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.”

To read the full article, click here.

The Feed-in Tariff Review

As we understand it, the Comprehensive Spending Review championing the government’s budget overhaul into spending includes a review of the solar FiT. The Department of Energy and Climate Change (DECC) is the authority on this matter, and only their official release will bring about the changes and outline to what extent cuts will be made.

One thing that figures from Ofgem are highlighting is that installation rates are much higher than what they anticipated. The current rates cannot be sustained at this exponential growth level. The boom is most certainly in full swing, and the bust now appears to be approaching in all its foreboding and unstoppable glory.

“Unless Earlier Action is Deemed Necessary”

The DECC, in speaking with industry sources has released the following statement:

“As we’ve previously said, all tariffs in the scheme are being considered in the Comprehensive Review and we will be consulting on proposals later this year. We’ve made clear that tariffs will remain unchanged until April 2012 unless the review indicates the need for greater urgency. There has been no announcement about the review so any rumors about its content are just that, rumours and speculation.” (Source)

In simple terms, nothing has changed at this point and we are no closer to understanding exactly when they will. The media storm has cracked through the sky, but the underlying realities of our situation remain. There is little doubt that the review will decrease the FiT rate by some extent, and also increasingly less doubt that the changes will be brought about before April 2012.

The only concrete truths the industry has to offer are that if you’re installed prior to the changes you will receive an enviable rate on your solar power for many, many years. If you do not, you won’t.

Written by Jarrah Harburn

jarrah@solarselections.co.uk

T: 0844 567 9835

© Solar Selections Pty Ltd 2011

The Comprehensive Spending Review

The government carried out what they called a Comprehensive Spending Review in 2010 in order to take better control of government spending. The Comprehensive Consultation into the Feed-in Tariff was a part of this review, and is the official name for the solar FiT review. It is carried out to ensure that the funding being spent to promote the uptake of solar energy installations via the FiT is under control and at a manageable level.

Expectations

International experience has taught us a lot when it comes to government incentives for renewable energy installations, especially solar power on a micro-generation (>50kW) level. The most successful solar industries in the world of Germany, Spain and Japan are perfect examples of this and we can review their developments to aid our predictions. In all of these countries:

1. FiT’s were introduced and subsidised by the government to bring in solar uptake;
2. Reviews on the FiT’s were carried out on loose timelines to control the government’s spending;
3. The FiT’s were reduced over time and via these reviews in order to stabilise growth.

So by this example we can make one point clear;

1) A reduction in the FiT is by far more likely to occur than an increase or a continuation.

The second aspect we must consider is the degree of reduction we could expect to see.  At this point, it looks likely that the UK’s FiT reviews will be flexibly carried out to ensure the government reduces their risk in over-spending via the Comprehensive Consultation they have established. Whilst we have a rough date in mind, we need to analyse the uptake figures for a better idea on when to expect the changes.

Installation Figures of Solar Energy in the UK

The timing of the review

The government has stated that a review will take place upon a certain budget for the FiT being reached or if we reach March 31, 2012. Looking at the current uptake figures being offered by the regulator for energy in the UK, Ofgem, we can expect to reach 550MW before March 2012. This would very likely be a number surpassing the government’s budget, and we can then loosely establish our second important point,

2) The FiT review is likely to be introduced after November 2011, but before the end of March 2012.

Whether changes are brought about immediately or postponed until April 1st, 2012 is uncertain and depends on the government’s perception of the uptake and budget. Here at Solar Selections all we suggest is for people to educate themselves on their options, ensure they understand the returns and benefits for the solar installation and then proceed as soon as they feel comfortable.

The scale of the review

The other important aspect of the review when it does come around is the scale of the reduction in the FiT to expect. The growth of the market here in the UK is not expected to be sustainable for another year, so reductions between certain percentages can be expected.

3) The FiT cuts could be in the vicinity of 25% to 40% of the current tariff levels.

Only a cut of this magnitude could stabilise the spending that is at the forefront of the governments concern. Whilst such reductions would be damaging to the growth of the industry, they do serve as incentive for people to consider their options now and sign up for the 25 year indexed to inflation rates on offer.

