Recent changes announced to the feed-in tariff were designed to encourage investment in smaller scale, household solar panel projects away from larger scale solar farms which were hoping to tap into the tariff mechanism on an industrial level. While commendable in theory, the reality is that householders and small scale investors simply can’t afford the steep upfront costs in installing solar equipment. While it is of course possible to generate long term revenue from solar projects by tapping into the solar feed-in tariff, photovoltaic solar installation can cost as much as £15,000, capital which most would find hard to raise. This is where critics believe that banks in refusing to lend to small businesses are crippling the solar industry in its infancy.

Already in the UK there have been over 31,000 solar installations amounting to 86MW with 81MW of these being domestic, roof mounted projects. For this reason, you would imagine that the solar industry in the UK has already shown potential lenders that there are returns to be made through investing in photovoltaic equipment especially when twinned with a government protected tariff mechanism like the one introduced last April. Lee Summers of Alumet Renewable Technology stated that,

“It would not be difficult for Government to instruct the state-subsidized banks to recognise its own feed-in-tariff scheme as suitable collateral.”

However, despite the clear evidence from abroad that there are indeed healthy yields to be taken from solar pv, the reluctance of the banks to lend is prohibiting a huge number of people to install solar panels. Summers went onto add that,

“For most homeowners they are unable to benefit from the 8 to 10% that the FiT guarantees to domestic generators because they don’t have the £12,000 or £15,000 they need to install the photovoltaic panels in the first place. Banks do not regard the Government’s 25 year index-linked, commitment as collateral for a loan. It is totally unfair that only the most ‘well-off’ individuals in a community can benefit from solar technology. The feed-in-tariffs are paid for by levies on every energy bill and so every home owner should have the opportunity to access the FiT.”

The proposed cuts to the UK solar feed-in tariff for large scale energy producers has been met by angry reaction from the industry who believe it could prove disastrous for fledgling solar projects. The plans are for the tariffs to be cut for more large scale solar projects such as those being set up on large solar farms or on the roof space of commercial buildings. The government has made efforts to distance itself from these more industrial scale solar projects and has instead publicly favoured micro-generation solar schemes for households and local communities.

The solar feed-in tariff works by offering guaranteed, premium rates for renewable energy both used and fed back into the grid by small scale renewable energy producers. The aim of this mechanism is to encourage investment in this once expensive industry by offering the opportunity of both long term revenue generation and savings on utility bills for households. Ernst & Young who have perennially made the connection between attractiveness for investors and the strength of feed-in tariffs believe that proposed changes to the mechanism at this point could be disastrous. Ben Warren, a partner of Ernst & Young commented that,

“The whole investor market was totally disengaged as a result of the feed in tariff being ripped up,”

Certainly the correlation between the strength of the UK tariff and the potential for investors to put their cash into solar projects in this country is significant and the warning from other countries is that where tariffs are rolled back, the solar industries in those countries fail as a result shortly after. Proposed government plans currently subject to lengthy consultation are for reductions of tariff payments for solar installations falling within the 250kw to 500kw bracket. This will affect larger scale schemes such as proposed solar farms based in the West Country where large areas of agricultural land are being set aside for the installation of solar pv systems.

The basic idea behind this plan is that more subsidies which essentially come from UK energy consumers are fed into projects which benefit the whole as opposed to wealthy investors looking to make a quick buck from solar farm investments. The move will certainly fall into Cameron’s cosy idea of a ‘Big Society’ whereby community projects, social housing and local services will all benefit from the revenue which will potentially be generated by tapping into renewable energy. Government spokesman Greg Baker said that he was keen to,

“Make sure that we capture the benefits of fast-falling costs in solar technology to allow even more homes to benefit, rather than see that money go in bumper profits to a small number of big investors”.

 With the government and in particular Chris Huhne making it clear that they do not want the feed-in tariffs to be tapped into by large scale solar farms, the focus is very much on small scale roof mounted projects very much like the one just launched in Bournemouth. The scheme will see a number of council homes and schools across the seaside town fitted with solar voltaic panels, allowing them to benefit from savings on electricity bills as well as generate revenue from the tariff.

The feed-in tariff works by offering guaranteed, premium rates for units of electricity both utilised and fed back into the grid by small scale generators of renewable energy. The emphasis for the feed-in tariff is now well and truly on roof mounted solar projects where home owners are able to benefit from reduced utility bills and of course, in some cases a guaranteed revenue over the lifetime of the project. When the feed-in tariff was launched in April last year, the scheme being rolled out in Bournemouth is exactly what the DECC had envisaged as a way of reducing carbon emissions on a local level.

The Bournemouth solar project is being implemented in partnership between the local council and Mouchel and will create a number of jobs in the installation of the solar pv systems. Bournemouth councillor Peter Charon announced that,

“This is a fantastic scheme for the borough and clearly demonstrates our commitment to reducing our carbon footprint in Bournemouth. We are one of the first authorities in the South to install solar panels on our housing and other council buildings. I am delighted that Kingsleigh Primary School and Heathlands Primary School have elected to join the pilot scheme. Following on from the pilot we will be looking to roll it out to include all council housing, care homes and schools. The overall investment could potentially be £22million with £12million of savings by way of cheaper electricity bills and £15million by way of an income from the Government’s feed-in tariff.”

The uptake in solar panels on the back of the feed-in tariff mechanism is creating excitement amongst industry insiders in the UK. Indeed, recent announcements about impressive growth figures from such firms as Solar Century have perpetuated a general feeling of optimism about the future of solar energy in the UK. Soon to invest in the UK PV market are Inventux Technologies and Abound Solar. Both of these companies have recently received their MCS (Microgeneration Certification scheme) certificates and are ready to invest in the UK. Moves like this are sure to be followed by other solar manufacturers, creating jobs and bringing the UK closer to the much hyped ‘green revolution’ expounded by politicians across the globe.

The solar feed-in tariff works by offering guaranteed, premium rates for units of renewable energy both used and fed back into the grid by small scale solar pv generators. The tariffs were introduced as a way of encouraging investment in what have historically been expensive projects to set up – solar PV. The scheme has already been successful in bringing about an increased uptake in solar panels through a variety of projects being set up by fledgling and indeed, more experienced installers.

A number of projects under way; most typically employing the model whereby the solar company installs the panels on the homeowners roof free, allowing the homeowne to benefit from vastly reduced utility bills over the life-time of the project. The solar company benefits over the life-time of the project from the revenue, generated by the feed-in tariff. While homeowners have the option of buying out the contracts, such schemes have been criticised in some circles as being grossly unbalanced with regards to the profits made by the companies compared to the monetary savings made by the homeowners. Nevertheless, such projects have proved popular over the last 10 months and all evidence suggests that they will continue to prosper until tariff rates are cut as part of a government review.

Inventux and Abound are buying into this market, aware that the aforementioned buoyancy us based on the government’s tariff scheme and without it, the UK solar pv industry would be unviable. Inventux who specialise in micromorph silicon thin-film modules have already announced that they are involved in projects in the UK and will continue to grow their UK operations so long as tariff mechanisms make it a sustainable operation. Similarly, Abound with its CdTe thin-film modules is hoping to expand into the UK market by building relationships with already established UK installers. However, both companies will be aware from past examples that where feed-in tariffs are in place, there is no guarantee of long term success – this of course is in the hands of the governement.