The Reduction in the Feed In Tariff for Household Renewable Electricity

It is good to see that governments incentivise renewable energy, particularly microgeneration. Whatever your views on anthropogenic climate change clean renewable energy is healthier and gives a better degree of energy security for nations, businesses and individuals and enables our fossil fuels, which are finite and are being gobbled up with increasing appetite by a world in which the human population is rapidly expanded.

However, any incentive programme should be designed to provide incentives, not free money. It can be a difficult thing to balance. Generally incentives for solar water heating have been very low, while incentives for wind turbines and photovoltaic systems, which produce electricity, have been historically over generous.

It is hard to see a logical reason why one type of renewable energy is preferred to another type; they both have advantages and disadvantages and any incentives should reflect this.

Generally incentives for electricity producing renewables have been very high. I imagine that it is probably due to some confusion in the minds of government between energy and electricity, thinking one to be more important than another. I also believe that the wind turbine and photovoltaic businesses, with their greater resources (founded upon a history of high incentives) can and do spend vast sums of money lobbying government for higher incentives.

PV has always attracted much higher grants and incentives from government. I trace this to the time when Mr Blair was in opposition and was advised by Jeremy Leggett, who founded Solar Century in 1998, a PV business. When Mr Blair came into office PV had a head start. Mr Leggett was appointed to the UK Government’s Renewables Advisory Board from 2002 to 2006 and PV has never looked back. No person connected to a solar thermal business was appointed to that board.

The present PV incentive is so generous at 42p per kWh for households. It is impossible to understand why it was devised to be so generous. However, as soon as it was announced and we say firms giving away free PV, but retaining the incentive and then securitising the incentive it became clear that the incentive was too generous.

This particular incentive is not, like the Renewable Heat Incentive, taken from general taxation, but is taken from consumers of electricity by an add-on to their bills. The add on is not transparent and various figures have been mooted for it, and I think the average household is paying an extra £70 a month for the benefit of subsiding PV installations so that businesses can make money by selling the incentive’s income stream, which is probably not the point of the incentive.

The Government has announced that for new installations after 12th December the incentive will be cut in half. Of course the PV industry is up in arms about this, complaining that the notice period is too short and jobs will be lost. They cannot claim not to have seen it coming. I was personally present when many PV businesses were heavily lobbying for the retention of the incentive more than eight months ago at a lecture on renewables which ended up being dominated by questions bemoaning any drop in the PV incentive.

The Government has good reasons to cut the incentive. First, such a high incentive is no longer needed as the costs of PV panels has fallen tremendously with the take up and the cost of installing them has also fallen as companies have created installation methodologies to install more cheaply, having regard to the scale of economies that a large market created. Further having a too generous incentive is unfair on electricity consumers and ultimately will bring the whole feed in tariff system in disrepute, but increasing electricity costs.

It would have been more sensible to have started with a lower feed in tariff; a large feed in tariff would always be at threat and would create a boom and bust cycle.

As far as the loss of jobs is concerned the PV industry has employed many people who were previously in solar thermal selling and installation. The jobs created in PV mainly came from solar thermal business which dropped significantly because there was no household incentive.

Now that the Renewable Heat Incentive is finally under way I expect many of the PV businesses to switch to selling solar thermal, (such as undertaken by my company, Genersys) so the loss of jobs will not be as severe as claimed and indeed there may not be any net loss of jobs.

2 Responses

  1. […] THE DAYWays to Compute How Much Solar Power You Might NeedMX Energy – Is The Company A Scam?The Reduction in the Feed In Tariff for Household Renewable ElectricityOccupy Green EnergyHow to cut your energy costsOBAMA’S REELECTION: SAFER BY THE DAYWays to […]

  2. The FIT has in many ways become a victim of its own success – with over 90,000 installations since last April and a 900% growth in the country’s solar power potential since subsidies were introduced.

    In addition, a huge industry has grown up around solar PV which is creating thousands of jobs at a time when most business sectors are in decline. In the past 12 months alone the number of people working in the industry has jumped from 3,000 to 26,000.

    This decision therefore, goes against many of the government’s own environmental and job creation policies.”

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