Through studying the UK solar industry in the wake of announcements of cutbacks in the solar feed-in tariff, IMS Research has concluded that the future looks very uncertain, if not bleak. Recent news that the government is set to reduce the aforementioned tariffs has been bemoaned by members of the UK solar industry and has been reflected in the findings from IMS. The feed-in tariff offers fixed, premium rates for units of energy both generated and fed back into the grid by renewable energy generators and is essential in off-setting the obvious costs in installing solar pv panels.

The government and in particular the Department of Energy and Climate Change (DECC) has made it clear that they would like to stifle investment in large scale ‘solar farms’ and instead concentrate on household roof-mounted solar projects. This, IMS believe will destroy the potential for industrial scale solar projects in the UK, something which they suggest will be the downfall of the industry in this country. Certainly, where feed-in tariffs have proved successful elsewhere, larger scale projects have proved extremely effective in helping to create competition and bring costs down over a longer term.

IMS Research has stated that,

“Effectively making solar energy uneconomic for commercial organisations demonstrates the Government’s lack of commitment to renewable sources. It also has an implication for the management of public buildings, such as hospitals and schools, for whom solar power will no longer be financially viable. Limiting solar power to small-scale installations means the sector will simply never take off, other than creating a niche industry. And while countries such as Japan, Italy, Germany, China and the U.S. have said that they will be giving greater financial support to solar power and already have substantial solar PV capacity in place, the UK government has taken the opposite approach, making it clear that nuclear energy is definitely part of the plan for power generation in the UK.”

At a time where job cuts appear daily in national newspapers and politicians expound the notion of a return of a British manufacturing sector, the reduction of solar feed-in tariffs for industrial scale projects is unsurprisingly being met by criticism. It will be hoped that the government does not retract tariffs any more than it has done, otherwise UK solar may just not survive infancy.

Since the intoduction of the government’s feed-in tariff scheme in April 2010, renewable energy and the potential for individuals to cash in has been a running theme in the British media. While certain newspapers have taken a negative view of the potential for green energy and an even dimmer view of some of the companies attempting to take advantage of the new legislation, there is little doubt that feed-in tariffs have had a big impact on the British mindset on renewables.

Historically reactive and often adverse to change, the British public is becoming increasingly aware of the financial rewards that can come from investing in renewable energy based on feed-in tariff pay outs both for the energy used by the household and energy fed back into the national grid. Once commercially unviable, feed-in tariffs work by offering premium, guaranteed rates to renewable micro-generator thus off-setting the high costs of solar panels while offering attractive returns to investors over a period of 20-25 years. This financial mechanism has led to a great deal of companies springing up with offers to fit solar panels to households for free, the benefit to the homeowner being reduced utility bills and the benefit to the companies being long term returns from the tariff.

Indeed, British Gas research alone has shown that the tariff will spur around half of Britain’s homes to eventually invest in solar panels, bringing in an annual revenue of between £600 and £1000. The national grid, which has been criticised of late for its perceived inability to cope with the shift towards green energy has released findings about the future for solar energy in the UK. Certainly, with the UK on target to meet its climate change targets within the next decade, it seems that solar photovoltaic (pv) should also go from strength to strength on the back of the tariff legislation. The national grid has shown that within the next 10 years around 31,950 MW of solar panels will be connected.

The national grid has shown that around 29,000 MW will be needed to exceed government targets of generating 15 per cent of energy by renewable means. This would mean enough energy to power around 20 million homes, a massive change in the way energy is both generated and consumed in the UK. The national grid has shown that while we are certainly on the right track in order to bring about a root change in the way the UK generates energy, the government has to remain focused on renewable energy. With a review of tariff rates due, it will be essential that the government maintains a tariff rate which continues to incentivise long-term investment.

Greece has recently gone through the greatest financial crisis to affect a member of the Eurozone since the introduction of the single currency ten years ago. With raging unemployment exacerbated by huge cut-backs in public sector spending, the Athens government spent the first quarter of 2010 faced by riots in the streets, a result of the financial crisis which is hitting the Greeks harder than anybody.

However, plans are afoot to revitalise the stricken Greek economy with the announcement yesterday that 12 billion euros will be invested in green projects in an attempt to create jobs in new renewable industries. In a press release issued by the Greek government, Tina Birbili the Environment Minister said,

“The ministry hopes the programme will decisively contribute to face recession and lead to dynamic economic growth”

Birbili believes that renewable projects could attract around 32 billion euros of investment from around the world creating up to 192,000 jobs. This will at least come as a glimpse of light in a country where unemployment is steadily on the rise and national debt is at an all time high. The EU bailout, funded largely by Germany expires in 2 years, by which point Greece will be hoping that the economy is back on track.

Both Gordon Brown and Barack Obama have been keen exponents of renewable energy as a means of kick-starting the struggling economies of the UK and US respectively. Sound bites such as ‘Green New Deal’ have regularly appeared in the press both sides of the Atlantic in a reference to the government projects of the 1930’s designed to boost recovery after the Great depression. It seems that Greece is going to follow this lead with a number of projects now in the pipeline.

Certainly, with Greece already falling behind other southern European countries with regards to its renewable energy uptake, the investment could provide the vital impetus needed to get the renewable energy industry in Greece on its feet. With targets of generating 40 per cent of its energy from renewable sources by 2020, they have their work cut out.

In a show of support for the possible introduction of a feed-in tariff, the UK solar industry, led by the UK Solar PV Manufacturers Association has launched its ‘We support solar campaign’. Following last years Energy Bill, there is now a real probability of a coherent feed-in tariff law being established in the UK

The feed-in tariff is government legislation which attracts investment and promotes growth in the renewable energy sector by making it a financially viable option. This is done by guaranteeing a fixed, premium rate for energy fed-into the national grid from renewable energy suppliers. The added cost of producing energy by renewable means is therefore offset by the fixed rates that the traditional energy companies are obliged to pay for the green Megawatts.

The feed-in tariff contracts will provide small renewable installations (generally under 5MW) with a steady revenue stream and it is believed that this will help spread the ‘green’ message into communities. Around 30 MPs are now backing the take up of a serious feed-in tariff policy, as has been seen in places like Germany and California where they have been successful. The government has hinted strongly that they will be looking to mirror feed-in tariff systems implemented abroad and there is growing pressure both from leading renewable energy producers and environmental groups alike for their adoption in the UK.

Former UK government minister, Michael Meacher has given his support to the feed-in tariff and Environment and Climate Change Secretary, Ed Milliband by saying,

“Ed Miliband’s decision to introduce a feed-in tariff for solar PV and other small-scale renewable electricity technologies is potentially a real turning point for the UK solar PV sector. It gives the UK a vital new policy tool that should help to maximise the contribution from solar PV to our demanding renewable energy target.”