Government hesitation on solar farms: a major setback for green growth?

Hi Reg, thanks for your comments on our FF piece.

On your first point, we went to OFGEM to double check our understanding of the FiT scheme - ie that one technology could not prosper at the expense of another because there was no limited pot of money. OFGEM saw it the same way as we did - we had both missed the transition from proper FiT scheme to a capped scheme it seems - and then on top of that it became Treasury's domain - not with much fanfare or publicity it should be said.

The thing is, by limiting spending under the FiT this government actually created the problem they then highlighted and set out to fix - by killing off big solar. They limited the pot, creating the possibility for one technology to flourish at the expense of others. There are some 50 FiT schemes in operation around the world and not one of them operates with a limited budget - such a thing undermines FiT schemes by undermining confidence.

Anyway, that's why we cited OFGEMs opinion - it's they we reached out to as FiT administrators and they had the same view as we did.

Coming to your second point - Solar is an expensive technology as you say, and bang for buck is important. That's our big point, 50% more bang for limited buck with big solar than with small. That's no small difference. We are way behind other countries on Solar right now (as you say), but that's no reason to give up IMO. And the UK already has solar manufacturers, we are in a position to see FiT money go to British industry. Of course there's also a chicken and egg thing going on - if we have a market (driven by an effective FiT scheme) manufacturing will follow.

You suggest offshore wind might be a better spend of our cash, in terms of jobs and industry - but the vast majority of windmills being installed in the UK are made abroad, so I'm not sure that's very different - in wind as in solar the UK is well behind the field.

On your last point - the government make a similar point, that the hearts and minds benefits of small solar are important and therefore worth paying for. I'm less inclined to believe that there is any real world impact, for example a lessening of NYMBY attitudes to other forms of renewable developments.

And it's worth bearing in mind that, other than council and social housing projects, small scale solar support typically goes to the relatively well off - those with £5k or £10k to spare. While the costs are borne by all, including the UK's fuel poor. As such it's a regressive tax - making it all the more important we get bang for buck - which brings us back to the fact that big solar gives us 50% more for the same £. I don't believe that giving people who are relatively well off, a good feeling about renewables, is a good way to spend that money.

I should say I'm up for rooftop installations and I can see they have a role to play - just not instead of big solar. If we can only afford one - it should be the big not the small we go with.

Thanks again for your thoughts.

Cheers.

While I am a great fan of Ecotricity I don't feel this is a very accurate representation of some important points.

Firstly, when the FiT was introduced it was never intended to have a cap but this all changed in the October spending review when Osbourne announced that by 2014/15 a review of the tariff levels would save £40m on what it was estimated to cost. This effectively changed the estimates of the policy cost into absolute limits, and because the FiT is counted by the Office for National Statistics as a tax and turns up on the Treasury's books the Treasury is able to control the budget for it. Ultimately it is the Treasury and not Ofgem that controls the funding tap for FiT.

Secondly, while it may be cheaper for large scale installations rather than domestic, compared with other technologies solar is a very expensive means to reduce carbon emissions. We must question what bang for buck we get from subsidising solar. Given the relatively small size of the UK market what happens here will have little impact on international manufacturing costs, so while the UK can't really help drive prices down it can benefit from lower prices driven by action elsewhere - indeed prices are already dropping significantly which is why the solar market is currently so lucrative. There are opportunities in terms of job creation and for the economy, but we are starting a long way behind other countries in this industry and we have no clear competitive advantage, so many of the benefits of our FiT subsidy will be felt elsewhere. As the UK is strapped for money it may make more sense to spend it on industries where we do have a competitive edge - e.g. marine or off shore wind.

However, IPPR will next week publish research that shows how FiTs and solar PV when located in communities at the domestic scale can have important impacts on attitudes to energy and it is these kind of additional benefits that are important to emphasise.

Reg Platt
IPPR - Researcher on Climate and Energy