Solar subsidies must go… eventually
Just weeks after promising to “unleash a solar revolution”, UK Energy & Climate Change Secretary Amber Rudd has announced the Government is considering a massive 87% cut to Feed in Tariffs (FiTs) for solar energy, leading to a predictable paroxysm of outrage from the industry and environmental activists. The Government’s argument is that it is ahead of its targets on renewable energy, capital costs have plummeted so subsidies are no longer needed, and the budgets are vastly overspent.
While this is strictly true, it is coming at the issue with the view that the target is a maximum, rather than a minimum. There is no such thing as ‘too much renewable energy’ until we get to grips with climate change. The other big issue is these sudden, colossal changes create uncertainty for investors – not just in installation, but those investing in technological advances.
You can trace the source of this problem back to a certain Miliband, Ed, who held Rudd’s post before the 2010 General Election. When Miliband drew up the plans for Feed-in Tariffs, the tariffs were fixed, no matter what happened to the capital costs of solar panels. This meant that, as volumes rose and capital costs plummeted, investors would make a killing, snaffling up the FiT budget at an unsustainable rate.
This flaw wasn’t spotted by the incoming coalition Government either who took the reins of a month-old scheme in May 2010. In 2011 they slashed the subsidy as inevitable economic forces took hold, and caused similar outrage to the present one. Before his silly downfall for trying to dodge a speeding offence, DECC Secretary Chris Huhne proposed adopting the German system – where FiTs track average capital costs – but as far as I am aware, this never happened.
This was a big shame as it would have taken short term politics out of the equation, FiTs would be gradually phased out as solar energy hit ‘grid parity’, yet investors and innovators would have a predictable economic framework to work in.
A big question is why do mature and declining energy forms such as conventional oil and gas require so many Government subsidies – and why these aren’t targeted as well? Maybe these highly inefficient subsidies are a source for topping up the FiT budget? Just saying…