The Government is now seeking permission to appeal to the Supreme Court. Friends of the Earth says the move will create yet more uncertainty for solar firms and after two courts have ruled their move illegal is urging Ministers to concentrate on safeguarding the industry rather than wasting more time and money on further appeals.

The High Court ruled shortly before Christmas that Government plans to cut payments for any solar scheme completed after 12 December – 11 days before the official consultation closed – were unlawful. The judgement followed legal challenges brought by Friends of the Earth and two solar firms, Solarcentury and HomeSun, last month.

Today’s judgement will prevent Ministers rushing through cuts to feed-in tariff payments in future, restoring some confidence to the UK’s clean energy industry. But Friends of the Earth warns that unless Ministers change other parts of their solar subsidy proposals, up to 29,000 jobs could be lost.

Friends of the Earth is urging Ministers to find more money – paid for from tax payments the industry generates – to safeguard the long-term stability of the solar industry. The environmental campaigning charity is also calling for crucial amendments to proposed Government solar payment changes, including re-examining over-strict energy efficiency rules that will prevent 90 per cent of houses from claiming solar subsidies.

Today’s ruling means that, subject to any further appeal to the Supreme Court, solar tariff payments will remain at 43.3p (p/kWh) until 3 March 2012 when – following Government moves last week – they will fall to 21 pence.

Friends of the Earth’s Executive Director Andy Atkins said:

“This landmark judgement confirms that devastating Government plans to rush through cuts to solar payments are illegal – and will prevent Ministers from causing industry chaos with similar cuts in future.

“The Government must now take steps to safeguard the UK’s solar industry and the 29,000 jobs still facing the chop.

“Ministers must abandon plans to tighten the screw on which homes qualify for solar payments – and use the massive tax revenues generated by solar to protect the industry.

“Helping more people to plug into clean British energy will help protect cash-strapped households from soaring fuel bills.”

The feed-in tariff works by offering guaranteed, premium rates for units of energy both used and fed back into the grid from small scale solar pv generators. Where they have been implemented elsewhere, they have proved to be very effective mechanisms at incentivising investment in what were once expensive projects. However, government plans to reduce the rate of energy paid to solar pv generators after 2012 means that now is the time for UK farmers to take full advantage of the profits from solar panels.

Many landowners are already taking advantage of the tariff rate which guarantees a rate of 29.3p/kWh for units of energy generated from their solar panels. Certainly, with projects lasting for 25 years, there will be some very healthy profits to be made, something which has not gone unnoticed within the industry. Regen South West are just one example of solar energy specialists involved in rural solar projects. Chief Executive Merlin Hyman has described such projects as an ‘exciting opportunity’ and that they can offer,

“Essentially it is a guaranteed income for 25 years with a better return than if you were to put money in the bank at the moment. But it needs to be in the right place and on the right sites.”

The emphasis of finding the right sites has been echoed throughout the industry. Also, there has been a focus on the need to avoid fly by night installers keen to make a quick Buck and run in the great UK solar Klondike.

This is a view supported by solar pv exponents, Mole Valley Farmers who have their own demonstration solar site set up on their director’s land and are offering open day invites. Business Development Manager at Mole Valley, Andy Taplin has warned that,

“We are aware of lots of businesses popping up and calling themselves solar energy experts, what we’re trying to do is prevent businesses profiteering from our members.

Going on to add, “our main concern is that for these investments to work the solar panels need to last for 25 years to profit from the feed-in tariff — Mole Valley Farmers will be here in 25 years’ time, but I’m not sure some of these solar panel companies will be around once the gold rush is over.”

According to many within the industry, the UK now has everything in place to become a player in the global solar market.

“The UK market for solar PV is growing explosively. This is because the FITs [feed-in tariffs] bring a huge new raft of players – the energy users – into the market; broadening it way beyond the traditional energy industry. All renewable power sources are benefitting, but solar is doing best because it is so easy to apply,”

Commented Philip Wolfe, Director of Ownenergy and leading exponent of feed-in tariffs.

With the tariffs working as a means of incentivisation for investors who were once reluctant to invest in what was once an extremely expensive field, the tariffs offset costs and greatly improve the attractiveness of green energy investments. In all countries where tariffs have been introduced there has been a massive uptake in investment with individuals keen to take advantage of legislation-protected investments with healthy ROIs.

