Photographer: Chris Ratcliffe/Bloomberg

U.K. Reduces Solar Subsidies Less Than Proposed After Appeal

  • Smallest PV installations face 65% cut rather than 87%
  • Proposals may cost 18,700 jobs in solar industry: government

The U.K. said it will cut solar subsidies by less than previously proposed after the industry shed thousands of jobs and appealed for less draconian measures to wean developers off government support.

The government also raised proposed deployment caps to allow for more installations between now and 2019, according to documents posted Thursday on the Department of Energy and Climate Change website. Even with the improved conditions, the department said thousands of jobs may be lost in the industry.

Ministers are trying to keep a lid on subsidies that it says risk becoming a burden on consumers. Energy Secretary Amber Rudd says the time is coming when solar power can compete with traditional forms of generation without subsidy, after the technology boomed in Britain over the past five years. The Solar Trade Association said in a statement that the government had only “partially listened” to its concerns.

“Subsidies should be temporary, not part of a permanent business model,” Rudd said in a statement. “When the cost of technologies come down, so should the consumer-funded support.”

Premium electricity payments for the smallest installations of photovoltaic panels will be slashed by 65 percent, the Department of Energy and Climate Change said in a statement. That compares with its August proposals for an 87 percent cut. Rates for systems larger than 250 kilowatts were given a bigger cut than previously proposed, while all rates for smaller systems were given lesser reductions.

Rudd has reined in assistance to solar, onshore wind, biomass and energy efficiency since she was appointed in May. The Office of Budget Responsibility, which advises the government, estimates spending on renewable-energy assistance programs will exceed Treasury caps by about a fifth by 2021.

The Chart shows U.K. Treasury-mandated caps on green levies that fund renewable energy projects and are added to consumer energy bills, compared with government projections of how much will actually be spent.
The Chart shows U.K. Treasury-mandated caps on green levies that fund renewable energy projects and are added to consumer energy bills, compared with government projections of how much will actually be spent.

The Energy Department also proposed Thursday caps on installations of 84 megawatts to 107 megawatts a quarter through March 2019. That allows more development than the 41 megawatts to 48 megawatts limit proposed in August.

Even with the improved conditions, DECC’s own impact assessment said the changes may lead to as many as 18,700 job losses in the industry.

“It’s not what we needed, but it’s better than the original proposals, and we will continue to push for a better deal for what will inevitably be a more consolidated industry with fewer companies,” STA Chief Executive Officer Paul Barwell said in a statement.

The association had warned that the limits on installations risked creating a “stop-start market” that left companies uncertain about their future. The lobby group estimates that 6,500 jobs have already been lost in the industry since the general election in May, when renewable-friendly Liberal Democrats didn’t win enough parliamentary seats to remain part of a governing coalition with the Conservatives.

The STA had proposed a set of milder tariff cuts that would allow 2.7 gigawatts of installations from 2016 through 2019, as opposed to the 600 megawatts under the government’s original plan. The new plan would allow for 1.2 gigawatts. About 1.6 gigawatts were installed under the program over the three years through October.

The current rates end Jan. 15, when there will be a three-week pause for new applications before the revised rates set in.

Rudd also confirmed plans to close a second subsidy program, the Renewables 
Obligation for solar projects below 5 megawatts, on April 1, a year earlier 
than it had been due for closure. She removed a policy called grandfathering, 
which allows solar developers to get premium payments over the lifetime of the projects by accrediting them before they are operational, backdated to July 22, when the original proposal was made.

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