17 December 2015
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The difference between government support for microgeneration and the largesse shown diesel and nuclear will grate, but this settlement offers the industry a route forward
The fact the government's cuts to feed-in tariff incentives this morning were not as bad as expected will be of zero comfort to the renewable energy industry workers who lost their jobs in the run up to Christmas, nor the estimated 18,700 who could lose their jobs in the New Year. The news will be of cold comfort to the developers who have seen investor confidence obliterated and the price of capital rise as a result of the government's post-election torching of green policies. And it will be of little comfort to those green businesses and campaigners who are today contrasting the £100m of support for potentially game-changing microgeneration technologies with the £175m handed last week to dirty diesel generators and the countless billions on offer for mature nuclear technology.
But all that being said, the government's decision to cut solar incentives by up to 63.5 per cent, instead of the 83 per cent cuts that had been planned is a hugely welcome development that gives the embattled industry the lifeline it needs.
Industry insiders were adamant that if the government went ahead with the eye-watering cuts that were being proposed the solar sector would survive, but would face a lengthy period of retrenchment that would delay the point at which subsidy-free grid-parity solar power emerges by several years. The more modest cuts, while still challenging, promise to shorten this period of consolidation, offering the best run solar companies the opportunity to continue to pursue the cost reductions and technological innovation that is crucial to the industry's long term future.
More encouraging still, the decision to reinstate the system of pre-accreditation that helps companies guarantee levels of support for projects with longer lead times lends a helping hand to the growing number of businesses keen to deploy renewable energy as they pursue 100 per cent renewables or science based emissions goals.
As Paul Barwell of the Solar Trade Association, anything but a cheerleader for the government in recent months, observes: "Even with these lower tariffs, the nature of high electricity self-consumption and a maturing commercial market should ensure solar is still a good choice for many power-hungry businesses across the UK looking to reduce their bills and use the empty space on their roofs." A market for UK solar firms, both at the domestic and the commercial level, is set to remain, albeit at a scale that is significantly lower than many would have hoped.
Sadly, any sense of relief at the cuts is not about to be translated into the popping of champagne corks.
The short hiatus between the 15th January deadline for the current higher tariffs and the 8 February introduction of the new rates is yet another challenge for the industry to navigate. More important still, the system of quarterly spending caps and the over-arching £100m spending cap for the scheme over the next three years means jobs will be lost and the industry will have to battle hard to deliver on its potential at a time when other governments are giving fulsome backing to the clean energy technology delivering the steepest cost reduction curves.
The contrast with the generosity lavished on nuclear and fracking, the scandalous subsidies handed last week to diesel generators, and the promise of further subsidies for carbon-emitting gas plants gets starker by the day. The modesty of the government's ambition for solar and small scale renewables suggests it is still yet to fully grasp the huge potential for increasingly cost effective renewables to deliver on medium term carbon targets that the UK is currently on track to badly miss. Consequently, the increasingly vocal critics of the government's climate and energy strategy will find it difficult to welcome today's announcement.
But there are two important reasons to look beyond the knee-jerk criticism and welcome the decision to row back on initial proposals that really would have condemned the solar and small scale wind industries to a period of prolonged crisis.
Firstly, while there will be painful consolidation for many firms the new rates will allow some form of market to survive, giving renewable energy generators the demand they need to drive continued cost reductions. The flickering promise of cost-competitive renewables before 2020 may have been almost extinguished, but as of this morning it remains, just about alive. Enough households and businesses will be convinced by the appeal of this attractive technology for the market to continue to evolve and start to deliver the crucial storage and smart tech offerings that are the key to its long term future.
As Paul Reeve of the Electrical Contractors' Association noted, "solar simply needs five more years to head towards a no subsidy future, and the government's announcement may just allow it to get there". It'll be touch and go, but the dream remains alive.
Secondly, the government's willingness to draw on the evidence base provided by the consultation and reach for a compromise position provides an encouraging signal as we prepare for a year when a host of critical climate policy decisions will have to be made. Faced with repeated accusations that its attack on renewables have been politically motivated it would have been easy for ministers to live up to that caricature and impose the eye-watering cuts that were originally proposed. Instead, many of the industry's recommendations have been accepted and ministers have been big enough to admit their original proposals were flawed.
The overarching funding limits might remain in place and the government seems as resistant as ever to the idea that a modest increase in clean energy funding now will deliver dividends in the long run. But the willingness to draw on up-to-date data and throw a green industry a much needed life line can only bode well for the battles ahead over the next round of clean energy subsidy funding, the fifth carbon budget, and the promised new strategy for ensuring post-2020 carbon targets are met.
The renewables industry and green economy still have some champions within government, hard as it can be to believe at times.
It is understandable that some within the solar industry will be reluctant to welcome today's announcement. The industry has been treated appallingly (and illegally) over the years, as businesses made clear to the Energy and Climate Change Select Committee this week, the government's recent climate policy changes could and should have been handled much better, big unanswered questions remain about the coal phase out, energy efficiency policy, and whether the government will live up to the promises it made in Paris.
But today's announcement could allow the small scale renewables sector to step back from the brink and continue on the path to delivering cost competitive clean power. And for that, Amber Rudd and the Department of Energy and Climate Change should definitely be put back on the renewables industry's Christmas card list.
