in limbo. And yesterday’s announcement is only a contingency plan. It gives no certainty until the Court of Appeal’s judgment is known.

Given that it is not yet known whether Government will lose the appeal, nor when that appeal decision will be known, Which? is not advising consumers who have not yet signed contracts to rush to install solar panels to try to meet the 3 March deadline. The deadline is again tight and there is simply no guarantee at this stage that people would receive the higher rate so it would be a risk.

Profile photo of Sylvia Baron
Admin

And more development today: the government lost its appeal. Which could have meant that there could still be a chance for consumers to get the higher rate of FIT of 43.3p/kWh as long as they could get a PV systems installed and registered before 3 March.
However the government is now going to the Supreme Court to over-turn the Court of Appeal’s refusal of permission to appeal, then if that is successful go to the Supreme Court to appeal the over-arching decision.
So in summary there is still unfortunately a lot of uncertainty about what rate of FIT customers can get if they were to install PV now.
Has this all be done in order for the government to win time and leave us in a state of flux until as close as possible to the 3 March deadline?