The Independent View: FIT for purpose

Every day the economic storm clouds get darker and darker as the recession deepens and unemployment soars. Over the past two years one new sector has offered a glimmer of hope: the UK solar industry. But Government cuts to solar payments this month are set to devastate a home-grown economic success story and pull the plug on tens of thousands of clean energy jobs.

Today Friends of the Earth and two solar firms are taking the Government to court. Ministers are slashing cash-back for generating green energy through solar panels, ahead of plan.

Pulling the funding rug from under small solar businesses’ order books is already having an impact; almost 30,000 jobs are at risk. Community projects are being shelved. And many homeowners who hoped to free themselves from the shackles of the Big Six energy companies have had to shelve their plans.

We believe the Government’s action is illegal: they introduced the tariff cut even before their consultation into the matter concluded. We think it is as economically as it is environmentally illiterate – at a time when we need new industries and jobs more than ever, and when millions of people are struggling to pay their energy bills.

It is especially surprising that the scheme should be devastated under the watch of a Liberal Democrat Energy Secretary. Lib Dem MPs were essential to the introduction of the scheme, and it is one of the most striking examples of Lib Dem principles in action: communities working together to produce their own energy, protect the environment and reduce energy bills for the poorest.

Lib Dems have spoken out passionately in support of the scheme – including party members, Peers, and councils like Eastleigh in Chris Huhne’s constituency. Regardless of the court outcome, Chris Huhne must step in to put the solar industry on a sure footing for the long term. Chris has shown he is prepared to stand up to George Osborne’s anti-green posturing, now he must make it count before this green success story is lost.

Friends of the Earth agrees that cash-back rates should fall – scales of economy mean solar costs are dropping quickly. But Government should reduce the rates in a measured way that the industry, householders and community groups can plan for. The Government should increase the total spending on Feed-in tariffs (FITs) by using the £275 million each year the scheme contributes to Treasury coffers: a no-brainer to save jobs at no extra Government cost.

Our legal challenge is part of our new Final Demand campaign – calling for energy we can all afford, and a public inquiry into the power and influence of the Big Six energy companies. Sign Friends of the Earth’s Final Demand petition: www.foe.co.uk/finaldemand.

Liz Hutchins is the Friends of the Earth’s parliamentary campaigner.

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10 Comments

  • Andrew Suffield 20th Dec '11 - 4:58pm

    And all from technology that is going to change rapidly. In fact, making it profitable to use today’s poorly performing solar conversion systems is going to crowd out development of better technology.

    It is already too late to prevent substantial harm from climate change, and you are seriously arguing for more delay to reduce costs? I am curious if you will maintain this argument when your lack of roof is below sea level. Nobody’s willing to come right out and say it in the current political climate, but by the end of this century we’re going to have to resettle substantial numbers of people away from the UK coastlines.

    Certainly we need more and better solutions, but we can’t avoid implementing easy, cheap ones like rooftop solar in the hope that it will prove unnecessary in the future. And as for “poorly performing” – they’re already at the level where they can supply the energy needs of the building while the sun is up, that’s a pretty substantial gain.

  • Simon McGrath 21st Dec '11 - 5:13am

    “he Government should increase the total spending on Feed-in tariffs (FITs) by using the £275 million each year the scheme contributes to Treasury coffers: a no-brainer to save jobs at no extra Government cost.”

    How on earth is this at no extra cost?if the Treasury has £275m less in taxes it has to either borrow more or spend less. Which one does the author recommend?

  • The scheme seems to have primarily benefited either well off middle class types with big houses (and therefore big roof space) and the cash to pay the up front costs, or energy companies who are leasingthe roof space of those unable to stump up the cash.

    This party is proud of its environmental concern. But that does not mean we have to support a particular scheme which did little, cost much, and benefited the well off most. And although I sympathise with individual workers who will suffer from the contraction in demand, a business model based on a temporary government subsidy boom was always going to end badly when the cash dried up.

  • Jock and Ben

    It is easy to demonise middle class homeowners making money from FITs, but how exactly is it different to middle class homeowners investing in building societies/banks/pensions where companies then put that money into Government bonds or big utility companies to make profits? The fact is those middle class people have savings that could be spent creating jobs, cutting carbon emissions, and reducing our dependence on imported fossil fuels. But to get them to do that, you have to offer a return at least comparable to alternative investments (and taking account of the fact it is hard to get savings back out of your roof).

    Also why is it unreasonable for middle class families to invest in something and expect a decent return, but perfectly OK for British Gas or Eon or whoever to expect a return when they build a power station?

    You have both ignored the ways in which FITs made panels available to lower income families – either through housing association schemes or rent-a-roof. I suspect the Government could have let FITs ride if it was just a middle class thing – it was actually when the poor got involved through these schemes that they started to put the brakes on.

    Which brings us to the big problem – do we want green policies to cut carbon emissions, or paper over our unequal society? We could have built a solar industry solely through Government fitting panels to every suitable school and hospital, paid for through taxes. But that would have cost a lot more than the incentives we have offered to get the capital from the middle class. These are not easy decisions, but it is shortsighted to criticise the current system without being honest about why we have it.

    The second thing is this idea we will just sit it out and fit cheaper solar when it arrives. It is superficially attractive – even if I remember never buying a computer as a kid because a better one was always just around the corner – but while you can import the new panels from China, you can’t import the expertise to design, and fit the systems. We need to build a domestic industry anyway. And we are repeatedly told about the looming energy gap – if we don’t fit solar, then something else (most likely gas powered) will be built to stop the lights going out…and once that is there it will be said solar is not competitive, and we will remain locked into international gas prices.

    Finally to Simon McGrath – if the tariffs are cut, less solar will be fitted. Therefore fewer workers will pay taxes etc and you will not have £275m. So you either have the tariff AND the taxes, or you have neither – you do not get to keep the taxes coming in from an industry with no support.

  • David Allen 21st Dec '11 - 1:05pm

    The big mistake by government was to fix the FIT payment rates for 2 years without an intermediate review. Initially it was no more than what was necessary to give investors a reasonable (but not generous) return. Then the price of panels fell sharply, thanks to competitive Chinese imports, and the return on the FITs became very good. So lots of people suddenly started piling in. Now Government has belatedly crashed its gears into reverse, halving the FITs, so that they have become unattractive. This is no way to build up an industry!

    The idea of subsidising a new technology so that it will develop, get cheaper, and become competitive earlier is in principle a good one. The fact that the price of panels has fallen suggests that it is working, here and elsewhere (e.g. Germany). We are paying a subsidy now which should reap financial benefits in the years to come when the price of non-renewable power goes through the roof. It should not be an unfair subsidy to the middle class. But it has been. That’s because it has (recently) been mismanaged.

  • Whether or not you agree with the argument that somehow its the horrible middle class who have pinched all the money for this scheme (I don’t as Ive seen a good many local housing association schemes where houses have been installed, right next to the homeowner who hasnt) the main problem with the governments u-turn is that it leaves Mr Joe Public wondering how much he can trust a government that puts into operation a plan and then pulls the plug on it because it deems it too successful.

    What would have been wrong with a gradual tailing off of subsidy to a reasonable level, a ban on farmers piggy backing on the scheme just to make money out of farmland and a sensible explanation? Just at the point where solar panels had stopped being the preserve of the sandals and t shirt brigade the government just put the boot in, which shows just how out of touch some ministers are.

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