With regards to potential for the solar PV industry, Edwin Koot CEO of Solarplaza stated that,

“Having experienced the benefits that FITs have to offer, European countries are now looking to capitalise on the emerging UK market. We can already see signs of this happening for our upcoming UK PV Conference: where 67% of delegate registrations are from international companies, compared to just 33% from the UK.”

However, warning that in the current climate the UK solar PV industry is unlikely to achieve overnight success, Clive Collison of South Facing said,

“It will take time to develop the UK market. Currently there is a lack of knowledge so education of potential customers and businesses is needed. Right now, very few people understand the feed-in tariff system and the opportunities to their full extent.

It took Germany, Spain and Italy three years after the start of their feed-in tariff to reach a substantial market scale. No doubt a similar market development will occur in the UK. That is why conferences like the UK PV Conference are important, to educate the business community and customers and build the business infrastructure. There will be plenty of business for everybody.”

E.ON plan to utilize the newly introduced legislation in order to offer their customers what they term the ‘SolarSaver’ scheme, a consultation, survey and installation service for solar photovoltaic products.

E.ON hope that their SolarSaver scheme will act as a sound investment product over 25 for its customers with expectations that it would take just 12 years to break even with 13 subsequent years of profit on the project.

According to the energy company, they claim that this projection is based on the fact that a 2.1kW solar kit costs around £11,350 and would be capable of generating around 1.5kWh p/a. Homeowners would expect to save in excess of £24,000 over the project’s lifespan with the added bonus of helping to offset their carbon footprint on fossil fuel energy savings.

A turnkey product is expected with E.ON stating that their solution will offer homeowners advice on the suitability of their home for solar paneling, consultancy for application of planning applications and advice for customers about entitlement to grants and other government schemes.

Phil Gilbert, spokesman for the SolarSaver scheme announced,

“We’ve all got a role to play in bringing down our carbon footprint and we’re helping our customers do that. With the long term benefit provided by the new Feed-in Tariff they’ll even make money back.

Adding, “This will be the first of many exciting new propositions we’ll have for our customers, giving them the power to produce their own heat and electricity from lower carbon sources.”

For full information about similar investment schemes offered through solarfeedintariff.co.uk please visit: http://solarfeedintariff.co.uk/solar-investments/

Afghanistan, the NHS, education and crime will almost certainly be hot topics for discussion. Even the issue of reducing the tax on cider distracts readers of certain tabloids from the more relevant problems of the day.

These issues aside, the three main party leaders, Gordon Brown, David Cameron and Nick Clegg have asserted that they are the ‘greenest’ party (perhaps excluding the Green party) and that they will each strive to set in motion the carbon neutral revolution of the economy in the next five years. During the next four weeks we are certain to read much boasting from the respective parties regarding their green manifestos but what are we to expect?

Conservatives

Energy: David Cameron has stated on numerous occasions that he doesn’t see nuclear power as a long term energy solution for the UK, insisting that he would prefer to see greater investment in renewable energy as a means of transitioning from fossil fuel energy sources.

With the EU setting a target of generating 20 per cent of energy from renewable sources by 2020 the Conservatives have supported the development of green energy sites from an executive level. David Cameron has long been an advocate of green energy and a supporter of the feed-in tariff mechanism as a way of driving investment in new technologies. 

Emissions: Ambitious targets have been set with the Conservatives announcing that they will set carbon reduction targets of 60 per cent by 2050 which would be monitored on a year to year basis by an independent climate change commission.

If elected into government the Conservative leadership has plans to replace the climate change levy with a system based on how many units of carbon a company emits rather than how much energy it uses. This, they believe would incentivise businesses to go greener, sooner.

Vehicles: Conservative plans to reduce emissions from UK roads include taxing drivers on how much they use their vehicles. They have also announced that they will employ measures such as reducing the average emission of new cars to 20g/km by 2022 and set an average for all cars by 2030.

The Conservative Party has also opposed the congestion charge in London and all road pricing across the country, however it remains unclear whether they would actually abolish the charge once in power.

