Government to launch Clean Energy Cash Back scheme

Climate change minister Joan Ruddock has this week confirmed that the government will include plans for a feed-in tariff as part of its renewable energy strategy, but will rebrand the incentive as the Clean Energy Cash Back scheme in an attempt to make it easier for householders and businesses to understand.

Speaking at an event in Westminster earlier today, organised by solar energy firm Solarcentury, Ruddock said the new incentive scheme, which would allow generators of low-carbon energy to sell it back to the grid at above market rates, would come into effect from April next year.

She added that it would be open to any renewable energy project generating less than five megawatts a year, while larger projects would continue to be incentivised through the Renewables Obligation mechanism.

She also confirmed that the renewable energy strategy, which is due to be released on Wednesday, would also include plans for a similar renewable heat incentive scheme for technologies such as solar and biomass heaters. However, she said the scheme would be more complicated to develop and as such will not come into effect until April 2011.

The announcement was welcomed by Charles Hendry MP, the conservative shadow minister for energy, but he counselled that judgement on the basis that the initiative should be reserved until the government confirms the level at which the new tariffs will be set.

"It would be a tragedy if having got a [feed-in tariff] mechanism in place it was not set at the right level that solar and other technologies need," he said, adding that the government should also ensure the incentives are retrospective so that systems installed between now and next April can qualify for the tariff.

Andrew Lee, general manager of Sharp Solar in the UK, said the UK had a lot of ground to make up in the global solar energy league, having recently fallen behind countries such as Belarus, Moldova and Latvia. "We have invested £21m in a solar production facility in Wrexham, Wales, that is working 24-hours a day to produce enough solar panels for 750,000 homes each year," he said. "But less than one per cent of those panels are fitted in the UK."

The introduction of the Clean Energy Cash Back scheme will further accelerate the commercial viability of solar power systems, according to Solarcentury founder and executive chairman Jeremy Leggett, who reiterated his view that photovoltaic solar panels could generate energy at the same price as grid power by 2013. "Costs are being squeezed out of every part of the solar supply chain, " he explained. "Our costs are coming down steeply and will continue to come down while the long-term costs for conventional energy are going up."

He added that recent pronouncements from BP chief executive Tony Hayward, suggesting that solar energy "is not going to make the transition to be competitive with more conventional power", would soon be regarded in the same light as IBM chairman Tom Watson's famous assertion that there would be "a world market for about five computers".

His comments were echoed by Lee, who said that solar panel prices had already come down by between 25 and 30 per cent in the past year as a result of increased polysilicon supplies and were likely to fall further by the first quarter of next year.