The most important consideration with these three conclusions is that time is of the essence. We here at Solar Selections do not condone the pressured selling tactics that can be used in the industry to make customers feel forced into a decision without doing research. We do want to ensure that as part of a potential solar energy customer’s education they learn that if the review is changed and the installation incomplete, the new tariffs will apply and that they are likely to be significantly less attractive than what is available now.

In Conclusion, once a project’s feasibility and interest is established, any further delays in the decision making process serve only to expose the project to the risk of lower tariffs.

To establish your project’s feasibility and your own knowledge and interest, get in touch with us today for free, intelligent advice.

For the full article, please click here

Written by Jarrah Harburn

jarrah@solarselections.co.uk

T: : 0844 567 9835

© Solar Selections Pty Ltd

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.

In a budget statement undoubtedly designed to garner support from renewable industry insiders and environmental groups alike, the Conservative party leader is leading a project which will see the creation of a green investment bank with around £2 billion to invest in new, green technologies and help to grow the fledgling industry in the face of tightened lending from the traditional banking sector.

With investment essential to help the UK carbon neutral economy take off, the Conservative’s announcement has been met with encouraging assent from those it is meant to appeal to.

Director general of the Institution of Civil Engineers (ICE), Tom Foulkes welcomed the news as being key to the success of the UK green sector,

“Clearly, transforming the energy sector will require massive investment in new and upgraded infrastructure. A Green Investment Bank will go a long way towards funding the development of new technologies, but there remains a need for a secure method of funding for the long-term investment in energy infrastructure.”

Certainly, with the election expected in May green issues are expected to feature heavily with issues such as the the Clean Energy Cash Back scheme and the Copenhagen summit making headlines in recent months. Some of the key lobbies to appease ahead of the May ballot will of course be the environmental groups who this time are behind the green paper’s plans for the green energy overhaul.

Andy Atkins, Director of Friends of the Earth commented that,

“A Green Investment Bank is desperately needed to fund the replacement of the UK’s outdated fossil-fuel energy infrastructure with the clean energy technologies of the 21st century, and to create new green industries and jobs.”

With the Department of Energy and Climate Change (DECC) bringing in the feed-in tariff on April 1, the ante has certainly been ‘upped’ with regards to real policy designed at tackling climate change and achieving targets on carbon emission reduction. With the Gordon Brown Labour government making positive moves towards a sustainable energy economy, the opposition will have their work cut out in order to show that they are also capable (and indeed willing) to see the development of a strong green technology industry in the UK.

solarfeedintariff.co.uk will regularly update all news regarding the feed-in tariff before the election so please visit us again to stay up to date with all green issues.

China, despite being criticised for its heavily industrialised, polluting economy and images of Beijing obscured by dense smog during the 2008 Olympic Games, the government is taking proactive steps towards reducing carbon emissions with measures that would shame certain other attendees of the Copenhagen climate summit.

With the growing realisation of the fallibility on basing the huge Chinese economy on fossil fuel imports which could become untenable within the next 25 years, the Beijing government is planning to spend billions of dollars in investing in solar and wind farm sites in addition to research projects which could keep China at the cutting edge of green energy generation.

Renewable energy generation grew by 1 per cent in China in the last 12 months with the government hopeful that figures will grow from the present 9.9 per cent to 15 per cent by 2020. The Chinese government is keen to diversify its economy as well as its means of energy generation with the dual purpose of slowing the effects of climate change and making the economy more robust in the face of any potential fuel crises which could arise in the near future.

In spite of passing legislation designed to have an immediate impact on renewable energy uptake such as the feed-in tariff, a mechanism to incentivise investment in green technologies, government spokesman Zhang Guobao is realistic about the timescales involved in such projects. Speaking to China Daily, Zhang commented that,

“Power projects take a long time to be up and running, and we are basically allowing five years to complete them although it is a 10-year program, otherwise, the facilities cannot be put into use by 2020.”