Labour

Energy: Having already established the department of Energy and Climate Change (DECC) which has overseen the recent introduction of the Clean Energy Cash Back scheme, Labour plan to move further towards green energy generation and intend to make all homes carbon neutral by 2016. The feed-in tariff which came into affect on April 1 is a mechanism which will seek to boost investment in renewable micro-generation, offering small scale generators guaranteed, premium rates for energy fed back into the national grid. The scheme introduced by the DECC will be carried on beyond the May election with hopes within the party that micro-generation will become a typical feature of the British energy industry.

Emissions: The Labour party has already set a target of reducing CO2 emissions 60 per cent by 2050 with a more short-term target of 26-32 per cent by 2020. Unlike the Conservative plan for annual emission assessments, Labour instead wants emission targets to be set and reviewed every five years as ‘carbon budgets’. In the past Labour has supported EU proposals of reducing carbon emissions 20 per cent by 2020.

Vehicles: Famously introducing the London congestion charge, Labour wish to extend the zone around the capital and want to implement the same scheme in other British cities as a means of combating congestion and pollution. Road pricing will become a Labour mantra with plans to charge motorists for the amount of time they spend on the roads.

Liberal Democrats

Energy: Going along with the European Union, the Liberal Democrats have set the target of producing 20 per cent of all energy from renewable means by 2020 with further targets of 50 per cent by 2050. The Liberal Democrats do not however believe in the use of nuclear power and have set out that they think that the money building new nuclear facilities would be better spent on renewable energy plants.

Emissions: The Lib Dems have set out emission reduction targets of 60 per cent by 2050. Nick Clegg’s party have announced that in government they would levy a carbon tax which would be payable by all consumers not involved in the emission trading scheme, something which they believe would make a real difference from a grass roots level.

Vehicles: The Liberal Democrats have proposed a dramatic rise in tax paid by motorists in the UK with plans to raise top payments from £215 p/a to £2000 p/a in a bid designed to encourage people away from their cars and into public transport. The Vehicle Excise Duty (VED) would be scrapped for less polluting cars and duties would be halved for vehicles owned by those in rural households.

Part of the plan to entice the British public away from their cars is being reflected in proposals to invest in public transport. Public transport funding would come from road pricing and congestion charges in and around the UK’s busiest cities.

The government’s feed-in tariff scheme to be called the Renewable Heat Incentive, will work by offering small-scale producers of renewable energy premium rates over a period of around 25 years for units of energy fed back into the national grid. Feed-in tariffs have been successful in countries such as Germany where they have proved to be an extremely effective way of off-setting the high costs of investing in solar power equipment.

Germany saw a massive uptake in all types of solar energy generation with tariff schemes rendering investments viable in the face of competition from traditional fossil fuel sources. For more information on how the tariff legislation is broken down year by year all of the information is available on solarfeedintariff.co.uk

In the UK, the essential figures are that homeowners wishing to invest in a typical £5000 solar thermal kit for their properties can hope to expect healthy returns on investment of around £500 p/a over a period of around 25 years not including the average £100 saving on utility bills per year. Such returns and savings are the basis of the tariff scheme and solarfeedintariff.co.uk is hopeful that these incentives will be sufficient to help the UK solar industry take off.

Through the installation of roof mounted solar panels, the sun’s energy is absorbed by the panel’s in-built technology which in turn is used to heat the water. The hot water is pumped through storage cylinders where it is heated further, providing households with south-facing roofs a good supply of hot water through the summer months and a contribution to water heating energy through the gloomier seasons.

Households aside, the government is also hopeful that the tariff legislation will bring about a grassroot change in attitude towards green energy as a whole and see technologies such as solar thermal become commonplace rather than an exceptional sight in the UK.

Solarfeedintariff.co.uk is already hopeful that with the obvious environmental benefits of utilising renewable energy sources along with the financial incentives built in to green energy schemes, the UK is set to follow in the footsteps of what are generally regarded to be the ‘greener’ nations such as Germany and Sweden. Households and community projects will all be set to capitalise on the feed-in tariff in the coming years with cash savings, investment yields and carbon emission reduction providing ample rewards for investors and communities.

Feed-in tariffs which have been established in other developed countries with the basic motive of attracting investment in fledgling renewable industries will be replicated in Britain with solar installers being offered premium rates (typically 25p/kWh over a project’s lifetime) for the units of energy fed back in to the national grid.

Such incentives are of course absolutely necessary in order to make investment in expensive technologies viable by offering attractive returns on investment to investors.

