Solar power incentives for new larger scale projects are being cut, the Government has confirmed.
Ministers have said they are concerned about commercial “solar farms” benefiting from the “feed-in tariffs” (FITs) designed to boost small-scale renewable energy, with more planning applications for large scale schemes submitted than expected.
Energy and climate change minister Greg Barker said the move to reduce the subsidies was needed to prevent the system becoming “overwhelmed”.
The Government has also committed to shaving off £40 million, or 10 per cent of the projected costs of the scheme, which pays people for electricity generated from small scale green technology and is funded through consumer energy bills.
But the industry has warned that cutting the rates for FITs for larger solar projects will damage the potential for green growth and jobs.
Cutting payouts for all schemes above 50 kilowatts (kW) - the equivalent of putting solar panels on around 20 homes - has raised fears that schemes for communities, schools and social housing could no longer be viable.
Under the revised rates, which come into force for new installations from August 1, the biggest projects will be paid 8.5p for each unit of green electricity they produce, instead of more than 30p under the current arrangements.
Mid-size schemes will see their subsidies slashed by as much as half, from 30p to 15p, while projects over 50kW will have a new, lower rate of 19p.
Barker said: “I want to drive an ambitious rollout of new green energy technologies in homes, communities and small businesses and the FIT scheme has a vital part to play in building a more decentralised energy economy.
“We have carefully considered the evidence that has been presented as part of the consultation and this has reinforced my conviction of the need to make changes as a matter of urgency. Without action the scheme would be overwhelmed.”
The fast-track review of feed-in tariff levels looked at support for large scale solar and anaerobic digestion projects, which generate energy from waste products such as food or farm slurry.
The anaerobic digestion subsidies have been increased in a bid to encourage more of the projects.
Barker added: “The new tariffs will ensure a sustained growth path for the solar industry while protecting the money for householders, small businesses and communities and will also further encourage the uptake of green electricity from anaerobic digestion.”
The original design of the scheme, drawn up under the previous government, estimated it would cost £400 million by 2014, but did not set a cap on funding.
The new Government has capped the spending at 10 per cent below the projected cost of the scheme, which was introduced last April and adds £1 a year on the average household bill, rising to £8.50 a year by 2030.
Friends of the Earth’s green energy campaigner Donna Hume said ministers had ignored warnings from community groups and investors during the consultation on the new tariffs about the “devastating” impact of slashing payments for solar.
“With mounting concern about the rising price of fossil fuels and the impact of global climate change, the Government should be increasing financial support for clean, green energy - not cutting it,” she said.
Solar industry leaders also blamed the Treasury for the cuts to the incentives. Under the new tariffs, cost-effective schemes on leisure centres, supermarkets and schools would be severely limited and innovative projects such as Belgium’s programme to power electric trains from thousands of panels on tunnel roofs would be impossible in the UK, the industry said.
Solar Trade Association (STA) chairman Howard Johns said: “Crushing solar makes zero economic sense for UK plc because it will lose us major manufacturing opportunities, jobs and global competitiveness. It also risks locking us in to more expensive energy options in future.”
“It is inexplicable that the Treasury can be allowed to damage energy and industrial policy by taking decisions without taking into account the bigger picture. The Prime Minister urgently needs to intervene to prevent this calamity.”
Green Party MP Caroline Lucas said: “The suspicion that this consultation was simply a box ticking exercise has been confirmed, as despite the fact that 81% of respondents disagreed with the proposed reduction of support for solar, the Government is forging ahead with its policy of organised under-performance as we sit back and watch countries like Germany soar ahead of us.
“This is bad news for jobs, bad news for the economy and bad news for the environment.”
But Richard Lloyd, executive director at Which?, said: “We’re glad that the Government recognises that as consumers pay for the FIT scheme through their energy bills, consumers should get the benefits.
“Feed-in tariffs are there to encourage households and communities to generate their own electricity, but the scheme was in danger of becoming a vehicle for consumers to subsidise green energy for big businesses.
“One large-scale solar installation could take the same amount of money from the FIT scheme as over a thousand households, so we’re pleased to see the Government reducing the tariffs for such projects.”