marylsommers: Consumers urged to install solar panels before subsidies cut

Industry experts fear the government is about to at least halve feed-in tariff rates

Consumers have been warned to install solar panels as soon as possible, in anticipation of fierce subsidy cuts that will make them less financially attractive.

Industry experts fear the government is about to at least halve feed-in tariff (Fit) rates, threatening up to 25,000 solar jobs, after officials were surprised at the speed of take-up.

"If the government goes ahead with the reduction of the rates, it would mean those taking up the scheme in April 2012 will not receive as much money for their energy as those who signed up prior to the changes, so it really is important to start thinking about installing solar technology sooner rather than later," said Helen Booker, solar expert at Npower.

The money allocated to the Fits was set at �867m to 2015, with annual spending of �80m in 2011-12 rising to �161m in the next financial year. But the unexpected degree of enthusiasm for the feed-in tariffs, by which households gain a guaranteed income for every unit of energy their panels produce, means the money is already running out. Current and planned installations add up to about �100m worth of feed-in tariffs, according to the industry.

More than 100,000 microgeneration systems ? mostly solar panels ? adding up to about 320 megawatts (MW) of capacity have been installed in the UK, nearly all since new feed-in tariff subsidies were introduced in April 2010. Around 100MW more are estimated to be in the pipeline.

The Department of Energy and Climate Change estimates that installations are set to top 500MW, which would far outpace the budget.

Chris Huhne, the energy and climate change secretary, appeared to confirm fears of a subsidy slash last week when he said that the costs of solar technology had come down. "It is absolutely right that the department goes on looking at the appropriate levels of subsidies to bring on these important technologies, and that is obviously what we will do," he said.

Although the subsidies are paid for through small increases on consumers' energy bills, and do not pass through the government at any point, the Treasury insists that they be included on the national balance sheet, which means they add to the deficit.

Ministers are also understood to be wary of headlines in sections of the media proclaiming "green taxes" to be a leading cause of increases in energy bills, though Huhne called such claims "wildly exaggerated" and promised a review of the real costs. He said that as oil and gas prices continue to rise, investments in renewables would bring down bills and protect consumers from price volatility.

Jeremy Leggett, founder of Solarcentury, said: "[This is] the ridiculous spectacle of a government destroying jobs it had only just created to save next to nothing, given the tax paid by those jobholders and the unemployment benefit avoided, merely to pander to a Daily Mail lie machine that has green measures detracting from the national economy rather than adding." He accused the nuclear and gas industries of conducting a propaganda war against green energy.

The widespread rumours of a shake-up are already having an impact. Empower Community, one of the first national-scale social enterprises seeking to use the Fits for community benefits ? and to bring large-scale investment from pension funds into the energy sector ? called a halt on its project in light of the rumours.

Daniel Green, of solar installer HomeSun, said the level of cut was crucial: "There have been price reductions in the solar market, and it is right that government reduces the tariff. A 25% reduction could be made to work, but anything more than that could be disastrous, placing jobs in jeopardy."

Howard Johns, the chairman of the Solar Trade Association, said: "Industry accepts there's a need to reduce the tariffs ? we asked for that months ago. But to go for another knee-jerk fast-track review is highly damaging and puts at risk the 25,000 jobs that the UK solar industry has created. The high take-up of the Fits should be seen as a success story."

Perceptions that the subsidies have been directed to middle-class households are mistaken, according to the industry. Installing solar panels can help to alleviate fuel poverty, and lower income households without the cash to spend upfront on panels can take up deals by which they get the free energy but the installer takes the feed-in tariff income. Dozens of social housing landlords are also working on installing panels on their housing stock, though they have lagged behind the private sector so cuts to the subsidies will hit them disproportionately.

Mother-of-four Amanda Matthews, a customer of solar company Engensa living in Houghton Conquest, said: "The money we save will pay for basic stuff ? food, clothes, holidays for our family. Long term we could not continue with energy bills the way they were. Going green is brilliant but this decision is really for us to live."

Engensa cited another example of one customer who was almost forced to move house because of high heating bills, but was able to stay put after taking up a deal to have free panels installed. Green of HomeSun said many of the company's customers were pensioners, for whom the �200 or �300 per year they saved was "critical".

The rates are due to be reviewed in April 2012, but by then ? if installations continue to increase at their current rate ? the cost for the year will have shot up much higher. No one can predict the future take-up rate, but if the total reached much above �200m, that would be enough to use up the entire budget for the rest of the parliament ? because whatever is spent this year is also committed for each of the following three years.

Last week, the government also announced reductions to the subsidies for large-scale renewables such as wind power, which are separate to the feed-in tariffs. Both sets of changes were putting off investors, said Phil McVan of Myriad CEG Power. "Continued government dithering and changes to policies and support is set to strip away investor confidence and it hasn't just hit the brakes but stuck everything into reverse. This leaves the prime minister's 'greenest government ever' boast looking fairly hollow. All the uncertainty has created a wave of frustration and bemusement across the industry, which will mean investors sit on their hands because of the lack of transparency and clarity over what is actually happening."

Duncan Clark

Fiona Harvey