U.K. Says It May Cut Prices Paid for Renewable Power
The U.K. government signaled today it may cut the prices paid for electricity from renewable sources, saying it began a “comprehensive review” of feed-in tariffs introduced last year.
Evidence that larger-scale solar farms may “soak up” money meant for roof-top panels, small wind turbines and smaller hydropower facilities prompted the study, the Department of Energy and Climate Change said in a statement. The move will allow officials to change above-market fees paid for renewable power by more than what was already planned in April 2012.
The department said it will speed up an analysis of solar projects bigger than 50 kilowatts, with new tariffs mandated “as soon as practical.” That threshold, which includes panels on buildings, is a “huge step back” for the industry, which expected only installations in fields to be reviewed early, said Jeremy Leggett, chairman of Solarcentury Holdings Ltd.
“This sets back the U.K. industry, and I wouldn’t be surprised if this was the last straw for some investors,” Leggett said in a telephone interview today after having lunch with Greg Barker, the minister in charge of the program. That meeting hadn’t put his mind at ease, he said.
Leggett’s views were backed up by Osaka-based Sharp Corp.’s U.K. solar chief Andrew Lee, who said the move will “cripple” the industry. Dave Sowden, chief executive officer of the Micrpower Council trade group, said it would put “jitters” into the market.
Crippling the Industry
Solar projects planned for schools, hospitals and local communities are all endangered by the fast-track review for projects over 50 kilowatts, the Renewable Energy Association, said in an e-mailed statement. The lobby group, which had estimated the feed-in tariffs could create 17,000 new jobs in the solar industry, said today’s announcement “undermines” the prospect for employment growth.
“The drop in the definition of large-scale being 50 kilowatts would cripple the industry overnight,” Lee said in a telephone interview. “A community housing project is over 50 kilowatts. The average house is 4 kilowatts. More than 12 houses and you’re there.”
Jenny Chase, head of solar analysis at Bloomberg New Energy Finance, said she expects the government to “dramatically reduce” or eliminate incentives for solar panel projects of more than 50 kilowatts.
“The sudden cut is hard on developers and international equipment suppliers who have already invested in the U.K. large- scale project market, but so far their costs have been relatively minor,” Chase said in an e-mail.
Market Jitters
The energy department said it aims to complete the comprehensive review this year, with price changes coming in April 2012 “unless the review reveals a need for greater urgency.”
Dave Sowden, chief executive officer of the Solihull, England-based trade group said he would have preferred a period of six months between the end of the study and the introduction of price changes. He also attended the lunch with Barker.
“This is going to put the jitters into some market segments,” Sowden said today in a phone interview. “It’s the fast-track threshold of 50 kilowatts that is of concern, because that’s going to catch a lot of rooftop installations. That’s come as a surprise. Nothing in reading the tea leaves of parliamentary language flagged concern in that area.”
Record Installations
Sowden’s view was backed up by Leggett, who said “never once through this exercise were we give to understand that solar on buildings was to be at risk by early review.”
London-based Solarcentury sells solar panels and designs and installs solar electricity systems.
The government said on Oct. 20 that an early review of the system was possible, though at that time it spared the feed-in- tariffs from changes brought in with budget cuts across all government departments.
The larger-scale solar study and another probe into farm- based anaerobic digestion plants, will be fast-tracked, the department said, without saying when announcements will be made on those. No retroactive tariff changes will be made, it said.
U.K. installations of solar panels last year were a record 33 megawatts, doubling the previous installed total, after the feed-in tariffs were introduced in April guaranteeing as much as 12 times the market rate for power from renewable sources.
‘Gold Rush’
In the wake of the program, Osaka-based Sharp Corp. announced a doubling of production of panels at its plant in Wrexham, Wales.
Companies from the German utility E.ON AG to Tesco Plc entered the market, offering to sell and install panels for their customers. The county of Cornwall in southwest England said it anticipated a “gold rush” that could lead to 1 billion pounds ($1.6 billion) of investment in England’s poorest region.
“Large-scale solar installations weren’t anticipated under the FITs scheme we inherited,” U.K. Secretary of State for Energy and Climate Change Chris Huhne said in today’s statement. “I’m concerned this could mean that money meant for people who want to produce their own green electricity has the potential to be directed towards large scale commercial solar projects.”
To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net
To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net
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