Solar incentive cuts to wreak havoc with UK businesses

Government subsidies for solar energy are being slashed, threatening to create chaos in the UK solar industry.

It is thought that planned cuts to the solar incentive Feed-In-Tariff scheme will wreak havoc for UK businesses, with many expected to go bust, following plans laid out by Energy Minister Greg Barker.

Following extensive installations of photovoltaic panels across the UK buoyed by FiTs schemes, the government is concerned that subsidies are spiralling out of control.

As well as domestic private users, many businesses have been said to be using the FiTs to their own advantage, making money from the schemes.

Barker has demanded “urgent action” to protect the industry and prevent “boom and bust”.   

A Department for Energy and Climate Change rep said: “Reduced subsidies for domestic solar electricity production have been proposed as part of an urgent effort to keep the FITs scheme budget under control, and reflect the plummeting costs of the technology.”

DECC pointed to a recent surge in solar panel trading which has threatened to “break the budget”, involving 16,000 new household installations in September.  This is nearly double the amount seen in June. 

There are now many more installations than were originally forecast, amounting to 400MW of capacity.

The government now proposes that any installations made after December 12 would receive around half the amount of FiTs that are currently received.

This will be disastrous for many firms will see business quickly effective by the cuts to incentives.

In Prime Minister’s Questions today, Labour MP Alan Whitehead highlighted the “chaos” that would be caused by such cuts, calling plans to be stopped.   However Cameron sidestepped the question, listing some of the actions taken to reach what Cameron has previously intended to be the greenest government ever.

TechEye approached the Department for Business, Innovation and Skills to find out what influence it has in ensuring that government policies protect the interest of business throughout the UK, but we are yet to receive a reply.

IMS Research analyst and solar industry expert Ash Sharma believes that the “knee-jerk” cuts will have a massive impact on the solar industry in the UK.

 “Cuts are deeper than expected and are very severe,” he told TechEye. “Also they have been brought forward, which means that businesses have very little time to decide about issues like staff reductions, and there are likely to be some pretty major repercussions.”

“The UK could become the seventh or eight largest solar producing country, Sharma says, but based on cuts will play a much smaller role on an international scale following the cuts.”

This will have a direct impact on many jobs throughout the UK he says, and will also adversely affect the economy.

“A huge number of jobs have been created as a result of the industry, with thousands of people employed in the UK.”

“There is also very little solar panel production so the UK will lose out on tax paid for equipment coming into the country.”

Sharma believes that while the current situation is untenable, more should have been done to ensure that the businesses would not be put in jeopardy with many at risk of redundancy.

“The government should have made more gradual cuts.  It was clear what was being installed, and the kneejerk reaction is very negative for businesses.

“It was certainly a bad decision to wait until the market has exploded with big investments having already been made.”