With the UK still struggling out of recession and with little good coming of the much heralded Copenhagen climate change summit, brighter news has presented itself in the recent report that the UK has over achieved on its carbon emission reduction targets.

Set by the Conservative government back in 1990, the original reduction target was to be 34% by 2020, however, recent findings suggest that this reduction will now be something nearer 36%, with a number of factors helping to reduce carbon emissions across the UK. The report, carried out by the Committee on Climate Change (CCC) and released in October is already sparking debate as to whether the government is doing enough to fight climate change through carbon reduction policies.

Government action

While the government has announced that it will not go ahead with the construction of any coal power stations employing carbon capture and storage, many believe that not enough is being done to bring about a wholesale change in the way Britain produces its energy.

However, despite surging ahead with non-renewable energy programs, it would be difficult to argue that ministers in Westminster have turned a blind eye to the potential of green energy. Indeed, the Department of Energy and Climate Change (DECC) has already overseen the devlopment of some of the largest off-shore wind farms in Europe.

The Clean Energy Cash Back Scheme (essentially a feed-in tariff) similarly represents a commitment to reduce carbon emissions through legislation. The DECC is already publishing papers on the future landscape of the UK power infrastructure with a grid capable of connecting various micro-generation sites across the country.

The recession factor

With the world financial crisis manifesting itself in the UK in the form of a protracted recession, this has of course had an effect on energy use with the population using less energy and therefore generating less carbon. Critics of the reports findings have highlighted that some of the carbon reduction percentiles can be accounted for by the economy and any imminent up-turn could similarly skew the figures.

In response to such assertions, Ed Milliband, minister for the DECC stated that,

“The recession will not deflect the Government’s efforts to cut emissions and move to a low carbon economy. We must redouble our efforts at home and internationally.”

As the party season ends, more sober thoughts turn back to the great issues that dominated towards the end of 2009. With the Copenhagen conference highlighting massive short-comings in international efforts to fight climate change, it will be hoped that 2010 will see the UK move ahead in the use of renewable energy and herald greater cooperation between the powers in agreeing .

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.

Consultants Ernst & Young have released their annual global renewable energy country attractiveness indices with the big news being that China has knocked Germany from its number one spot, a position which they have enjoyed for the last seven years. The report indicated that in the lead of attractiveness are the US and China followed by Germany, India and Spain.

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

Following on from the various criticisms of the government’s recently announced Clean Energy Cash Back System, comes the announcement of the closure of phase two of the Low Carbon Building Program for solar installations in the UK.

The news is a blow to the industry as it will leave a crucial funding gap until the feed-in tariff comes into operation in April 2010. The move which has been made because of what the government calls ‘unprecedented demand’ seems to have become a victim of its own success.

Initially the government had earmarked £18 million of grants for solar PV installations for public sector buildings such as schools, hospitals and housing installations however it is feared that this cessation of the grant system will kill the solar PV industry in its tracks with the Clean Energy Cash back system still months away.

It is generally believed by industry insiders that the gap left by the closure of the low carbon program comes at an extremely bad time especially with regards to the general economic climate and Britain’s desire to become a real global player in solar PV. Speaking as general manager of UK solar firm, Sharp Solar, Andrew Lee commented that,

“The government’s decision to close the Low Carbon Building Programme Phase 2 is one that threatens to kill the UKs PV industry. At a time when the UK should be building-up interest and support ahead of the introduction of a UK Feed in Tariff next year, the decision to end the LCBP grant procedure because of too much demand is just another unnecessary hiatus in support.

adding,

“PV continues to be overlooked as the government conducts a stop start approach to adopting renewable energy. While we understand that PV technology is part of a wider renewable mix – if every building in the UK had a solar panel on its roof, there would be no need for any other energy source.”

The Department of Energy and Climate Change (DECC) has come under the fiercest criticism since the dual release of the Clean Energy tariff details and now the low carbon program closure news. Some industry observers have commented that the DECC’s hand is being forced by a strong anti-solar lobby currently operating within Westminster and that this news is a hiatus possibly designed to appease the lobby headed by the utility companies.

Defending criticism of the government, a spokesman for the DECC stated,

“It’s very encouraging that there’s been an unprecedented demand for this technology but we have to be fair to all renewable technologies. We’ve put £18 million into the solar PV ‘pot’ since April which is more than the industry asked us for, so it’s really an unprecedented demand. FITs that come in next April will provide future incentive for solar PV projects.”