Labour MP and advisor to the Department of Energy and Climate Change (DECC) Alan Simpson has warned of the presence of an cartel acting against the interests of renewable energy in the UK. At an event organised by Solar Century to promote the government’s proposal of a feed-in tariff system, Simpson announced that there is currently a lobby opposing the renewable campaign headed by the big utility companies keen to protect their own commercial interests at the expense of the development of green energy in the UK.

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.

The end of the British government’s consultancy period on the introduction of a feed-in tariff (FIT) system, to be called the Clean Energy Cash Back System when introduced in April 2010 finished last week, sparking debate on the viability of the proposed system.

The Renewable Energy Association (REA) has raised doubts as to the potential effectiveness of the Cash Back System. The proposed system, essentially a feed-in tariff, works by offering fixed, premium rates for renewable energy fed-in to the grid by small scale (sub 5mW) energy producers, and bought by the utility companies who are obliged by the legislation to purchase the units of energy over a set number of years.

With the key purpose of the tariffs to attract investment in young renewable industries through incentivisation, the REA has expressed doubts about whether the rate offered by the government for clean energy will prove sufficient to spark sufficient investment.

Indeed, while supporters of the scheme have stated that 5% of the UK’s energy could be generated by renewable means by 2020, the UK government has set the meager target of 2% by 2020 triggering worries that the rate will not be high enough to demonstrate attractive returns for those wishing to invest in the new industries.

Speaking on behalf of the REA Leonie Greene stated,

“From the industry’s perspective the scheme is well designed, but the proposed tariff levels are set too low and applied inconsistently across technologies.”

Where feed-in tariffs have been introduced elsewhere, they have proved to be extremely effective mechanisms for generating huge interest in green energy. However, successes have been based upon generous, yet well balanced schemes and this will be a key factor in either the success or failure of the UK renewable industry.

Dave Timms, campaigner for Friends of the Earth expressed his own concerns,

“The Clean Energy Cash Back scheme has huge potential, but it will fail to make an impact unless the government dramatically improves the amount that will be paid to businesses, households and communities that generate renewable electricity.”

China has reinforced its commitment to moving forward to a more progressive, green economy by agreeing with First Solar the construction of a 2GW solar facility in Ordos, Inner Mongolia. The construction of the large solar facility will begin in June 2010 and is expected to be completed by 2014 in a multi-phase operation expected act as a demonstration of the Chinese governments resolve to make giant leaps towards a renewable energy economy.

 With the solar feed in tariff legislation making the headlines in the UK under the guise of the Clean Energy Cash Back Scheme, the Chinese project will be taking advantage of a similar tariff system with the price of electricity guaranteed at a premium rate over a period of years. Tariff systems such as this have generally proved to be extremely effective means of generating investment in new solar sectors.

 Mike Ahearn, CEO of First Solar commented that,

 “The Chinese feed-in tariff will be critical to this project. This type of forward-looking government policy is necessary to create a strong solar market and facilitate the construction of a project of this size, which in turn continues to drive the cost of solar electricity closer to ‘grid parity’ where it is competitive with traditional energy sources.”

Certainly, it is expected that with the Chinese feed-in tariff policy in place, there will be a number of other large investments in the Chinese photovoltaic (PV) market over the coming months and years. China is also the largest manufacturer of PV product needed for solar projects around the world and is therefore attracting much interest from those wishing to provide turn-key products from manufacturing, construction and installation.

“This major commitment to solar power is a direct result of the progressive energy policies being adopted in China to create a sustainable, long-term market for solar and a low carbon future for China. We’re proud to be announcing this precedent-setting project today. It represents an encouraging step forward toward the mass-scale deployment of solar power worldwide to help mitigate climate change concerns,” announced Mike Ahearn.

With China and in particular the capital, Beijing under the spotlight in recent years with concerns over pollution and carbon emissions, China is now making a very powerful statement to the world that they are about to be at the forefront of the solar revolution.

In a bid to increase profitability among its offshore wind farms, China has introduced a feed-in tariff system designed to make the generation of electricity via wind farms economically viable. China has recently been a leading advocate of the tariff system as the Beijing government seeks to diversify both the economy and the means of energy generation. With the New York Times last week announcing that green power is taking root in China, the move to encourage the take up of wind power generation comes as no surprise as the Asian government is supporting all kinds of renewable energy, especially solar and wind.

The Chinese wind feed-in tariff system will inevitably attract investments in the offshore wind generation industry there with the hope that it will enable the clean, wind energy to compete with that generated via coal fired plants. The guaranteed premium rate which will be offered to wind generators will be met by the existing grid operators with the additional cost being spread over all electricity consumers. The idea is that bigger, more profitable wind plants will receive a more generous tariff rate in order to help them catch up with the bigger wind farms.

The tariff payments are set at around 0.51 Yuan the equivalent of £0.05 per unit of electricity fed in to the grid, depending on the size of the wind farm. Compared with the rate paid for coal fired electricity (0.34 Yuan) the wind farms will e set to receive a generous payment. The announcement by the National Development and Reform Commission (NDRC) stated that the scheme will,

“change current inconsistent pricing, foster clear expectations and facilitate investments in the sector”.

The previous system which operated regarding wind power electricity purchasing involved public bidding using low-rate tariffs which did not enable most wind farms to gain grid connectivity, a hindrance which meant that at least 20 per cent of China’s wind power producers were unprofitable. With the feed-in tariff system generally regarded as by far the most effective means of generating capital in green energy, China will be set to succeed in its bid to diversify its economy and become a major player in the world of green energy production.