U.K. to End Small-Scale Renewables Aid in Blow to Solar

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WERDER, GERMANY - OCTOBER 30: Wind turbines stand behind a solar power park on October 30, 2013 near Werder, Germany. The German Social Democrats (SPD) and Christian Democrats (CDU and CSU) are currently in the midst of negotiations to form a new German government and renewable energy policy is among their main points of discussion. (Photo by Sean Gallup/Getty Images)

The U.K. proposed to end an assistance program for small-scale renewable energy projects as part of a drive to cut the costs to consumers of subsidizing clean technologies.

Ministers plan to cut subsidies by as much as 87 percent from January and cap the budget for assistance, ending the program for new entrants after March 2019, according to the proposals outlined Thursday on the Department of Energy and Climate Change website. If it isn’t possible to rein in spending, the program of guaranteed electricity prices, known as feed-in tariffs, may close in January, it said.

The tariff program “has exceeded all renewable energy deployment expectations,” the government said. “However, this deployment success has also come with costs exceeding our projections.”

The announcement is a blow to the solar industry, which accounts for more than four-fifths of all installations under the program, according to Bloomberg calculations. Energy Secretary Amber Rudd has ended or reduced a slew of clean energy programs since her Conservative Party won the general election in May, saying her actions are designed to protect consumers who pay for the subsidies on gas and power bills.

‘Hugely Damaging’

Thursday’s proposals “would be hugely damaging for the U.K. solar industry,” said Mike Landy, head of policy at the Solar Trade Association. “Proposals to suddenly cut tariffs combined with the threat of closure of the scheme next January will spark a massive market rush. This is the antithesis of a sensible policy for achieving better public value for money.”

The program has led to the installation of at least 3.3 gigawatts of small-scale renewable power capacity since it started in 2010, 83 percent of it solar, the calculations show. Last year, it cost consumers 850 million pounds ($1.3 billion) in subsidies, up from 650 million pounds a year earlier.

The Treasury sets annual spending caps on clean-energy assistance programs that rise from 4.3 billion pounds this tax year to 7.6 billion pounds in 2020-2021. The government projects actual spending to reach 9.1 billion pounds by 2021, an overrun that only just falls inside the 20 percent headroom provided to allow for shifting costs.

Thursday’s proposals would limit spending on new projects through March 2019 to 75 million pounds to 100 million pounds. That would allow for 82,000 new solar panel installations, mostly rooftop, between now and the closure, according to the energy department. It may also allow for 7,400 new small wind projects, 920 hydropower plants and 70 anaerobic digestion installations.

Smallest Projects

The plan would cut subsidies in January for the smallest solar projects to 1.63 pence per kilowatt-hour from 12.47 pence. Wind and hydropower rates would also be cut, with no reduction for the rate paid to anaerobic digestion plants. The government proposed a new formula for quarterly “degression” to reduce assistance as costs come down and deployment rises.

“The proposed cuts mean that installing solar panels at home will no longer be attractive to British families,” Good Energy Group Plc Chief Executive Officer Juliet Davenport said in an e-mailed statement.

The proposals are subject to a public consultation that ends on Oct. 23.

“If cost-control measures are not implemented or effective in ensuring that expenditure under the scheme is affordable and sustainable, government proposes that the only alternative would be to end generation tariffs for new applicants as soon as legislatively possible, which we expect to be January 2016,” the department said.

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