One of the first projects to take advantage of the feed-in tariff or ‘Clean Energy Cash Back’ scheme is a social housing scheme in Manchester which plans to generate around £900 per household a year by selling renewable energy back in to the national grid.

The Manchester based co-operative called Horizon Energy Corporative is working with landlords in the Manchester area to maximise the potential of solar energy in the Manchester region.

The scheme, put together by EIC has received the full support of the department of Energy and Climate Change (DECC) which hopes that such schemes will help the UK to catch up with other countries where feed-in tariffs have been established now for some time while at the same time offering financial rewards for social housing projects.

Managing Director of EIC, Andrew Melchior stated that,

“Our energy will be used to drive down the costs of electricity and hot water for those in need of relief from fuel poverty, while supplying community-generated energy to householders in North West England.

With sufficient support there is no reason we shouldn’t end up producing energy output equivalent to one quarter of a conventional coal-fired power station.”

2009 was a year which saw the announcement of the introduction of the Clean Energy Cash Back system, essentially a feed-in tariff designed to attract investment in the UK solar industry. The announcement by the Department of Energy and Climate Change (DECC) was welcomed by those who have seen how successful similar tariff regimes have proved in other countries where they have been introduced.

However, following the consultancy process which followed the announcement, there have been a number of observers who have noted that the tariff rate will need to be sufficient in order the UK to compete with more mature markets in Germany, Spain, China and the US. While this month will see some clarification of the specific rates to be set for the UK tariff, it will be absolutely essential that the numbers are sufficient to boost investment in the new industry.

Critics of government policy have been headed by the flagship group ‘We Support Solar’ claiming that many within the government are acting against the general interests of solar energy, something which they believe will be reflected in a watery feed-in tariff.

However, not all predictions for the UK solar industry in 2010 are so pessimistic. David Kidney, Under Secretary of the DECC stated that any criticism of UK solar policy is nonsense and that the UK are set fair to strive to compete with the big international players this year. Speaking at a low carbon conference last month, Kidney fielded questions from an audience which pulled no punches, claiming that the UK was a leading light in the use and development of renewable energy.

Speaking mostly of the UK’s big offshore wind projects, matters also turned to solar where Kidney was adamant that the UK solar energy is looking healthy. Talking with regards to the introduction of the feed-in tariff system in April, he claimed that,

“April FiTs [feed-in tariffs] arrive in the UK and the solar industry is gearing itself up for what it thinks will be a major increase in demand for its products.”

Everybody within the industry will be hoping that the government under secretary’s optimism is well founded. As we approach the tariff date we will be able to greater gauge the level of investor interest in solar PV products. Certainly, with solar markets still going strong in Germany with investors looking to diversify portfolios with green stocks, the UK industry will be hoping to attract similar capital.

With Ernst & Young offering their annual solar attractiveness indices at the end of 2009, it again highlighted the clear correlation between strong feed-in tariffs and attractive markets for investors. Until the UK can produce a robust tariff (hopefully this will happen in the first quarter of this year), investors will be put off solar investment by the traditional worries that returns to not justify investment.

However, with the government under massive media pressure to fight climate change, 2010 may just be the year which is looked back on as the watershed in solar installation. With growing public awareness of solar combined with viable solar investment products, the UK could be set to become a world player…we hope.

As I’ll discuss the, UK feed in tariff is designed to strongly influence the type of solar installations built in the UK, but what kind of solar installations are best and what should we expect in the UK?

Let’s look at what’s going on in other countries around the world. In Germany, the world’s biggest solar market by far this year, grid-connected solar systems are defined in three categories; residential, commercial and utility scale. Residential scale is the smallest type of installation and refers to all installations less than 10kW (~60m2) typically found on private houses. Commercial scale refers to installations between 10kW and 100kW (600m2) typically found on the roof of a factory, office or warehouse. Utility scale refers to all installations above 100kW and these are typically ground-based installations on fields (also known as solar farms) and can cover hundreds of hectares.

These three types of installation are quite different from each other in terms of price and the technology used. Which type of installations are the most popular? Figures published by the Bundesnetzagentur (the German grid regulator) state that the market in 2009 is divided into 17% in the residential scale, 17% in utility scale and 66% in commercial scale. This means that because residential installations are smaller, there are many more of them in number than utility scale installations.

