HC 1605 Energy and Climate Change and Environmental Audit CommitteesWritten evidence submitted by Patrick Whitty

Reducing the FiT; Impact on the Solar PV Industry.

1.At 43.1p the FiT has encouraged many people to adopt solar PV and reap a wide range of benefits

2.Solar PV FiT reflects both high cost and potential for technological advance

3.The FiT at 43.1p has resulted in the emergence of companies fitting free solar panels and to hard sales tactics by double glazing companies

4.Reducing the FiT to 21p at short notice has lead to unprecedented sales, placing the industry under intense pressure

5.The government has unwittingly created the boom and bust scenario which it sought to avoid. Many companies will be unable to survive, leading to loss of employment opportunities

6.The cost of solar panels has come down, but not enough for the industry to absorb a 50% reduction in benefits occasioned by the reduced FiT

7.The sudden change in policy has lead to loss of confidence in the government and in its commitment its own carbon reduction policy

8.Reduction in the FiT could have been staggered over a longer period to ameliorate the effect

9.The damage to the industry could be offset by other measures.

1. The solar PV feed in tariff, originally set at 41p rising to 43.3p per kW in April 2011, has provided a powerful incentive to adopt solar PV technology, often by people who would not normally have considered so a radical move. While the financial rewards offered by the feed in tariff were sufficient to overcome objections and inertia, the actual benefits have been much wider, increasing awareness of energy use, home insulation levels and the advantages in selecting more efficient domestic electrical equipment to maximise the benefit from the panels. Solar PV is a high visibility technology and the appearance of solar panels on an increasing number of roofs has improved public awareness and perception of solar technology, and of renewable technology as a whole.

2. While the FiT rate for solar PV was set much higher, and for a longer period, than for other technologies, this reflected the higher initial cost, but also reflects the potential for development in solar PV technology including, for instance, multi junction and organic solar cells. Increased uptake of solar PV will inevitably fuel development of newer technology as companies strive to maintain their market position, leading to greater power output per unit cost or area. The potential to improve the efficiency of solar panels is enormous.

3. The high rate of the FiT for solar PV has lead directly to the emergence of companies fitting free solar panels purely to reap the FiT rewards, and to double glazing companies adding solar panels to their portfolio. While the pros and cons of free panels are often clearly presented and do allow people who are unable to afford to fit panels for themselves to reduce their demand on the national grid, there are inevitably other companies who are less trustworthy. Double glazing companies who have jumped on the solar PV bandwagon generally rely on selling ‘on the night’, employing direct sales procedures which can do much to harm the solar PV industry. While the high sales volume sought by these companies has done much to increase awareness of solar PV, their prominence may be taken as evidence that the FiT for PV was, initially, set at too high a rate.

4. The unexpected decision to reduce halve the FiT for solar PV at short notice has placed potential purchasers in a situation closely resembling the unpopular ‘buy now’ direct sales technique so beloved by double glazing reps. The resulting surge in sales has placed the solar PV industry under intense pressure, unprecedented demand for panels and inverters resulting in companies fitting any equipment available so that their customers will qualify for the 43.3p FiT. Inevitably, as demand outstrips supply, lower quality equipment will be substituted to the customer’s potential disadvantage.

5. Companies risk financial hardship where shipments of equipment, placed before the announcement of the reduced FiT, are not expected to arrive until after the 12 of December, leaving them with stocks of materials for which there will be limited demand. As a result of the proposed change many of the companies fitting free solar panels are no longer taking orders. With the approaching deadline companies are no longer selling panels which they know cannot be fitted in time to qualify for the higher rate FiT. For many the solar PV industry will no longer offer potential for employment and large numbers of jobs will be lost within the industry at a time when unemployment figures are very much in the public eye.

6. It has been suggested that the industry can counter the lower FiT rates by reducing the cost of fitting solar panels and that the cost of panels has plummeted There is no doubt that there are very cheap solar panels now on the market, but then every commodity has its budget options. It also true that developments in manufacturing technology have enabled the cost of panels to be reduced, but the cost of panels is only part of the cost of a system. Transport and labour costs continue to rise. The actual cost of a solar panel system of reasonable quality has reduced by around 12% between November 2010 and November 2011.

7. Quite apart from reducing the incentive to fit solar panels, the government’s change of heart has lead to loss of confidence in it’s commitment to carbon reduction and will inevitably blunt enthusiasm for fitting not only solar PV but also other domestic scale renewable technology. Doubts over whether the government can be trusted to stand by the 25 year period of the FiT will also reduce the incentive to select solar PV for long term investment.

8. If, as may well be the case, the current FiT for solar PV is unsustainable then it could have been reduced in, perhaps, two stages over the next two years, limiting the shock to the industry and reducing appearance of panic and lack of forward planning. Even if the government back tracks on its proposed reduction, the damage has now been done; with the loss of confidence people will be reluctant to invest heavily in solar PV. It will take a long time to regain public confidence.

9. One way forward could be to proceed with the proposed reduction, making it absolutely clear why this has been necessary, but then to reduce the damage by, for instance, extending the interest free loans currently available to SMEs to members of the public, perhaps covering a percentage of the purchase price. Encouragement could also be offered by further relaxation of planning control, for example in the case of ground mounted solar PV systems and ASHP.

22 November 2011