Warning over solar tariff changes

UK solar tariff cut damaging the industry - MPs

The Government’s plans to cut solar subsidies is hurting the UK solar industry and undermining confidence, MPs have warned.

The Environmental Audit Committee and the Energy and Climate Change Committee have issued a joint report into changes to the solar subsidies on homes and businesses. The report comes a day after the Government plans were ruled legally flawed by the High Court.

Energy Secretary Chris Huhne wants to cut feed-in tariff subsidies (FITs), payments made to households and communities that generate green electricity through solar panels, on installations completed after December 12 this year.

Mr Justice Mitting ruled yesterday that the minister was "proposing to make an unlawful decision".

Friends of the Earth and two solar companies, Solarcentury and HomeSun, had challenged the proposals, saying they were creating "huge economic uncertainty". They also argued that the reduced payment levels had been brought in before the consultation into the changes was completed.

Ministers said the payments made under the FITs scheme had to be halved because they were too generous in the face of falling costs of solar technology. The number of people cashing in on the scheme meant it was unsustainable and would end up costing consumers, who pay for it through additions to their energy bills, too much, the Government said.

However the industry estimates the abrupt changes put thousands of jobs at risk.

Tim Yeo, chair of the Energy and Climate Change Committee, said there was “no question that solar subsidies needed to be urgently reduced, but the Government has 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,” he said.

The MPs also warned that the new plan to require homes to have a "C" grade energy efficiency rating on their homes before they could benefit from the solar feed-in tariffs would require 86 per cent of homes to be better insulated. Upfront costs for householders could increase by £5,600 to £14,000 before they have even bought the solar panels, potentially having a fatal impact on the industry, the MPs said.

Joan Walley, chairwoman of the Environmental Audit Committee, 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 by the MPs has called on the Government to:

- Develop a system to review and adjust the subsidies in an orderly and timely way.

- Consider alternative energy efficiency requirements to avoid devastating the industry.

- Design a ‘community tariff’ for local groups and social housing projects.

- Collaborate between the Department of Energy and Climate Change and the Department of Business, Innovation and Skills on how the FITs scheme could be used to encourage solar panel manufacturing in the UK.

- Require electricity suppliers to provide annual returns on how much the scheme has added to energy bills.

A spokeswoman for DECC said: "We appreciate the uncertainty faced because of the changes we have proposed to the feed-in tariff scheme but we believe solar projects will still be an attractive investment.

"We stand by the need for the proposed changes in order to protect the budget which is funded by consumers through their energy bills.

"We will consider all responses to the consultation on FITs for solar PV carefully and will announce the outcome early in the new year."

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