Large plants are cheaper due to economies of scale, however the planning process can be long and complex, and it can be difficult to find banks willing to loan money for such projects. Rooftop plants on the other hand have a much easier time getting planning permission, and often are fully funded by the owner, so don’t require a loan. This explains why commercial scale rooftop plants dominate the market.

In the US, rooftop installations also dominate, and there is an additional reason why. In the US there is no feed-in-tariff, rather a complex array of grants that vary from state to state (California has the best).

Solar installations generate money by selling electricity to the energy utility at the regular unsubsidized rate. This means if you generate energy at the place where you use it, you get the same price of electricity that you would have to buy it at, the retail price. On the other hand, if you have a utility scale power plant, this requires the utility to distribute the energy for you and you only get the price that other types of power stations get, the wholesale price. Since wholesale electricity prices are roughly half that of retail electricity prices, its much better to have a solar installation in the same place as where you use it, i.e. on your roof.

So what does this mean for the UK? Well, as we are led to believe from the governments initial announcement, the UK feed-in-tariff will be strongly weighted towards smaller installations. This means that the larger your installation the less you will be paid for the electricity it generates. This cutoff is quite severe, with the rate dropping from 36p to 31p per kWh for installations over 4kW, to 28p for installations over 10kW and down to 26p for installations bigger than 100kW.

The argument behind this is so that all installation deliver an equal return on investment. This implies that the government assumes the cost of energy from a solar installation is 14% lower for a 5kW installation than for a 4kW installation.

Where does this assumption come from? Data from Germany suggests that this is not the case and the 14% drop does not exist. Cost of energy does fall with increasing scale but by how much is unclear and changes constantly with prices of various technologies.

I can understand if the government wants to ban solar farms (although having visited several under construction in Germany last month I think it’s a real shame that we don’t have a single solar farm in the UK, even just from an educational standpoint) but the current FiT structure does something else. It restricts the most effective type of photovoltaic installation, namely commercial scale rooftops.

Germany’s flat feed-in-tariff structure and the US’ grant scheme both allow the market to evolve naturally. If large rooftop installations make the most sense economically then why not let this segment grow fastest? Trying to engineer a feed-in-tariff so that everything grows at the same speed will inevitably slow growth overall.

Let’s hope changes are made while there’s still a chance.

With various leading economies around the globe vying to become leaders in the renewable energy sector the Ernst & Young indices provides a tangible demonstration of how attractive the competing markets are to investors based on the measures taken by the respective governments. The commitments by the Chinese government to slow climate change through the reduction of carbon emissions has certainly been reflected in their rise in the investment indices.

Once the pariah of the international community with regards to fighting climate change, the Beijing government has demonstrated through legislation that they have a very earnest desire to slow the effects of climate change.

Recently the Chinese government announced 1.8 GW of solar installation throughout the vast country with investment incentivisation coming in the form of the Golden Sun subsidy scheme designed to transform the Chinese solar market from a purely manufacturing base into a world leader in solar PV installation. This, the report indicated was the key feature in China moving up the table from sixth place in 2007 to the joint number one position enjoyed today.

The report will come as an early Christmas present for the nations perched in the top 5 positions as it gives investors a comprehensive assessment of the most viable markets in which to invest based on criteria such as existing infrastructure, incentives and location benefits.

With the success of China as a potential solar PV market, analysts in the UK will not have missed the direct correllation between government action and market attractiveness, something which the report explicitly highlighted. The UK enjoyed limited success, moving up one point to sixth, an increase based on limited government action taken so far in the form of the creation of the Department of Energy and Climate Change (DECC), the introduction of the Energy Act in November 2008 and the recent announcement of the Clean Energy Cash Back system, essentially a feed-in tariff to be introduced in April 2010.

The UK’s position of sixth could be bettered by the next indices published by Ernst & Young at the end of 2010 but will depend greatly on the initial successes of the UK market in the light of the newly implemented tariff system. At the present moment members of the lobby group We Support Solar are arguing that the UK government will have to increase the tariff rate if the UK is to compete with the emerging solar tiger economies with manufacturing bases much closer to home.

For more information on the Ernst & Young global renewable energy country attractiveness indices, please visit:

http://www.ey.com/Publication/vwLUAssets/Industry_Utilities_Renewable_energy_country_attractiveness_indices/$file/Industry_Utilities_Renewable_energy_country_attractiveness_indices.pdf