HC 1605 Energy and Climate Change and Environmental Audit CommitteesWritten evidence submitted from London Rebuilding Society

The Committees will examine the factors Government should consider when setting the rate of the Feed-in Tariffs in future, including the impact on electricity bills, “green jobs”, take-up of other renewables and energy-saving behaviours. The Committees are interested in receiving written evidence that looks at the following themes of the inquiry:

Summary

We agree there must be a change in the rate

But this should enable social and community benefit to be linked to fuel poor households and to shared FITS and not for profit schemes (i.e. where the FITS revenue is recycled to support wider energy efficiency and renewable energy for the benefit of vulnerable people).

Those who are too poor to benefit from FITS should not be expected to subsidise those who are wealthy enough to

We request the rate be increased from 16.8p for social schemes, to 30p to enable this to happen.

(a) Impact to date of Solar PV Feed-in Tariffs and the state of the solar energy market

1.Our scheme – Shimmer - is a shared FITs model that uses surpluses to reinvest in domestic energy retrofit for the poorest households. See attached document.¹

2.This scheme would never have been funded unless FITS was present as a business driver. The success of the 18 home Shimmer Pilot put us in the position of being able to raise finance for a 10,000 home project.

3. Delivering SHIMMER to 10,000 homes would have delivered a substantial economic impact on the local and wider economy. EST estimate that from the installation of solar PV alone, the direct economic effects of our scheme will generate around £127.5 million worth of sales, will directly support local employment equating to over 684 full time positions and potentially generate around £55 million of Gross Value Added (GVA). Every year the installations are estimated to save nearly 11,500 tonnes of carbon dioxide and the aggregated fuel bill savings come to over £1.7 million per year.

4.Furthermore, the indirect effects of the solar PV installations resulting from the increased demand and increased money being spent by employees and the businesses will generate over £250 million worth of sales, create the equivalent of nearly 1,400 full time employment positions and inject an estimated £50+ million of GVA into the local economy from the supply chain.

5.This has now been put at risk even though our financial model was based on FITS rate of 30p not 43.3p.

(b) The balance between affordability and delivering the objectives of the Solar PV Feed-in Tariffs, including factors to consider when setting the rate of small-scale Feed-in Tariffs including jobs created, emissions reductions and energy saving behavioural change

6.New tariffs overstate the drop in real “install” prices by some 20% evidenced by the fact our not for profit rent a roof model for social benefit requires a rate of 30p to allow social investors to take part not 16.8p

7.Our fuel poor clients gain £140 pa from solar which more than repays the 7p per day FITs adds to energy bills and we feel FITs should be reduced to a level which lets the poorest benefit. To deliver the benefits of our scheme to vulnerable fuel poor households we would require a FITS rate of at least 30p.

8.The proposed new tariff does not acknowledge the role of FITS as a business driver. Our approach to transitioning to an inclusive low carbon economy was based on the ability to recycle the benefits of FITS to deliver whole house retrofits for some of the very poorest people and to gear up for the introduction of RHI and Green Deal. The cut means we will not now be able to deliver the supply chain and skills training needed to make RHI and Green Deal work for stakeholders such as private and social investors, local authority/social housing partners, installers and customers.

9.The cuts are putting at risk the emergent low carbon economy before RHI, Green Deal, Green Investment Bank and Green Deal Finance Corporation are in place.

10.Seen in context, FITS, for all its flaws, has kick started the development of the industries and jobs of the future at no cost to government. For example, after ten years, the German renewables industry now supports 340,000 jobs and replaces €5 billion (£4.3 billion) worth of energy imports per annum. In a single year of FITs operating, the UK solar PV industry has created 25,000 jobs, many of which are now at risk.

11.FITS has created an interest and appetite for renewable energy and retrofit amongst early adopters and an aspiration for friends and neighbours to follow.

(c) The way in which the Government has managed the Solar PV Feed-in Tariff, the impact this has had to date, including the management of the Consultation

12.Two major unintended consequences of FITs were exploitation of the scheme by big rent a roof schemes and exploitation of the mechanism to drive social benefits to the very poor.

13.DECC has, probably unintentionally, interpreted the FITS regime in terms of cost per household, ignoring the jobs created, reduction in fuel poverty, increased local economic activity, the increase in tax generation to the treasury, and, the irrelevance of the FITs levy to our poorest households compared to free PV power worth £140 pa when compared to their more pressing problems like the ongoing rise in utility energy prices.

14.Social enterprise schemes benefiting our poorest households require stability and certainty in order to achieve their objectives. The constant fluctuation and uncertainty of DECC policy does not enable this.

15.A major concern of ours is FITS, in our experience, became a driver towards household retrofit via RHI and Green Deal. DECC policy risks putting the whole house retrofit agenda back by several years until government changes or is trusted to delivery stability.

(d) Affordability of Solar Photovoltaic energy versus other renewable energy (given the overall levy-funded cap for energy bills) and the impact of feed in tariffs on energy bills and

16.Taken in isolation, individual PV installs in domestic households are inefficient compared to centralised power production/distribution. However, as a driver for whole house retrofit, gaining the interest of households in RHI and Green Deal, and in local jobs creation, it is unsurpassed. And all, at a cost to government of £0.

17.Our fuel poor clients gain £140 pa from solar which more than repays the 7p per day FITs adds to energy bills. UK households have seen utility bills rise in 2011 by £175 on average. DECC, probably unintentionally, is ignoring the commonsense impact of “cash”. All of us would willingly pay 7p per day in return for £140 per year.

18.It is, of course, only right that FITs should be minimised to reduce profiteering and the cost to the poorest. But DECC should balance the cuts so as “not to throw the baby out with the bath water”.

e. Experience of similar incentive mechanisms for renewables in other countries.

19.No comment.

Reference

¹ http://www.energysavingtrust.org.uk/scotland/Publications2/Energy-efficiency/SHIMMER-Smart-Homes-Integrating-Meters-Money-Energy-Research

22 November 2011