02 May 2014
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Shadow Energy Minister Julie Elliott warns lack of clarity over reported solar subsidy review "serves only to choke off investment and damage confidence"
Labour has today waded into the escalating row over the government's planned review of solar subsidies, accusing ministers of fuelling uncertainty across the industry in a way that will "choke off investment and damage confidence".
BusinessGreen reported earlier this week that the Department of Energy and Climate Change (DECC) was planning a new consultation on solar subsidies, in a bid to support the recently launched national Solar Strategy and its goal of shifting the industry's focus away from solar farms and towards commercial scale rooftop developments.
Subsequent reports in the Daily Mail, Guardian, and Telegraph similarly confirmed that a review was in the offing and suggested that ministers were planning to cut subsidies for solar farms.
However, no details have been provided on the scale and timing of any cuts to subsidies, nor the extent to which any reduction in support for solar farms will be offset by increased support for solar rooftop projects.
Government sources indicated that changes were necessary to address fears that a recent surge in solar farm development will eat into the government's available budget for clean energy subsidies, while ministers are also said to be concerned that excessive solar farm development could spark similar local protests to those faced by some wind farms.
But the solar industry has responded angrily to the news, accusing ministers of once again damaging investor confidence by failing to publicly clarify how solar subsidies will be reformed. Concerns are also mounting that with the civil service entering a period of purdah ahead of this month's European elections, the promised consultation may not be launched for several more weeks.
Labour's Shadow Energy Minister, Julie Elliott, has now called on the government to clarify its thinking as a matter of urgency, writing to Energy and Climate Change Secretary Ed Davey to confirm when the anticipated consultation will be published and clarify what sort of reassurances he can offer the solar industry.
"Certainty is absolutely critical for confidence and investment in low carbon technologies," the letter states. "It is therefore concerning that unnamed government sources are reporting that further changes could be made to the to the Renewable Obligation for solar, before any information has been provided to Parliament or discussed with the industry. This could have major negative impacts on the industry, especially given the long lead times for large-scale solar developments."
Industry insiders have warned that if any changes to the Renewables Obligation are rushed through before the end of this financial year numerous projects in the pipeline could be put at risk. Others have warned that if changes are imposed at short notice the government could find itself open to a legal challenge, similar to that which followed previous attempts to cut the solar feed-in tariff.
Elliott added that the lack of clarity over the future of solar subsidies was already harming investor confidence. "The solar sector is now facing a third review into the Renewables Obligation in less than three years," she wrote. "The speculation about the changes, and the lack of detailed information about the nature of the proposed consultation is likely to have a damaging impact on investor certainty and confidence."
As such she called on Davey to confirm when the consultation will be published, the extent to which proposed changes have been discussed with the solar industry, and what steps the government will take to boost the solar rooftop market. She also inquired as to "what sort of reassurances and transparency will DECC's review, reported as 'imminent', provide for the solar industry".
Labour was last night keen to link the latest move to restrict solar farm development with recent Conservative proposals to effectively ban new wind farm development, accusing Tory ministers of once again attacking the renewable energy industry.
"These government leaks and briefs against the solar industry serve only to choke off investment and damage confidence," said Elliott. "Having already sought to destroy onshore wind, which is the cheapest form of renewable energy, the government has now turned its fire on solar power. These announcements are further evidence that David Cameron is more interested in appeasing UKIP voters than he is in ensuring that the UK has a thriving clean energy sector, supporting hundreds of thousands of jobs and producing the energy our country needs to succeed."
But a Whitehall source hit back at Labour's attack, arguing that the Opposition has "consistently opposed all reforms to solar policy and has zero credibility with business or industry". They added that Labour's previous opposition to solar subsidy cuts would have resulted in the government's clean energy subsidy budget being burnt through, meaning less renewable energy would have come online over the past two years. "They would have broken the levy control budget and not secured the sustainable future the renewables industry needs," they said, adding that the government was now on track to deliver up to 4GW of solar capacity by the end of this year.
One industry source said the onus was now on the Liberal Democrat Secretary of State to ensure the prospective consultation does not set out to cripple the UK's solar farm sector.
"The Daily Mail's report predicting that solar support will be 'slashed' has actually done the solar industry and the 85 per cent of the British public that support us a huge favour," they said. "They have encouraged a huge political, industry and NGO push-back from the very moment that the article was first published. We hope now that commonsense will prevail and in particular that Mr Davey will get a grip of the consultation before it is finally published. He will have no more interest in the Daily Mail's wishes being granted than we do."
Meanwhile, reports yesterday in Solar Power Portal revealed that DECC has this week sought to reassure the industry that any changes to subsidy levels are unlikely to take effect until next April.
The website reported that an email sent by a DECC official to a number of senior solar industry figures had said that the department intends to ensure that any changes to Renewables Obligation would not take effect until 2015/16 and that developers who had made "significant financial commitments" to new projects may be given a further grace period.
"I have received a number of questions from around the sector asking whether any changes to the financial incentives, and in particular to the RO, would apply to this financial year," the email from Trevor Raggatt, head of small-scale and emerging renewables at DECC, reportedly stated. "I can confirm that the proposals on which we will be consulting are intended to take effect from the 2015/16 financial year. Additionally, we will be consulting on grace period arrangements to protect developers who have already made significant financial commitments."
He added that DECC had originally intended to publish the consultation this week, but it had been delayed as it "has taken longer than anticipated for us to reach an agreement with colleagues across government on publication this week".
The email confirms the consultation document is now expected to be published next week.
The reassurance was welcomed by at least one industry source, but they added that until the proposals are published concerns will remain over the precise scale and timing of any subsidy cuts. They added that the revelation that the delayed publication of the consultation had been caused by difficulties reaching an agreement with "colleagues across government" would also fuel fears that renewable energy is once again being used as a political football by the coalition parties.
