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…

After the long wait we finally know for sure the amount to be paid to producers of solar electricity under the clean energy cash back scheme. The result of a consultation process lasting 6 months, the initial outlook for solar energy in the UK is positive.

In comparison with the provisional figures released last year, there has been an across the board increase in the generation tariff paid per kWh for all sizes of installations. The table below shows the feed in tariff as they stand now;

There some important new features of the arrangement;

–         The export tariff (the amount paid when energy is fed into the grid) is reduced to 3p/kWh. This will increase the motivation for generators to use the energy for themselves since retail electricity prices are normally significantly more than 3p/kWh.

–         The lifetime of the FIT is 25 years. This is in line with other feed in tariffs around Europe and increases the attractiveness of solar (compared with 20 years) as it increases the security of the investment.

–         The feed in tariffs are linked to inflation. This means payments will increase over time in absolute terms. This is something that we had been campaigning for as ‘inflation risk’ is a significant worry that we have encountered in prospective solar producers.

–         The feed in tariffs can be legally assigned to any party. This allows room for innovative leasing models that are popular in Europe and the US where the either a third party leases roof space or a home owner leases the solar panels system.

Our initial calculations show that this level of tariff should result in 7-8% annual returns for homeowners retrofitting PV systems under 4kW. This means solar will compete with the best investment funds out there for investors pounds.

For Solarfeedintariff.co.uk this announcement represents a positive move by the government. It shows that during the consultation process it has listened to voices in the solar industry (hopefully including ours) and taken note of what is happening in the rest of Europe. Germany has shown that microgeneration, in particular solar PV generation can contribute very significant amounts of the nation’s energy and that a feed-in-tariff is the best way to encourage this growth.

Claims that have recently been made in the press that solar panels are merely ‘eco-bling,’ exhibit complete ignorance of what is happening in the rest of the world. Unfortunately this is a common attitude in the UK, the last major European economy to implement a feed-in-tariff. Hopefully, now with the tariff announced, this will change. We fully expect strong growth in the UK solar industry. This is a good day for Britain and our hopes of achieving our emissions targets.

Stay tuned for more updates.

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.