The UK feed-in-tariff announcement has generated a lot of interest in solar energy for homeowners. But what of the interest for organisations such as farms, businesses or local communities?

Some in the press have criticised the government’s proposed feed in tariff plans because they do not offer specific incentives to businesses as well as private individuals.

I would argue that the feed in tariff as it stands applies equally well to enterprises as it does homeowners. Businesses are often able to think longer term about investments. The incentives for installations above 50kW are still attractive for commercial roofspaces, especially if businesses use the electricity they generate for themselves, meaning that installing solar would be a prudent investment to have on a balance sheet. That is not to mention the kudos that comes with being a net exporter of green electricity.

In Germany the commercial rooftop segment of the market is the largest by volume, and with a feed in tariff pricing that now looks rather similar to the UK’s. We may therefore expect that companies start to explore using their roof space for PV. In fact if they haven’t thought of it yet, someone else will soon be approaching them with an offer.

That’s not to say the governments plans are flawless however. The UK is still pitifully behind the rest of Europe when it comes to renewable energy generation and particularly microgeneration.

Still lurking in government policy the ridiculously low target of 2 percent of energy coming from microgeneration by 2020. This is incomprehensible given that Germany is already at 4 percent from solar and other countries like Denmark with biomass gain nearly 40 percent from microgen. Surely this target must be revised!

Speaking as a professional in the global solar industry, the new UK feed in tariff has put us on the radar (a bit). Rather than smirking when I mention the potential for solar in the UK, my colleagues are now starting to take some interest…

On Friday rumours emerged that the German government is likely to significantly reduce the price paid for electricity produced by solar panels. Furthermore, the reduction may be made as early as April rather than in July as previously anticipated.

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.

In a letter written to the Guardian by Environmental pressure group Friends of the Earth (FOE), they have outlined their belief that the government is not doing enough to promote small-scale renewable energy generation in the UK.

The letter published on Jan 18th in the national daily newspaper asserted that the government’s proposed targets of producing two per cent of all energy by renewable means by 2020 is too low, and that the UK government should drastically increase its ambition if there is to be a realistic hope of fighting climate change through carbon emission reduction.

Initiatives such as the creation of the department of Energy and Climate change, the passing of the Energy Act in 2008 and the more recent announcement of the imminent introduction of a Clean Energy Cash Back Scheme have done little to allay the concerns of FOE. In a statement issued by the influential environmental group Executive Director, Andy Atkins he commented that,

“Businesses generating their own clean electricity will reduce their energy bills, increase their competitiveness and reduce their vulnerability to future fossil energy price rises.

He added, “Setting higher feed-in tariffs for small-scale renewable generators could treble the amount of renewable electricity generation by 2020 compared with the proposed scheme.”

With similar pressure groups such as We Support Solar urging the government to deliver higher targets with regards to 2020 renewable energy generation there is a mounting media pressure for the government to match its rhetoric with results.

If initiatives such as the Clean Energy Cash Back scheme fail to bring about a wholesale change in Energy production within the next five years, we can certainly expect further disquiet from those with a real desire to see the effects of climate change brought to an end.

On Friday rumours emerged that the German government is likely to significantly reduce the price paid for electricity produced by solar panels. Furthermore, the reduction may be made as early as April rather than in July as previously anticipated.

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.