Zhang added, “It appears that some local governments approved energy-guzzling projects during economic crisis so only by fully implementing our energy saving regulations can we realize economic growth with less energy consumption.”

We expect an official announcement this week and will update you then but the rumours alone have already sparked hefty losses in solar energy stocks around the world. This is not surprising considering how large a proportion of the world solar market Germany represents. In 2009, close to 4GW of solar energy capacity were installed. The next biggest markets, Italy, France and the US were a maximum of 1 GW each. If demand drops significantly in Germany, it could lead to more pain for solar equipment manufacturers.

Personally, I believe a significant reduction in Germany’s feed-in-tariff is a good thing for the industry. Things got out of hand in 2009 as installers and manufacturers (particularly inverter manufacturers) struggled to meet demand. Everyone wants the solar industry to grow, but it must be stable growth. Too much too soon and there isn’t enough time for problems to resolved.

For example, in the southern part of Germany, solar energy makes up close to 5% of all energy production now. This is already causing problems for the electricity grid because of the intermittency of solar power. If solar energy were to grow more slowly, these problems could be dealt with as they arise.

The other problem of the feed-in-tariff is that it was making people too rich. Solar farms in Germany are providing 10-15% annual returns virtually risk free. No hedge fund can offer that. Given the risk of a solar investment, the return needs only to compete with long-term savings accounts, so if they provide just a 4% return, that should still be attractive. It is hard to predict what the effect of the drop in feed in tariff will be. Certainly, if the return on investment is lowered, there will be a reduced incentive and less of the ‘urgency’ which gave rise to the boom of last year. However, if there is still a reasonable, positive return on investment, then large numbers of people will still take up the opportunity. If someone handing out 20 pound notes switches to giving out 10 pound notes, would people start walking away?

On the verge of releasing details of the UK feed-in-tariff, what does is the message for UK policy makers observing this 17% cut? Why should they listen to the voices calling for an increase in the tariff whilst all our neighbours are busy cutting theirs? I would ask the government not to waiver in their commitment to growing the UK solar industry. The market in Germany is one thousand times greater than that of the UK (4 gigawatts compared to roughly 4 megawatts last year). The Germans have created an efficient industry with that is able to provide solar installations at competitive prices. The UK industry has not got off the ground yet. We must provide a decent incentive so that people begin to accept the concept of solar energy in the UK.

The experience of Germany shows that subsidies do not have to be provided forever, however the industry must be there before you can scale back.

My message to policy makers is this; we have a lot of catching out up to do, so don’t lose your nerve before we have even started.

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.”

Thin film solar panels are made using a radically different process. The underlying physics is similar in that they still use a junction between a positive and negative doped semiconductor, however thin film solar panels have the potential to be made in much fewer steps than crystalline silicon. The idea is to take glass (or sometimes foil or plastic) and coat it directly with a series of layers, including the active semiconductor layers to produce a working solar cell. The glass is then encapsulated with a protective plastic and a second sheet of glass as protection. This process saves having to make lots of small cells and connect them together. The other advantage is that the layers are very thin, hence thin film solar cells. The active layers of the cell are only a few nanometers (billionths of a meter) compared to 0.2mm for each silicon wafer.

The important point of all this is that the manufacturing cost of thin film solar cells has the potential to be significantly lower than crystalline silicon. Unfortunately, there are some catches. Firstly, they are not as efficient as crystalline silicon. Crystalline silicon reaches 16 – 18% efficiency in modern solar panels, whereas the most efficient thin film solar panels on the market today  are under 11%. The next drawback is reliability. Thin film solar panels have had less time to prove themselves and have been known to suffer from degradation meaning that their performance gets significantly worse over time.

Despite these drawbacks, several companies have managed to become very successful in manufacturing thin film solar cells. The most notable is called First Solar who are now one of the top two largest solar panels manufacturers in the world and have a significant advantage over rivals due to their low manufacturing costs. First solar make thin film solar cells made from cadmium telluride, one of a number of semiconductor materials that can be used for thin films. First Solar’s panels are less efficient but are very popular for large scale solar installations because of their low cost.

