MPs slam Government’s handling of solar FiT cuts

In their report, the committees acknowledged the FiT for solar electricity needed to be reduced, but concluded that the speed and scale of the Government’s plans to cut the subsidies smacked of retrospective action and was undermining green policy and damaging the UK solar industry. The six weeks notice the Department of Energy and Climate Change gave installers and consumers was inadequate and clumsy, they said. 

 
The Government announced on October 31 that it was planning to cut the subsidy for solar electricity installations by 50 per cent from December 12. The cut-off date for tariff reductions preceded the conclusion of a consultation into solar FiTs review, which ends tomorrow (December 23).

The select committees’ report is highly critical of the Government’s management of the review, saying it should have taken action earlier and describing the Department of Energy and Climate Change’s (DECC) monitoring of take up of the scheme as "deficient".

"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," Tim Yeo MP, chair of the Energy and Climate Change Committee, said.

Energy efficiency standard
The MPs calculated that 86 per cent of homes would need better insulation before they could qualify for the FiT under the Government’s proposals – increasing up-front costs for homeowners by £5,600 to £14,000, even before the panels are purchased.

"Access to FiTs should not be closed-off by the need to improve take-up of Green Deal measures. Requiring the 'C’ rated EPC energy efficiency standard could limit access to wealthier households," the report concludes.

Impact Assessment
The Government’s Impact Assessment, which the Government based its proposals on, was also heavily criticised by the committees. In their report they said, as well as being out of date at time of publication, the impact assessment failed to "address the consequences for the industry in terms of their cost of capital resulting from any reduction in investor confidence.

"It appears that the Impact Assessment was produced and subsequently used to justify a policy decision that had already been made," the report concluded.

"The consequence of the rushed, eleventh-hour consultation will be uncertainty among investors in all kinds of renewable energy, which will inevitably push up the cost of capital," Yeo said. "This is an extremely unfortunate outcome, because right now we need unprecedented levels of investment to replace ageing power stations and reduce emissions.

"The Government should build predictability into its energy policies and then stick to it. There should always have been a review mechanism for FITs that responded to falling costs."

Recommendations
The report makes a number of recommendations. These include, developing a system to review and adjust FiT rates "in an orderly and timely way"; considering alternative energy efficiency requirements to the 'C’ rated energy efficiency standard; and designing a 'community tariff’ that takes in to account the wider impacts on community groups and social housing projects; and requiring electricity suppliers to provide annual returns on how much FiTs have added to annual energy bills. The scheme is paid for through household energy bills. The report calls on DECC to look at the budget cap on the FiT, which was introduced by Chancellor in the Comprehensive Spending Review, following the launch of he FiT in April 2010. 

The committees also recommend that DECC and the Department for Business, Innovation and skills collaborate on finding a way to get the FiT scheme to encourage solar panel manufacturing in the UK.

Reaction
Today’s report was welcomed by the Solar Trade Association chairman Howard Johns, who said: "We are particularly pleased the Committees have urged DECC to abandon the more extreme energy efficiency eligibility proposals (EPC-C) which could stamp out the UK solar market next year. They have also urged DECC to look at how the budget cap could be loosened under different budget classifications – that might sound a rather dry recommendation but it is an essential one if we are to retain a UK solar industry. The Committees have rightly pointed out that these changes hit social homes and communities hardest and have already hit confidence in the sector."

Cathy Debenham, founder of YouGen, a website that helps people find information on renewable energy for their homes and businesses, said she was "delighted" with the findings of the select committees report.

"We have be calling for DECC to uncap the FiTs budget, extend the reference date for the introduction of the new tariff, set up a generous community tariff and drop the requirement for buildings to reach EPC (energy performance certificate) level of C to qualify for FiTs," Debenham said.

"We are delighted that these are all issues addressed by the committees and hope that DECC will take them on board. Given that DECC did not do a sufficient appraisal before including the Feed-in Tariffs in its spending review and capping the FiTs budget, we trust that they will revisit that decision and make more money available for this popular technology which is rapidly falling in price."

High Court ruling
Yesterday, Friends of the Earth and solar companies Solarcentury and Homesun won a legal victory against the Government’s solar FiT cut plans, when the High Court ruled Energy Secretary Chris Huhne had acted unlawfully.