UK halts its solar momentum

After a short-lived solar boom for residential solar installations in the UK, the industry has run into trouble with the government slashing subsidies in the wake of the sharply falling silicon prices and poor fiscal conditions prevailing in the country.

In October-end last year, UK minister for climate change Greg Barker slashed benefits for the solar power producers. The solar industry has decided to fight against what it calls “unjust” and “overly speedy” cuts.  Fearing job losses and collapse of the industry, solar manufacturers took the government to court.

The industry view was upheld by the high court on December 21,  2011. The judge reasoned that the legally stated time had not been given for consultations. The industry was invited to give comments on the decision to reduce benefits until December 23, 2011, but the new rules were to come into effect on December 12, 2011—11 days before the end of consultations, and therefore “ministers were proposing to make an unlawful decision”.

The government protested and filed its appeal against the high court  decision in the court of appeal on January 4.

The UK model for solar power works by giving a set tariff—a fixed amount of money per unit of electricity that a producer supplies to the grid—to any company or individual that sets up solar power modules. Smaller the installation, higher the tariff per kWh. The old tariff ranged from £0.43 (Rs 35.26) per unit for small roof-top installations of 4kW (small enough to fit on the roof of a private house) to £0.085 (Rs 6.97) per unit for a large-scale 250kW to 5MW unit.

The interest shown by individuals and companies in the programme, called the British Feed-in Tariff scheme, had surprised the UK government with over three times as many installations as were expected—over 100,000 by November 2011. The total capacity of installations increased from 65 MW in 2010 to a staggering 800 MW in 2011 (see graph). The programme was launched in April 2010.

Home installations hit

Under the first review, that started in February 2011 and ended after consultations in October 2011, it was suggested that the solar tariffs given to small systems would be cut by half to £0.21 (Rs 17.22) per unit while that for large-scale projects stayed the same. Over 25,000 new jobs in the sector created during the last year are now in the risk-zone because of the cuts.

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The government justified its move by arguing that price of an average photovoltaic installation has fallen fast, by as much as 30 per cent in Britain. According to the UK Department of Energy and Climate Change (DECC), people have started taking advantage of the preferential tariff by making too much profit from it and that its popularity would make the tariff programme run out of funds too fast.

The British Feed-in Tariff scheme is funded by a levy on the electricity bill. The programme was first proposed without any ceiling on its funding, but a cap on the funds available and to be appropriated for the scheme was set when the UK ran into financial trouble last year. DECC says that without these cuts the tariff would cost the taxpayers £980 million (Rs 8,036 crore) a year by 2014-15, but with the cuts it will only cost about £265 million (Rs 2,173 crore). According to the industry, the cut will almost double the payback time for customers (the time it takes for the solar power plant to reduce the electricity bill enough to be worth the installation cost) from 10 to 18 years.

The price fall for solar modules can partly be attributed to a fall in cost of producing modules as supply has increased, but it is also partly because of lowered demand in Europe, which in turn is attributed to lowered tariffs in many countries. For instance, Spain, through a royal decree, cut its fixed tariffs by the end of 2010 by as much as 45 per cent while also cutting the hours of the day that the tariffs would be given. By lowering the amount of hours per day the tariff was given for already installed solar plants, it retroactively gave them a lower income. This move, said the industry, destroyed trust. In April 2011, the industry stated that it would take the Spanish government to court.

Cue from Germany

The industry in Britain is arguing that the cuts by the government are too fast and too hard. It cited the example of Germany, where the tariffs were cut by only 15 per cent (compared to 50 per cent in Britain), as a more sustainable approach. This is also what the court case is about. The court said the government had not taken the full, law-mandated time to consult on the changes and not given enough time for the industry to adapt to the changes.

Charlotte Webster, public relations manager of SolarCentury, one of two solar companies that filed the court case, hopes that “if the court is in our favour we will get a proper six-week consultation phase where we can argue for the need for less drastic cuts”.

She goes on to state that “the UK has so far seen a lot of talk and little action. We wish DECC would listen to the people—a recent survey stated 74 per cent of the public wants the government to have higher ambitions in solar energy.” The survey quoted is from a Sunday Times poll of 1,609 people.

According to a recent report, Britain is third from bottom in the EU in terms of amount of renewable energy with just 3.3 per cent of total power, only able to best the tiny states of Malta and Luxembourg. Most of Britain's electricity comes from natural gas, nuclear material and coal. On the other hand, because of the new 2010 feed-in-tariff scheme, it is now among the top 10 solar power producers in the world.

India on the other hand does not have a small-scale, roof-top grid connected solar  scheme for these types of home installations yet. For the small scale off-grid installations, it runs a different subsidy model of upfront capital incentives. The performance of the capital incentive scheme has not been comprehensively assessed yet.