Opinion: Feed-in tariffs and the Lib Dem fight to ensure the Coalition really is ‘the greenest government ever’

Feed-in tariffs, a policy mechanism designed to accelerate investment in renewable energy technologies, have been used successfully in many countries to increase the amount of electricity being generated from renewable sources.

The UK has actually been fairly slow off the mark on this. Our aim to be ‘the greenest government ever’ included support for feed-in tariffs.

Indeed, in the Coalition Agreement the preamble to the section on Energy and Climate Change said: ‘We need to use a wide range of levers to cut carbon emissions, decarbonise the economy and support the creation of new green jobs and technologies.’ It went on to say ‘We will establish a full system of feed-in tariffs in electricity,’ and ‘We will encourage community-owned renewable energy schemes where local people benefit from the power produced.’

So what is happening to the system of feed-in tariffs? And how are the changes going to encourage community-owned renewable energy systems?

Well, the consultation that Chris Huhne’s Department for Energy & Climate Change has just started includes introducing a cut-off date for the current solar power scheme only six weeks into the two month consultation period, and a slashing of the feed-in tariff rates for smaller schemes.

The industry has gone into overdrive to install systems under the current regime. But what then?

The current tariff provides a payback of 10 years or less. The industry knew that this is over-generous and six months ago they were suggesting a cut of about 30% would be appropriate as competition and technology changes were bringing prices down.

But the proposed new rates would provide a payback of nearer 20 years, and only then if one has a near-perfect aspect for the installation. This will dramatically reduce the number of viable sites, and undermine the fledgling industry that has created 20,000, mostly skilled, jobs in the last year or so.

So how does the proposed change, and the way it is being handled, ‘support the creation of new green jobs and technologies’?

Community-ownership of renewable energy can come in many shapes and sizes, from a large wind or water turbine in a town or village, to photovoltaic panels on the community centre roof. And should ‘community’ in the wider sense be included, to mean some of those corporate bodies working for the good of their community, like social housing providers and schools?

If so, Chris Huhne’s proposals to slash rates for ‘multi-installations’ will undermine this element of the Agreement too.

Trying to be positive, the consultation does include a very valid point of encouraging investment in energy efficiency before investing in solar power or photovoltaics (PV). And of course, it IS consultation. When the results are analysed and the changes finalised, it may be better than both the industry and many householders fear…

I am naturally an optimist, but that doesn’t mean we shouldn’t fight to ensure that Chris Huhne’s department sees sense.

* Lucy Care is a member of the Lib Dems’ Federal Policy Committee and Federal Conference Committee; was a councillor in Derby from 1993 to 2010; and a general election candidate in 2005 and 2010.

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14 Comments

  • I entirely agree with the article. Whilst it is reasonable to expect adjustments to the FIT scheme over time, the current proposal undermine projects in progress and threaten to bring a crunching halt to installations over the winter at a severe cost to jobs. Much better for economy and the environment to start adjustments for next year in line with anticipations rather than shutting it off early.

  • David Pollard 7th Nov '11 - 5:59pm

    Brilliant article Lucy. The worst thing a government can do to any industry is to make short term decisions one after another. This consultation comes after the recent consultation on the 5MW limit for solar. NO ONE IN FUTURE IS GOING TO BELIEVE A THING THE GOVERNMENT SAYS ABOUT RENEWABLES AND FITS. The louder you can shout the better. This is no way for LibDems to act in government. Hard decisions are necessary when we are in such a financial state. Panic decisions just bring the government into disrepute – just like every other government before this one. Give ’em hell!

  • A payback time of 20 years is frankly ludicrous and for 99% of the population will fall in the “not worth bothering” category. Is this their intention?

  • Thank you for some common sense. The consultation proposals risk wrecking this country’s developing solar industry and undermine the Government’s claim to be the greenest ever.

    It is misguided to consider FIT payments in terms of Return On Investment as money spent on panels cannot be cashed in like liquid investments. More important is the payback time; typically this is 8 or 9 years now but will double to 16-18 years. Few people stay so long in one house and no-one can know their circumstances far into the future.

    Rather than reducing the FIT, it should be INCREASED but paid over a much shorter period, reviewed annually in line with installation costs. For instance, £1.05 per kWh paid over 5 years would be equivalent to the proposed 21p per kWh over 25 years. People would be fairly sure of recouping upfront costs, as well as benefiting from lower electricity bills indefinitely.

  • I would like to know where the party learned the art of shooting itself in the foot on these policy matters?

  • I shared Lucy’s concerns but at least one PV installation company doesn’t think this is a problem
    “We had anticipated the FIT payments being slashed by the Government and actually think it is a good thing. It will clean up the industry. We will continue installing our free solar panels and it won’t affect our customers at all, who will continue to benefit from day one. Keep applying, we have thousands of free systems to install.”
    http://ashadegreener.co.uk/

  • Nigel Quinton 10th Nov '11 - 3:33pm

    Great article Lucy. I have been commenting on this since the announcement last week on the members Forum and very disappointed with the response amongst LibDems. Hywel’s comment above is typical. This misses the point totally and RMeehans contribution is spot on. I like Alun J’s proposal too, the main problem being that for people contemplating the change to PV is the length of time till payback. One of the contributory factors here is the delay in rolling out the Green Deal which would help (in theory) by removing the need for upfront investment and making this available to a wider range of consumer.

    The Tories continue to get their evil way in government despite not having won a majority. Wake up Nick! (and Chris, and, especially perhaps, Tim!!!)

  • Good article – hope all LibDems MPs who will be voting on this tomorrow have read it.

    They should also read an older LDV post here

    https://www.libdemvoice.org/clegg-unveils-plans-for-huge-expansion-in-renewable-energy-with-energy-independence-by-2050-3208.html

    This was Nick Clegg promising an effort on renewables equivalent to putting people on the moon. Yet he and Huhne are presiding over a scheme being cut because fitting the same amount of solar in a year as Germany manage in a month is apparently far too much progress.

    This gap on an issue as central to LibDems as green policy is so damaging to the party.

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