The Court of Appeal today (Wednesday 25 January 2012) unanimously rejected Government attempts to overturn last month’s High Court ruling that its plans to rush through sudden cuts to solar tariff payments are illegal.

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.”

We stand presently in a state of transition. At the time of writing this article, the most lucrative residential solar power incentive ever to be offered in the United Kingdom is days from being cut in half. So what does this mean for those still considering purchasing a solar energy system for their home or property? Will the new rates kill off the residential market completely, or is there some tangible evidence of the investment remaining economically worthwhile? Let’s take a look.

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The new rates have been announced and the primary one to focus on for all residential sized installations is the now reduced Generation Tariff:

• 4kW and >4kW Installations: 21 pence per kWh generated

This adds to the other two incentives that come from a) saving energy otherwise bought from the grid and b) exporting surplus when over-producing. The Export Tariff rate remains at the negligibly effective 3 pence per kWh, but exporting simply isn’t going to happen in the vast majority of households and properties. Of more importance is the savings rate will continue to reflect the price you pay per kWh from your energy retailer. This currently stands on average of 13 pence for residential properties.

So all in all, let’s conservatively say we are going to be generating solar kWh’s worth:

(21p Generation + 13p Savings) 24 Pence per kWh

Whilst this is a significant reduction in the previous tariff rates, if a few other factors come into play then solar installations will remain a worthy investment for many thousands of people.

Let’s have a look at some other factors that may determine the feasibility of solar installations for thousands of people across the UK.

Areas of Development and Promise

Reduction in Upfront Capital Outlay

The first and most immediate change that we will see in the residential solar industry is a substantial reduction in upfront cost of purchasing a solar energy system. This will involve not only less profit margins for their own businesses but better rates at which they buy components, in-house adaptations for scaffolding and accounts to avoid external expenditure, streamlining sales and marketing and essentially running as efficiently as possible.

We expect this to account for anywhere between a 15% to 35% drop in prices by the time we arrive at late January 2012. This means the most price competitive are set to get as low as £8,500 or even better. This alone would catalyse returns on investment to reach back to their 8%-12% mark, easily trumping rates achievable with bank savings accounts or ISA’s. Ultimately this in itself is enough to recreate interest from large numbers of home and residential property owners, but let’s consider some other possibilities that may work in tandem.

Community Groups

It is a common retail and purchasing philosophy that buying more of something results in a better price per unit. Solar power installations for residential properties are not alienable from this. Community groups that are geographically localised have a significant advantage in that they can receive discounts by purchasing a solar energy system collectively. So long as a reputable and knowledgeable organisational arm is employed to do this work, comparisons can be made across the local installers and the best possible deal brokered. This lowers the upfront capital costs for all involved on often sliding scales up to 20%. Solar Community Organisers here at Solar Selections are experts at organising and facilitating such an effort. Contact us today for more information.

Remote Power Opportunities

Whilst the majority of the population live in relative proximity to power plants and the main grid, properties that are on islands or over mountains usually pay much higher rates for their energy. In Australia, our parent company Solar Choice invented a unique approach to assisting communities in some of the more isolated regions of the land down under. Because they were paying more for their energy, their systems saved them more and the returns on investment improved. If you’re unsure about how much you’re paying for your energy, have a look at your bills or contact your energy provider.

Finance

A solar power system is a very straightforward, low maintenance and low risk investment once installed, and bank and credit institutions across Europe are warming to this slowly. At this point in the UK there are several commercial opportunities for finance from groups such as Barclays. Over time, residential markets will present another opportunity for banks to lend money and charge interest so the market is expected to open up. More information on this will become available as it comes out.

Conclusion

These suggestions are merely a handful of methods that the residential solar industry will utilise to adapt to the tariff changes. By watching the pricing and ensuring potential customers investigate all of the best prices available, consider organising a community  group and explore finance options, residential properties will find solar a worthwhile investment as soon as January 2012. For an up to date account of all the possibilities, contact Solar Selections today and speak to a dedicated member of staff.

Written by Jarrah Harburn

jarrah@solarselections.co.uk

T: 0844 567 9835

© 2011 Solar Selections Ltd

There is a growing degree of speculation in the industry regarding the feed-in tariff (FiT) review that is approaching towards the end of 2011. Due to the incredible importance of the tariff to your average solar energy installation, such debate is healthy and ensures awareness of its approach. Speculation however, is not quite as beneficial, so this article will evaluate the current situation and explain what is to be expected when the review is announced and brought about.

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.

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Written by Jarrah Harburn

jarrah@solarselections.co.uk

T: : 0844 567 9835

© Solar Selections Pty Ltd