Deep Cuts and VAT Bring Ruin to UK Solar Industry

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Less than a week ago Amber Rudd was basking in the glory of the Paris Agreement. Today, she’s betraying all her high-flown rhetoric as she smashes up what’s left of the UK solar industry with a deep cuts in incentives to solar generators and the imposition of 20% VAT, writes Oliver Tickell of The Ecologist.

The government today concluded its attack on the UK‘s solar sector with amassive 64% cut in supportย for domestic scale solar power up to a 10kWย capacity.

The cut is not quite so serious as set out in a consultation this summer, whichproposed an 87% cut. But it’s still plenty deep anough to devastate the UK‘s solarย industry.

Under the new feed-in tariff (FIT) generators will receive just 4.39p per kWh generated compared to 12p today, plus the price they are paid by their electricity supplier for exported power (currently aboutย 3.4p).

So the combined return on power returned to the grid by solar generators is about 8p – about half what the electricity company will sell it for to the house nextย door.

In additional move to keep the development of renewables within tight bounds, quarterly limits are to be imposed on the permissible volume of renewables build, defined separately for each technology and each scaleย band.

Say One Thing, Do Theย Opposite

The moves follow numerous bullish statements on climate change from both the prime minister David Cameron and Amber Rudd, the energy secretary, who came close to claiming personal credit for negotiating the Parisย Agreement.

โ€œThe Paris agreement truly marks an historic turning-pointโ€, sheย told MPsย this week.โ€Nearly every country of the world has committed to take the global action needed to solve a global problem. Of course, it was hard fought and of course it required compromise to bring everyone withย us.

โ€œNow we have to set about implementing the commitments made โ€ฆ All parties have recognised that economic and global security requires us to tackle climate change. All have come together to commit to a single goal-net zero carbon emissions by the end of the century. All have agreed to set out plans to curb emissions and to be held accountable for theirย actions.โ€

In another attack on solar power last week, the government announced that it would levy theย full 20% rate of VAT on solar PVย installations, currently charged at 5% – adding about ยฃ900 to the cost of a typicalย system.

A Massive Blow to Jobs and Tackling Climateย Change

Friends of the Earth renewable energy campaigner Alasdair Cameron was quick to show up the gap between Rudd’s rhetoric and her actions:ย โ€œLess than a week after the UK Government agreed in Paris to keep global temperatures well below two degrees, the government has shown its true colours – and they’re certainly not greenโ€, heย said.

โ€œThese huge, misguided cuts to UK solar are a massive blow for jobs and the economy, and further undermine the government’s already tarnished credibility on tackling climate change. Massive public opposition to the government’s original proposal may have forced ministers to modify their plans, but this is still terrible news for the UK and its small-scale renewablesย industry.

He also attacked the government’s vast subsidies to fossil fuels,ย estimated by the International Monetary Fundย at ยฃ26 billion per year, about 1.4% of GDP. According to the Department for Energy and Climate Change theย cost of supporting all renewable energy technologies in 2014 to 2015 will total ยฃ3.5ย billion.

โ€œIt’s outrageous that the government continues to hand out billions of pounds in subsidies every year to climate-wrecking fossil fuels, while trying to block the clean energy sources we urgently need to power our homes, hospitals and schoolsโ€, said Cameron.
ย 
โ€œThe good news is that the global renewable revolution is unstoppable, and the technology is advancing far faster than government thinking. But that will be scant comfort to the thousands of people whose jobs are under threat as a result of this short-sightedย decision.โ€

Commercial Solar Out in theย Cold

In a simultaneous move, the government also announced today theย end of support for larger scale solar generationย under the Renewables Obligation (RO) scheme from 1st April 2016. The largest solar power schemes ofย over 5MW in capacity were already excludedfrom the RO lastย year.

Modest commercial rooftop schemes up to 50kW – the size of a school or small commercial building – will also have to absorb a big cut in their FIT to 4.59p per kWh, slightly higher than that paid to domesticย generators.

But the rate will fall sharply for larger schemes. Those up to 250kW will get 2.7p per kWh, up to 1000kW 2.27p, and above that threshold just 0.87p. The effect will be simple – to make medium and large scale solar installations commerciallyย unviable.

โ€œGovernment has partially listened. It’s not what we needed, but it’s better than the original proposals, and we will continue to push for a better deal for what will inevitably be a more consolidated industry with fewer companiesโ€, said Paul Barwell, CEO of the Solar Tradeย Association.

โ€œHowever, in a world that has just committed to strengthened climate action in Paris and which sees solar as the future, the UK Government needs to get behind the British solar industry. Allocating only aroundย 1% of its clean power budget to new solar is too little, particularly when solar is now soย cost-effective.

Poor ambition for solar risks missing out on not only our renewable energy targets in the UK, but on the world’s greatest economic opportunity too. The industry will certainly try its hardest but we will be pressing Government to do much more to boost solarย power.โ€

Jan-Willem Bode, chief executive of solar installer Mongoose Energy, added:ย โ€œBy preparing us for the worst possible scenario and then climbing down slightly, it feels like they’re trying to make bad news lookย good.โ€ย 

Photo: Wayne National Forest viaย Flickr

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