The Government’s appalling mishandling of the proposed feed in tariff cuts is inexcusable and will be hugely damaging to the industry. According to reports in the Daily telegraph, Sharp Solar, which employs around 500 people at its manufacturing plant in Wrexham, has sent a private briefing document to David Cameron warning that the proposed cuts will force the company to review its presence in the UK.
Just another stark reminder, from a growing list of solar industry companies, that this fledgling green industry could be quashed before it’s given a chance to become stable and established. It’s no secret that the FIT for solar PV would be reviewed and the rates cut due to the burgeoning uptake numbers. However, the short time frame imposed and the fiasco of the cuts being imposed before the end of the consultation, highlights the Governments disregard for supporting the Green industry.
However, when the imposed cuts are made, what will that mean for the future of Solar PV installations in the UK? In cutting feed-in tariff incentives for small domestic installations from 43p/kWh to 21p/kWh, and slashing tariffs for aggregated community and solar financing schemes by a further 20 per cent, the government has effectively ended the ‘rent a roof’ PV solar market. With average rates of return expected to be around the 4.5 to five per cent mark, solar firms will find it near impossible to attract investors to cover the upfront cost of such schemes. However, this is an average rate of return and on a case-by-case basis an optimally orientated and inclined roof maximising the incident solar gain could still give returns of 7%, even with the lower 21p/kWh rate.
Although this is far less enticing as previous rates of return, once you factor in the tax-free, index-linked nature of feed-in tariff payments and the likelihood of rising energy prices, it again looks like a more sound investment than an ISA or other conventional savings option. For businesses there are the additional benefits of ‘green brand’ profile, reduction of carbon footprint and boosting employee and customer awareness of energy conservation.
A knock-on effect of the mishandling of the proposed feed-in tariff cuts could be a reduction in prices for those businesses and households considering deploying solar panels. According to ‘Business green’ the pace of the proposed cuts looks set to leave many installers holding excess stock as a result of orders they will not be able to cancel, a situation that is likely to result in over capacity in the market and inevitable downward pressure on prices. None of this is to suggest that the government was right to rush through such deep cuts to incentives. The coalition is about to do serious damage to a growing green industry for the want of a relatively small amount of money. It remains absolutely critical that a workable compromise is reached that gives the industry more time to prepare for reductions in incentives that are phased in at a manageable rate.
However, for those businesses committed to cutting carbon emissions and considering solar energy as means of doing so, it is worth remembering that, despite all the negative headlines, solar installations can still make sense. If you are currently considering a solar investment, talk through the viability of such an installation with us here at CO2Sense.