Before the financial crisis, when silicon was in short supply and very expensive, all thin film solar panels were a good idea. First Solar could not produce enough and billions were invested in a large number of thin film solar companies aiming to follow in their footsteps. Now that the silicon shortage is over and the price of crystalline silicon solar panels has fallen, the environment for thin film solar cells is more challenging. First Solar will remain a strong player as they have managed to get to high volume and have a reliable production process. Many of the 200+ start-ups hoping to replicate their success will struggle however. For thin film solar cells there are a wide range of different manufacturing processes and materials that can be used, and there is still a lot of research being done to improve our understanding of the underlying physics. This means that there is a lot of opportunity to invent a ‘unique’ technology and start a company but only the best thin film solar companies will make it however. They have to show not only that their technology is efficient and reliable, but also demonstrate that large scale production is feasible and low-cost. Many ideas that look good on paper or in the lab turn out to be impractical when it comes to volume manufacturing.

At present, it seems like crystalline silicon will retain a strong market share for the foreseeable future (it current represents 80-90% of the market) but I believe that eventually certain thin film technologies will begin to displace crystalline silicon. There is a lot of potential for efficiency improvement in thin film, as well as lower manufacturing cost. Some technologies, particularly that usce solution processing are really very exciting.

What does this mean for the UK solar industry? Very little actually. I would expect over 90% of the UK market will be crystalline silicon for a long time. The reason is that the UK market will be dominated by smaller rooftop applications (partly due to the structure of the feed.in tariff as discussed last week). In such space-constrained applications you want to use the most efficient technology to maximize the energy generated from the available area. For now, this means always choosing crystalline silicon as it’s efficiency is significantly above any thin film solar panel out there.

Keep an eye out for breakthroughs in solar technology as some are surely bound to occur, but beating high quality crystalline silicon solar panels made in China for cost, efficiency and reliability is not easy.

With the government’s announcement regarding the introduction of the Clean Energy Cash Back system (essentially a feed-in tariff system) in April 2010 much debate has raged regarding the tariff rate which will be required in order to optimise investment in the fledgling UK renewable energy industry.

The feed-in tariff works on the principle that small, renewable energy producers are guaranteed a fixed, premium rate for all units of energy they feed back into the national grid. The renewable energy units are purchased by the utility companies, something which they are obliged to do by the tariff legislation. In actual fact, the government has set a rate of 5p/unit with a subsidy of 36.5p for units of energy generated by small scale solar and wind installations, something which Simpson has controversially asserted will not be sufficient to spark the must needed investment in the industry.

Simpson claims that with the current rate set at 5p, the ROI for solar investors will only be around 5-7 per cent, yields which would possibly not be generous enough to turn the heads of investors who would potentially be attracted by more generous tariff rates elsewhere in the world. With a tariff rate of 10p, Simpson believes that returns could be a more healthy 10 per cent, rendering the UK as a highly competitive market in the world for attracting renewable investment in the long term.

For the UK to finally become one of the major players in the world of solar drastic changes will need to occur within the coming years to catch up with established markets such as Spain and Germany who are currently generating 2,511 MW and 1,500 MW of renewable energy annually respectively compared to the UK’s peak 6MW. Simpson certainly believes that this shortfall can only be remedied with the introduction of comprehensive tariff systems. Speaking at the Solar Century event, Simpson announced,

“Current energy policy in the UK is dominated by the vested interests of “Big Power”. The national grid is monumentally inefficient as an energy system. It was a half-decent idea for the middle of the last century, but 70%-80% of energy put into the grid disappears before you or I even switch the light on. We need not an energy, but a power revolution that takes control from the centre and literally puts power back into the hands of the people”.

Those within the industry back the words of Alan Simpson and are well aware that the future of the UK renewable energy industry is completely reliant on a strong tariff rate. Come April, it will be there to be seen if the government’s rhetoric on tackling climate change can be matched by a determination to take on the big utility companies and drive through a system which will see the UK become a leading light in the green energy revolution.