The Feed in Tariff review – Who are the real losers??

Much has been written about the Government’s proposal to radically reduce the Feed In Tariff, in a ridiculously short time.

Many people agree with this, suggesting that it is only “for the rich”, and grossly unfair to the masses? However, they are usually mis-informed, don’t understand the “bigger picture”, or maybe somewhat jealous??

So, let’s look at the bigger picture, and see who the real losers will be??

Firstly, what is the Solar industry is unhappy about?

1). The level of reduction – Whilst we all knew that a reduction was coming, that level is particularly high (certainly higher than expected?!).

43.3p to 21p represents a 51% reduction! If we look at Germany (the instigators of the scheme back in 2000, and “World Leaders” in Solar), their first reduction was a shade over 30%, their latest is 15%, and overall the reduction is 57% less than it’s highest level (8 years ago!).

It’s fair to say that this shows a measured approach?

However, even if it does stay at 21p, I’m sure that the industry will cope with it?

2). The time frame for this reduction – This is probably the biggest issue that the industry have with the proposal?

This has put immense pressure on installers/suppliers to deliver before the 12th December. Many home owners will be satisfied, but many larger projects (Schools, Community Centres, Charities etc) will not!

Also, many Local Authorities have pulled the plug on plans to install free solar to the social housing stock, and other buildings?

3). This is not the first “fast track review” to the FIT? Many people don’t realise that earlier in the year, a similar process was carried out for the large scale solar installations?

The Government cocked up here too – In effect, they put a stop to any development over 50kwp by reducing the tariff to such a low level, that almost every investor pulled out of any plans in the UK.

If they had any sense at all, they would have kept the tariff as it was, but introduced certain caveats that meant that any investor would have to “put something back into the community”.

For example, this could have been free solar panels to the local school/community centre and letting them take all the benefits ? It could have been a “community fund”. IE an element of the profits put back into the community? The options were endless??

They (the Government) also didn’t seem take into consideration the level revenue they would have received through taxation etc?

As I mentioned, many of the critics suggest that it is only for “the rich”, and greedy? Maybe with the exception of the, rich,  investors (and we’ll cover that later), this is not actually the case?

Most home owners installing solar tend to fall into a particular “type” (apologies?!). They are not classed as rich, but “comfortable”.

They tend to have low mortgages, nice houses, and an element of “investments”. The problem is, their “investments”, with Banks and other financial institutions (if you want to talk about greed, then look no further?), are not delivering the returns they want/are expecting? They see solar as a better option?

Those same critics suggest that the”poor” are paying for the FIT, so the “rich” benefit??

However, you look at it, the scheme has to be paid for by someone? In reality, and as with any form of “levy”, it is the “rich” who will pay more towards this?

In fact, this is a mute point really, as recent figures suggest that Solar PV has generated the Government an additional £280m in taxes and VAT, whilst only costing £220m…

That’s not a bad profit and could of course continue??

Many critics seem to have a problem with investors offering free solar? And their so called “greed”??

Of course, these investors aren’t doing it for love! They need to make money, and (unlike the domestic home owner, so much), they have strict returns they need to achieve. If the can’t get them, they won’t invest, and will take their money elsewhere. Remember, we are not the only Country to have (or having) a FIT??

Those who were involved in the “solar farms” earlier in the year, will know that many of the investors were looking to develop several “farms”, with the view to selling them on… Pension funds were a particular end target (how many of us have pensions that are not performing?? Wouldn’t you like to know that your pension fund has a very attractive, guaranteed, index linked income??) ….

Whilst many will argue that you are better off buying the panels yourself (even if you have to borrow the money?), and receiving all the benefits? This is usually true.. However, not everyone wants to do this??

These groups, typically, include:

Schools, Charities, Community Centres and the “less well off”? In other words, people who, perhaps, really need money?!

As a consequence of these, and previous, Government actions, several things are likely to happen?

1). The investors pull out of the UK totally (like they did for solar farms), and no one will benefit from free solar?

This probably won’t happen? But, their criteria will be stricter, and their “offer” may not be as attractive?

2). As mentioned above, the criteria will be much stricter? Consequently, less people will be eligible?

3). Again, as mentioned, the “offer” may not be as attractive? Currently, it is expected that you will receive any electricity generated (that you use) for free. In some instances, there may be an offer of an “additional” payment too?

However, as the margins are now tighter, that offer may change to “receiving that electricity at a reduced rate”? Incidentally, at the very start of the FIT scheme in 2010, this offer was the most common one, and the ROI on the FIT payments was deemed higher then, than it would be under the new proposals?!

Ultimately, less people/organisations will be able to benefit??

We also need to mention, again, all the Local Authorities who were planning to install free solar panels to their Social Housing  stock, and other municipal buildings.

Most of these plans have been shelved, or at the very least, put on hold?

What we are also forgetting, is that all these decisions made by the Government do not give confidence going forward?

Many of the aforementioned, regardless of what happens, will not go ahead with any plans, because they simply do not trust this Government?

One client said to me,”We are not convinced about the integrity of those that lead us, to uphold their commitment to continue to support the FIT”…

I think that says it all???

So… Who are the real losers in this????

For me, it’s certainly not the “rich”???

Please feel to comment on this?

Alternatively, you can contact us on 0845 437 4484, or email info@viridisec.co.uk

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