HC 1605 Energy and Climate Change and Environmental Audit CommitteesWritten evidence submitted by Colchester Borough Council
1. Executive Summary
1.1 Colchester Borough Council has developed a solar PV project to install over 2,000 properties with PV through a roof rental agreement with our supplier. The Council has already been significantly affected by the feed-in tariff consultation announcement and as such would like to express the following concerns:
The severity of the proposed reductions to feed-in tariff (Fits) for small scale PV installations will deem many large scale projects unviable.
The large scale projects developed by local authorities and social housing providers are aimed at supporting the most vulnerable in society, it is likely that the lowest income families are likely to suffer the biggest impact of the proposed changes.
The short notice given for the proposed changes by 12 December will not allow projects to complete before the changes are imposed.
The sudden changes to the Fits will damage confidence in an emerging sector. It will affect supply and demand both within the UK and internationally.
The Fits helped to create thousands of UK jobs and helped to establish a low carbon economy. Many of these jobs are now at risk because of the proposed changes.
2. Introduction
2.1 The Council and our housing organisation CBH worked in partnership to establish a large scale PV project aimed at supporting thousands of social housing tenants to access low carbon, free energy. The implementation of the scheme started in October and was due to scale up in January – March in order to achieve around 9.68MW of electricity generation (around 2,000 properties). Due to the specified timescales it is unlikely that the Council will be able to continue this project past 12 December, meaning that only around a quarter of the planned generating capacity will be achieved.
2.2 It is extremely disappointing that a project developed in good faith, which would support the most vulnerable residents, reduce fuel poverty and reduce carbon emissions will now be brought to an end. The efforts in establishing such a project were significant and included work to engage with tenants and Council members to highlight the benefits of the project. The sudden changes will not only impact on our project as well as many others across the UK but will remove confidence of organisations to put resource into such projects in the future.
2.3 The level of Fits allowed the Council to develop the project that previously would have been impossible. The project was developed with minimal outlay by the Council – the Council felt it would not have been able fund the £24million project through Council budgets given recent pressures and as such entered into a roof rental agreement with our supplier. The project would enable thousands of local residents to benefit from green energy, whilst generating an income for the Council to re-invest in further energy efficiency measures.
3. Impacts for Colchester’s PV Project
Affecting the viability of projects
3.1 With diminishing budgets across the public sector, CBC found that the Fits provided a means to implement a large scale renewable energy project which would have previously been not viable. As such a project has been developed in partnership with our housing organisation CBH and a preferred supplier that will significantly reduce emissions, generate a small income (through a roof rental scheme) and help to reduce and prevent fuel poverty for our most vulnerable residents.
3.2 The income generated for the Council would be recycled to create further energy efficiency projects further benefiting our communities and reducing carbon emissions. The level of Fits enabled the Council to establish a leasehold agreement with external funders to supply and install the panels, the reductions to the fits are likely to deem this project unviable past December 2011.
Impacts on vulnerable residents
3.2 The purpose of the Fits was said to “Empower people and give them a direct stake in transition to low carbon economy”. The original rates did achieve this aim and allowed the Council to create a partnership with our supplier to empower social housing tenants to have a stake in the transition to a low carbon economy. A lower Fit rate will not empower people to benefit from PV projects, it will make it unaffordable for most households and stop social housing schemes such as our own.
3.3 The proposed reductions to aggregated schemes and “roof rental” scheme impacts even further on this. Schemes such as our own allowed social housing tenants, some of the most vulnerable residents to benefit from solar PV, helping to reduce fuel poverty now and in the future. This particular proposal in the review will help to exclude the most vulnerable people from accessing low carbon technologies and incentive schemes.
Impacts of short timescales
3.4 On of the most significant impacts for Colchester project is the timescale. It seems to be reckless for such a significant cut to Fit rates at such short notice given the number of planned PV projects such as our own. It will not allow time for projects to be pushed forward in order to achieve the expected Fit rates and will leave thousands of organisations and residents out of pocket. It also threatens a relatively new PV market creating instabilities for work force, supply chain and future demand both locally in Colchester and Nationally.
3.5 Public sector organisations were actively encouraged by the government to harness the income potential of Fits by implementing large scale schemes, as such many organisations have done so and will now be severely affected by these changes. A reduction in Fit before 31 March 2012 is likely to lead to costly contractual disputes as suppliers will seek to protect their financial positions by trying to pull out of contracts or negotiate their positions within contracts, while Local Authorities will seek to impose the contractual conditions as they will be hindered by the procurement procedure rules and could be challenged by other suppliers under this rule.
Impacts on local solar PV market
3.6 The government made clear a commitment to creating a green economy and ensuring that green jobs would be a priority in stabilising our economy. The positive uptake in the Fits scheme has helped to achieve this goal by creating jobs, strengthening the industry and giving consumers confidence to purchase technologies such as PV. This sudden change to the Fits will undoubtedly see jobs being lost along with uncertainty within the industry and for consumers. Colchester’s PV project is also now at risk of losing its PV supply chain as international suppliers consider whether it is still worthwhile supplying PV to the UK due to possible price reductions that would be necessary to make projects viable. As a country we rely on importing good quality PV systems and the Fits reduction could be jeopardising this supply.
3.7 The consultation claims that there has been a significant reduction in equipment and installation costs for solar PV, however we do not feel that this is the case. Companies with large bulk buying power will have benefitted from lower costs, however as with our own supplier they have seen prices of around £9,000 for domestic installations since 2010. Smaller local installers will not have this buying power and therefore will not have seen these reductions. In is also likely that although the cost of PV may have reduced, the costs of inverters and labour will have increased.
Impact on local jobs
3.7 The original tariff rates helped to create a strong supply chain, evidenced by the number of local suppliers that tendered for our project and by the number of smaller installing companies that have been in touch since. Many of these installers started solar PV businesses to access customers through the Fits, the reduction will ensure that business is “booming” until December however the “bust” created from the Fit’s reduction will see jobs being lost in our local area.
3.8 The Council and CBH chose a local Essex based company as its suppliers in order to support local skills and jobs within the low carbon industry, as such we now feel that the local area will now take an even bigger hit because of the possible redundancies that will result.
4. Recommendations for Action
4.1 The Council does understand that economic pressures will impact on such incentive schemes but feels that the reductions should come after March 2012 as planned to allow existing projects to complete. In order to minimise the impact of a rush to install before March 2012 the government should only allow proven “planned projects” with relevant signed contractual agreements to receive the full tariff, any projects that are not already planned to this stage could receive the lower proposed tariff. By allowing the planned projects to continue the government will help to reduce the detrimental impact on employment, financial risk to companies and investors and also to maintain confidence in the market.
4.2 The Council would suggest that a multi-installation tariff is restricted to commercial projects, where projects that will benefit social housing tenants still receive the higher rates.
23 November 2011