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MPs slam 'clumsy' handling of Feed-in Tariff reductions

The government’s handling of “shock” cuts to feed-in tariff payments to solar schemes was “clumsy” and is undermining confidence in energy policy, according to a report by two MPs on influential select committees.

The report, released today, said that by giving the industry and customers just six weeks to react to the halving of feed-in tariffs paid to homeowners - from 43.3p to 21p/kWh - the government created shock, uncertainty and damaged investor confidence.

Energy and Climate Change Committee chairman Tim Yeo said: “There is no question that solar subsidies needed to be urgently reduced, but the government handled this clumsily. Ministers should have spotted the solar gold rush much earlier. That way subsidy levels could have been reduced in a more orderly way without delivering such a shock to the industry.”

The government announced on 31 October that it would introduce a reduced rate for solar PV installations of less than 4kW from 1 April 2012, which would affect all installations on or after 12 December 2011. According to MPs, this announcement was “based on inadequate impact assessment and unfairly set a 12 December deadline for changes to come into effect before the close of the consultation on 23 December”, the report said.

MPs recommended that the government introduce a “trigger mechanism” for recognising increasing uptake of the feed-in tariff, and the report said it was disappointing that a year after this idea was initially floated it has still not materialised. “The current panicky response to the upsurge in solar installations in 2011 might not have been needed if DECC had actually developed such a trigger mechanism,” said the report.

Plans to require homes meet C rated energy efficiency standard before they are eligible for the feed-in tariff were also criticised by MPs. The report said this would limit access to wealthier households and could have a “fatal impact” on the industry.

Environmental Audit Committee chair Joan Walley MP said: “It doesn’t make sense to let the sun go down on the solar industry in the UK. As well as helping to cut carbon emissions, every panel that is installed brings in VAT for the government and every company that benefits from the support is keeping people in work.”

The report comes directly after a High Court ruling yesterday that said the 12 December feed-in tariff cuts had been “unlawful”, following a legal challenge by Friends of the Earth and two solar firms Solarcentury and HomeSun.

The report urges the government to:

Develop a system to review and adjust feed-in tariff rates in an orderly and timely way
Consider alternative energy efficiency requirements to avoid devastating the industry
Design a community tariff that takes into account the wider impacts on community groups and social Housing projects
Collaborate between DECC and BIS departments on how the feed-in tariff scheme could be used to encourage solar panel manufacturing in the uk
Require electricity suppliers to provide annual returns on how much feed0in tariffs have added to annual energy bills