The recent news that the UK government will be introducing a feed-in tariff system in order to encourage the growth of renewable energy has been well received by advocates of clean energy production who see it as the best way of achieving grid parity with non-renewable sources in the future.

The UK government set climate change goals at an 80 per cent reduction of carbon emissions by 2050. This, along with the European Union which has set the target of a 20 per cent take up of renewable energy production by 2020 means that governments of all member states have been taking some form of action to reach targets set both by their own government and of course diversify their means of energy production.

A document released by the British government entitled ‘Consultation on renewable electricity financial incentives 2009’ has set out the UKs plan to roll out feed-in tariffs within the next 12 months. In the report Lord Hunt stated,

“feed-in tariffs will open up renewable energy generation beyond the traditional energy companies. It will enable communities to come together and invest in generating renewable electricity. It will make it easier for householders and business to finance their own electricity generation. It will help us all play our part in renewing our electricity supply”.

The points set out in the report and explained by Lord Hunt concisely illustrate the obvious benefits of feed-in tariffs which will have the duel effect of reducing carbon emissions through the adoption of solar while also helping the economy through job creation and the growth of the photovoltaic sector from manufacturing through to installation companies.

With Gordon Brown recently declaring his desire to create a green economy through the introduction of tariffs, it is certainly the view of many within the government that this system will be the most effective means of doing it.

At the beginning of the month the British parliament voted in favour of a parliamentary motion supporting next year’s introduction of feed-in tariffs by a massive majority of 240 MPs. The legislation designed to spur investment in the photovoltaic (PV) industry will, when implemented be an extremely effective mechanism for promoting growth in the fledgling renewable industry in the UK as it has been in other regions where feed-in tariff legislation has been introduced.

Feed-in tariffs work by offering fixed, premium rates for electricity fed-in to the grid by small scale solar energy producers. Over a period of 20-25 years the feed-in tariff (FIT) contract offers a return to solar investors thus greatly increasing the installation of PV plant. In Germany, for example where the tariff has been extremely successful in attracting investment there have been other market advantages such as job creation in the solar industry and of course a sharp rise in solar equipment manufacturing.

Members of the UK solar industry are now increasingly optimistic that the government FIT will generate a successful solar industry across the UK. As Clive Collison, head of Action South Facing a Hertfordshire based solar installation firm commented,

“We are very excited about this. We are now getting all sorts of inquiries from companies, local authorities and individuals. But nothing is guaranteed. We don’t know the level it will be set at yet and the big energy companies are still lobbying against it.”

With big conventional energy producers lobbying against solar energy legislation and a lingering support for nuclear power, it will be essential that the government seizes the opportunity this year to set up a FIT which offers real possibilities for a vibrant PV industry in Britain. With Gordon Brown’s commitment to the ‘Green New Deal’ with planned job creation and economic revitalization by means of the renewable energy industry, it is expected that the UK will reap the benefits of a strong tariff mechanism. Jeremy Leggett, Chairman of Solar Century has added his wait to the debate by pointing out the dangers of missing the boat on effective PV policy,

“UK plc will essentially have to sit and watch as other countries create jobs, tax income and energy security in one of the fastest-growing industries within the emerging green industrial revolution.”

A report released last week announced that the solar industry has grown worldwide despite the recession which has gripped economies. The report stated that the photovoltaic industry saw a 89 per cent increase through 2008, something which has been reflected through the first quarter of this year with the rise of investment in green technologies.

2008 marked an important watershed for the solar industry and photovoltaic technology in general, particularly in the UK as the British government passed legislation designed to promote green energy. The Energy Act of November and the establishment of the Department of Energy and Climate Change was seen to mark a shifting of gear in British political circles as the UK government sought to establish environmental legislation, emulating the success stories of California, Spain and Germany. The solar successes, particularly in Western Europe have been based largely on the establishment of coherent feed-in tariffs which have proved to be effective mechanisms at incentivising investment in the green sector.

In spite of the global photovoltaic revolution breaking out, the UK government has been slow to get behind the solar industry with enough weight to encourage green investment en masse. The recent political rhetoric of the prime minister Gordon Brown in which he espoused the need for a ‘Green New Deal’ in order to revitalise the economy through ‘greentech’ investment has not been immediately followed up by action. The feed-in tariffs which were established in principle at the end of last year will not come into effect until 2010 and until then, there are no other government schemes in place to make solar investment viable since the government terminated its grant program without warning at the beginning of the year.

Leading members of the solar industry, along with representatives from the construction industry have lobbied the government in order to ensure that the government’s rhetoric on solar and climate change is matched by action which will allow the solar industry to reach its potential in the UK, just as it is doing in Germany with outstanding commercial results.

Following up on Gordon Brown’s ‘Green New Deal’ pledge, the government has announced that it will oversee a complete upgrade of British housing in order to make homes greener. The targets set last month outline the government’s objectives to completely overhaul the way homes are constructed and also to upgrade all existing houses by 2030.

The ambitious targets of reducing the carbon footprint of homes across the UK will represent a massive overhaul not just of the way homes are built and invested in, but also of the mindset of homeowners and construction companies who will demand tangible benefits from any outlaying of money. While wall insulation is of course the best way of reducing heat loss through external walls, the government will seek to introduce a series of economic measures designed to make investment in all household green technologies a viable option.

Currently, one proposal is to offer low interest loans to homeowners and landlords to spur investment in property refurbishment in order to make homes greener. This option would be an effective way of reducing the heating efficiency of homes and enable the installation of smart meters which will be essential in the future as a way of monitoring energy usage and will be essential to manage feed-in tariffs (FIT).

Feed-in tariffs could prove to be an extremely effective way for the UK government to make homes across the UK greener. The tariffs, when introduced in 2010 will offer long-term contracts to those investing in renewable energy technology in their homes. The idea is to offer premium, fixed rates for energy fed- in to the national grid by small (under 5mW), renewable energy producers. The plan is that the tariffs will spark investment in technologies such as photovoltaic (PV) which will enable households to greatly reduce their carbon footprint by installing solar technology. The principle of the tariff is to incentivise investors by offsetting the obvious costs of investing in green plant and guaranteeing a yield on the investment of a long-term period.

Speaking on behalf of the housing association Peabody, Stephen Howlett commented on feed-in tariffs stating,

“Ensuring greater use of renewable energy through feed-in tariffs and the renewable heat incentive could offer real opportunities for us to create a package of carbon-reduction measures, based on financial models we have been working on for some time”.