The government has announced a cut in subsidies which it says will lead to around 620,000 more sites installing solar panels by 2015.
In its response to a consultation on the Feed-in Tariff, which gives money to small-scale generators of green energy, the government cut the rate paid to 21p per kilowatt generated from 1 April this year for panels registered or commissioned from 3 March 2012.
The government expected the tariff budget to give money to more generators of energy as a result of cutting the rate paid.
Sites with more than 25 panels will receive 80 per cent of the full Feed-in Tariff rate. The tariff for micro-combined heat and power plants will rise.
The cut came after an unexpected boom in solar panel installations at the end of last year, prompted by reductions in solar panel costs and uncertainty over the future of the tariff, which put pressure on the budget for feed-in tariff payments. The cash for the tariffs is generated from a levy on all electricity bills.
The government also said homes with an energy performance certificate rating of D or above would be eligible for the Feed-in Tariff payments from 1 April this year. At present there is no limit on the energy performance of eligible homes.
In an impact assessment of the policy, the department for energy and climate change estimated that the number of full-time jobs associated with the feed-in tariff would grow from 15,000 at the end of 2011 to between 40,000 and 50,000 from 2012 to 2014.
However the impact assessment also predicted a fall in jobs of 33 per cent to 10,000 in 2012/3 before a return to 15,000 the following year.
The government is also consulting on cutting the tariff by 10 per cent every 6 months from 1 July and also making further reductions should the number of installations run ahead of predictions. That consultation closes on 3 April.
However Daniel Guttmann, director of renewables and cleantech, at consultancy PwC said the proposed six-monthly 10 per cent cuts were too steep and could lead to “stop start” work in the industry until suppliers and installers dropped their prices to balance out the change. He suggested that the cuts should be less than 10 per cent. He added that the changes of rate would have to be well communicated to consumers. He thought the announcement of the cut in rate from April could prompt large numbers of consumers to purchase solar panels. He said: “Over the next five weeks I think the industry could go crazy and install a huge amount [of solar panels] as happened at the back end of last year.” He added that it was extremely hard to predict how many more homeowners would install solar panels as a result of the government’s changes.
David Symons, director at consultancy WSP Environment & Energy added that the Green Deal will come in to effect from October. “It will be interested to see how that will play alongside changes in the tariff.” Homeowners might be more inclined to install panels, despite the cut in tariff rates, because they do not have to pay for installation up front under the Green Deal. However the proposed “golden rule” for the Green Deal says the cost of energy efficiency measures should not exceed the money saved in reduced fuel bills.
Climate change minister Greg Barker said: “Instead of a scheme for the few the new improved scheme will deliver for the many. Our new plans will see almost two and a half times more installations than originally projected by 2015 which is good news for the sustainable growth of the industry. We are proposing a more predictable and transparent scheme as the costs of technologies fall, ensuring a long term, predictable rate of return that will closely track changes in prices and deployment.”
The Solar Trade Association, which represents suppliers and installers of solar panels, welcomed the government’s plan to cover the overspend on feed-in tariffs this year with unspent subsidies for large-scale renewables. But it urged the government to prevent the job losses predicted in the industry this year.