HC 1605 Energy and Climate Change and Environmental Audit CommitteesWritten evidence submitted by Peter Morgenroth, Morgan Lighting of Chorley
Executive Summary
The introduction of Feed-In-Tariffs (Fits) for solar PV in the UK has been a major success in changing hearts and mind of the UK consumer to embrace and install system on domestic properties to help reduce their CO2 footprint, help control their future energy costs and receive a defined income for their significant long term investment.
The Fits have achieved the desired catalytic to generate about 25,000 jobs in the UK for suppliers, designers, installers, training organisations, roofers and electricians.
A review of the proposed DECC changes shows them to be severely flawed and unworkable and will have consequences not envisaged in the draft impact assessment.
The impact of the proposed changes will:
Destroy the Consumer confidence and uptake of PV systems by more than 95%.
The UK will lose about 25,000 UK jobs.
Will send the message DECC and the Coalition are abandoning their CO2 commitments and be seen to be taking away the mechanism for individuals and home to reduce their fuel bills and CO2 footprints.
The report makes recommendations to modify the DECC proposal.
1. Introduction
The responds to the Committees request for feedback.
The report considers the proposed FIT reduction from 43.3p to 21p for domestic systems up to 4kW against the actual cost reductions actually seen. The author has serious concerns that the proposed cost reductions will force suppliers and customers to use lower cost parts that are likely to have a significantly negative impact on the safety and longevity of the systems. The impact of the proposed requirement Energy Performance Certificates and building being upgraded to class C is discussed. Whilst the objectives make sense the practicality of the proposals and impacts are discussed.
The report steps back to review the messages and the impact that the proposed changes will have and how these need to be modified if the PV FIT success is not to be maintained.
The report makes recommendations to alter and modify the DECC proposals to enable Consumers and the PV Solar industry to continue to contribute to the CO2 reduction commitments and to protect UK jobs.
2. Impact to Date of the Solar PV Feed-in Tariff
2.1. To date the Feed in Tariffs have achieved the desired effect which was to act as a catalyst to encourage the adoption of Solar PV systems, develop the UK supplier and installer network. Many SMEs have invested time and money to develop their capabilities to offer PV systems to customers. It has created a new green industry creating many UK jobs.
2.2. Consumers have been encouraged to make the significant capital investment which locks up their money based on a reasonable return in the future. The scheme has allowed the Consumers to feel they can make a difference to their Carbon Footprint, enable them to reduce their bills when they are able to use the electricity and to help reduce the CO2 by exporting spare energy to the grid.
2.3. DECC and the Coalition has shown that the policy is working and able to contribute to the CO2 reduction targets made by the previous Government and the Current Coalition.
3. The Balance between Affordability and Delivering Objectives of the Solar PV FITs, including Factors to Consider when Setting the Rate Small-Scale FITs including Jobs Created, Emission Reductions and Energy Saving Behaviour
3.1. The DECC proposal is supported by the Draft Impact Assessment. Key assumptions in this document are as follows:
Costs of systems have fallen by 30-35% ( Ref 1 Table 3).
The proposed reduction of the <4kWpk FIT from 43.3p to 21p will reduce uptake by 70% ( Reference 1 Policy Option 2 last paragraph).
The addition of policy Option 3 to include EPC 3 will reduce the uptake by 92%.
3.2. Morgan Lighting has been installing solar PV systems for 18 months. The costs of materials of similar quality have fallen by about 20% not 30-35%. To achieve greater cost savings then the designers and installers have to use lower cost products and cut corners on the installation. DECC expect the products to last 25 to 35 years. The author is an expert is the design of high reliability silicon, electronics and electromechanical products. Sadly much of the electrical industry in the last few years has adopted the lowest cost options to the significant detriment of product reliability, performance and safety. The standards MCS 01 and MCS 005 need to be strengthened to ensure additional work is done to ensure product installed have the best chance of achieving their lifetime goals. The proposed reduction in FIT of more than 50% is too large a step and will reduce the quality of many installed systems to the point where the industry could get a bad name for of quality.
3.3. The impact statement suggests the proposed reduction in Fit will reduce the uptake by 70%. Our analysis suggests this will be 80%. The step should be reduced substantially to protect the consumer confidence where they must have more than a 4-5% ROI for them to make a capital investment locking up money for 25 years. The 70% reduction in installations will immediately reduce UK jobs and the benefits have not been included in the cost analysis.
3.4. If Option 2 is adopted and the solar PV systems can only be installed on homes that will achieve the EPR of C or better combined with the Fit cut will reduce the uptake by 92% according to the draft impact assessment. Our analysis should the impact will be higher. If only 9% of homes meet C or better today and probably 20% of homes are suitable for a PV system then this will limit those who can fit without the additional cost of upgrading to EPR C. The additional costs will reduce the uptake by more than 95%.
3.5. Whilst we understand the desirability and benefits to encourage consumers to enhance the EPR of their property it is an outrage for DECC to link this to the PV installation because the Green Deal is NOT in place and may not get agreed. The Green Deal funding is not assured and may not be available to many consumers. Many of the SMEs who have set up to install PV are not in a position to support the Green Deal and it will become a preserve of the larger organisations and Power Generating Companies. The proposal will put barriers in the way killing the current PV success and demotivating customers to make improvements to their homes and remove the ability for homes and businesses to reduce their fuel costs. The Green Deal should stand on its own.
3.6. All forms of alternative energy have higher costs compared to fossil fuels. The Wind Energy requires a subsidy and also requires the grid to be upgraded to get the energy to the right place. Solar PV is local and small scale so does not require upgrading the grid. It also generates more power during the day when the grid load is at its highest.
4. The Way in which the Government has Managed the Solar FIT, the Impact this has had to Date, including the Management of the Consultation
4.1. To date the FIT has achieved its objective as a catalyst to generate a new UK solar PV industry, creating UK jobs, skills and most importantly generated and interest in the General Public so they can participate in reducing the CO2 emitted from power stations and to help keep their fuel bills under control.
4.2. The Consultation has not been handled at all well. Information was leaked early. It appears that DECC have been unduly influenced by the large Power Companies and come up with a proposed FIT reduction that will kill the industry and consumer interest. They have linked in an un-workable addition requiring it to be fitted to homes with EPR C or better.
4.3. The 12 December cut-off date has caused chaos. We have had to return deposits for orders because we cannot get parts from our normal quality suppliers. The Consultation is due to finish after the cut-off date.
5. Recommendations
5.1. The reduction to 21p should be scrapped and replaced with an initial reduction of say 25% with a further small step reduction in future years.
5.2. The requirement to require Energy Performance Certificates and requirements to upgrade to C should be removed from this proposal in its entirety. If the DECC want the Green Deal to work it should stand on its own. Leaving it linked will cause the current PV success to fail.
5.3. The costs should include the benefits of UK jobs and the full costs of wind power and nuclear power should be used.
5.4. The MCS Standards urgently need to be reviewed to ensure the manufacturers and importers produce products that have a high chance of still being working in 25 to 35 years to ensure product safety and product reliability.
6. Conclusions
6.1. The DECC proposals as they stand will kill the industry with the loss of UK jobs and the loss of Consumer confidence that DECC and the Coalition are serious about the commitments to CO2 reduction and Energy Security.
6.2. Modifying the proposals as suggested with a balanced approach can deliver PV at reduced cost, CO2 reductions and the maintenance of UK jobs.
Reference
1. DECC Draft impact Assessment 2 November 2011.
22 November 2011