The government's chronic mishandling of the imminent cuts to solar subsidies is going from bad to worse
You could not make it up. In a development that reads like a plot from The Thick of It, the Energy Saving Trust inadvertently published a fact sheet on its web site this morning providing details of the government's imminent cuts to solar feed-in tariff incentives and apparently confirming that they will, as widely expected, be halved to 21p per kWh.
The Department of Energy and Climate Change (DECC) then rushed out a statement insisting that the document was "neither final nor accurate", but declined to let anyone know what was inaccurate about it, leaving the 25,000 people who work in the solar industry facing a truly depressing weekend as they wait for Monday's promised parliamentary announcement.
The shambolic events follow a fortnight of leaks and rumours that offer an exemplary case study in media management at its worst.
I am no conspiracy theorist, but the manner in which reports found their way into the press suggesting that that feed-in tariff rates could be cut to just 9p per kWh, only to be followed by an off-record briefing to the Financial Times suggesting that the rate would in fact be around 20p per kWh looks like a classic softening up exercise dreamed up by some real life Malcolm Tucker in Whitehall.
The plan appears to have been to try to convince people that a rate of around 20p is in fact a good deal on the ground that it could have been a lot worse. The FT fell for it, running a story about an imminent halving of support that will eviscerate a fast-expanding industry under a headline suggesting that the move was a "boost" to the sector.
It is impossible not to have a huge amount of sympathy for the solar companies which now face an extremely uncertain future.
Greg Barker and DECC have undoubtedly been placed between the proverbial rock and hard place by the Treasury spending cap and feed-in tariffs that were set at inflated levels, fuelling a boom that is threatening to push the scheme over budget. Cuts were needed, as the industry fully accepted, and a better mechanism is urgently required to handle the ongoing reduction in subsidies as solar technologies become cheaper.
But the handling of the whole affair - the three separate reviews within a year, the leaks, the consultations on changes that look to have already been decided, the scale of the proposed cuts - has been little short of appalling.
It might look like a small issue, but our revelation yesterday that DECC has failed to second a single representative from the solar industry, and failed to set up a promised government-industry working group, is symptomatic of the manner in which a solar sector that now employs more people than the nuclear industry is being grossly short changed.
At times it has seemed that, contrary to ministerial statements, the government actively wants to undermine successful and fast-expanding solar firms. You can hardly blame these firms for fighting tooth and nail to ensure that the government rethinks the scale of the cuts as a result of its promised consultation exercise.
Legal action cannot be ruled out, and the solar industry's case can only have been strengthened by the leaks that appear to suggest that the cuts have already been decided and the consultation exercise is an exercise in futility.
The one piece of silver lining is that the industry will not be killed by these proposed cuts.
I suspect officials were guilty of manipulating expectations on the scale of the cuts, but it really could have been a lot worse. The 70 per cent cuts imposed on solar farms and large installations killed that market stone dead and cuts of a similar scale for smaller installations would have completely destroyed the sector.
As it is, cuts of 50 per cent will lead to a significant contraction of demand as free solar schemes close and social housing projects are shelved. But the promised rates of return of around four per cent are still more attractive than most investments, and as such relatively wealthy green households and businesses will continue to install panels.
Jobs will be lost and many of the smaller solar firms will go to the wall, but the more established companies such as Solarcentury, Homesun, and Engensa are likely to tweak their business models and soldier on. The industry will survive.
However, this does not mean that these proposed cuts are anything other than a disaster. The government is about to deal a crippling blow to a fast expanding green industry that is serving to cut carbon emissions and create jobs.
The solar sector is not perfect and it has plenty of legitimate critics. The technology is still too expensive and the government is right to argue that it has become over-subsidised. In the current climate anything that places upward pressure on energy bills, as the feed-in tariff does, needs to be very tightly managed.
Moreover, there is a strong case for the UK's energy policy to centre on large-scale centralised low carbon generation rather than decentralised microgeneration - an argument that the recent proposed changes to renewables obligation subsidies suggests ministers are listening to.
But the counter-arguments in favour of maintaining solar feed-in tariffs at a level that allows growth in the sector to continue remains compelling.
Firstly, the UK is still right at the start of a decades' long transition towards decarbonisation, and as such it is far too early to effectively rule out a technology that could play a major role in cutting emissions.
The government keeps saying that it does not pick winners, but it does, as evidenced by the proposed increase in the level of support for marine and offshore wind energy. Ministers should be keeping their options open and doing their utmost to ensure that any green technology with the potential to play a viable role in the low carbon economy remains in the mix. That way, when we are in a position to remove subsidies completely, we'll be able to select the best from a range of mature technologies.
Secondly, solar has unique potential. Yes, it is currently expensive, but costs have come down 30 per cent in the past year and are continuing to fall. Moreover, while other renewables technologies will eventually see costs reach a plateau (there is no cheap way to undertake advanced engineering projects on offshore wind turbines or wave generators) advances in nanotechnology and manufacturing mean that the potential for solar cost reduction is near limitless.
Efficiencies are constantly improving and there are scientists who are confident that the solar industry could develop its own version of Moore's Law, the IT industry truism which dictates that the number of transistors that can be placed on an integrated circuit doubles about every two years. Industry insiders are confident that solar will be cost-competitive with grid power by the end of this decade.
Thirdly, as Barker himself has acknowledged, solar panels are a great way of normalising the green economy and pushing it into the mainstream. They are hugely popular; they reconnect people with the energy they use, encouraging further energy savings, and they help break the stranglehold of the Big Six utilities, which the government has said it wants to see loosened.
Finally, and perhaps most importantly, the industry requires what is in the scheme of things a very small amount of money to continue to prosper.
DECC has said that the cuts are essential because the scheme is proving too popular and is on track to exceed its £860m spending cap. It is this cap that is at the heart of the problem and, if the government is serious about supporting a thriving solar industry, it is this cap that needs reassessing.
The government must either raise the cap or pump some additional money into the scheme from general taxation or the Green Investment Bank. Industry sources reckon that around £100m would allow for cuts in the tariffs of about 25 per cent that would allow the sector to continue to grow and provide solar firms with a base from which to build wider services to support the Green Deal.
Before the wailing starts about the impact that extra £100m would have on energy bills or the deficit, it is worth considering how large that impact would actually be.
The feed-in tariff is responsible for a tiny fraction of people's energy bills, and increasing the cap would add just a few pence a week to the average bill. In fairness, rising energy bills is a politically toxic issue and it is understandable if the government chooses not to go down this route.
So what about pumping some additional funds into the scheme? Could £100m be found? That is a question for the Treasury, but it is worth observing that £250m was somehow found for Eric Pickles's utterly perverse crusade against fortnightly bin collections, and closer to £2bn was found for Osborne's fuel duty cut earlier in the year.
Despite all the talk of the deficit, spending decisions are being made. Moreover, as every good Keynsian knows, this investment would drive much needed growth and job creation, creating more tax receipts for the Treasury. The government will also soon have the perfect institution to provide the funding in the form of the Green Investment Bank. In fact, if the bank is not there to support an emerging green industry that cannot break into the mainstream without investor backing, you have to ask what it is for.
Without an intervention along these lines one of the greatest economic success stories of recent years will have the rug pulled from under it, leaving businesses bankrupt, a promising renewable energy technology treading water, and the government's increasingly tarnished green credentials looking worse than ever.
It is time for the real life Malcolm Tucker to realise that killing off an emerging green industry is not just bad for the environment, it is bad economics and bad politics as well.
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