Could the government be forced to delay the implementation of the cuts to Feed in Tariffs?

The news was always likely to upset businesses working in the solar power industry and consumers who’d planned to install solar PV panels, but even climate change minister, Greg Barker, couldn’t really have foreseen the fuss that would ensue. There has been a public outcry about the proposed changes to the Feed in Tariff rates. The tariffs are to be slashed from 43.4p per KWh to 21p, and will apply to all new Solar Panel installations after the 12 December, 2011. Even those organisations the government assumed it could rely on, like the CBI, have roundly criticised the proposals. Director-general, John Cridland, has accused the government of moving the goalposts and shooting itself in the foot.

What is set to make matters even worse is the prospect that Friends of the Earth may also seek judicial review adding to the 3 separate legal challenges that the government is currently fighting. Barker has responded to the criticism, and has held emergency talks with members of the solar industry, and comments now leaking from Whitehall would suggest that the government is seriously starting to consider delaying the Fits changes, or at the very least phasing them in more gradually. A lot depends on how much money is left in the £867 million pound budget. Unfortunately this won’t be known until the consultation period closes at the end of December, two weeks after the changes are due to be implemented.

So, why has there been such an outcry? What will the changes to the Feed-in-Tariffs mean for solar power generating households?

The current Feed-in-Tariff system

Producing your own energy is often cheaper than buying it from energy companies: households that generate their own electricity pay less for their energy.  Solar PV panel households can also sell any excess energy they generate to energy companies, using Feed-in Tariffs (FITs). The solar panels most commonly installed by homeowners consist of eight panels, can generate up to 2.5kW and cost between £10,000 and £12,000. The Energy Saving Trust says these panels could generate at least £990 a year from a Feed-in Tariff, as well as saving you about £70 a year on energy bills. In addition, you could make a minimum of £35 to £40, and arguably a lot more by selling unused energy back to the national grid. It’s estimated that households paying for solar panel installations should be able to break even after 10 to 12 years. Any income earned after this time is guaranteed by the government’s 25 year commitment.

The proposed system

Feed-in-Tariff rates are set to drop from 13 December, 2011, from 43.3p per kWh of solar electricity to just 21 pence, cutting returns from a healthy 7 percent to just 4 percent. Whilst this still represents a comparatively good return on investment, this will now almost double the payback period for householders, meaning someone installing £10-12,000 solar panels will only be in credit after 18 years rather than 10. As it currently stands, the best value Fit rate on the market at the moment is offered by Utility Warehouse, which has pledged to offer an additional 2 pence per KWh on top of the standard rate.  Solar panel customers on the new tariff can expect to earn somewhere in the region of £700 per year from Generation Tariff, £25 per year from the Export Tariff, and £110 per year reduction in current electricity bills.