September 23, 2010 11:10 pm

Solar power subsidy under review

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The recent mini-boom in solar power could be in jeopardy, as the government has privately indicated that new feed-in tariffs that have fuelled the industry could be slashed.

If such cuts are adopted, renewable energy experts fear that it will scare off investors – with repercussions throughout the industry.

“To change the subsidy system just when you can see the success it has had beggars belief,” said one. “Renewable energy investors . . . will lose faith in this government.”

Industry insiders also accused the government of hypocrisy. They say that while Chris Huhne, the energy and climate change secretary, was promising the Liberal Democrat conference 250,000 green jobs as part of a “revolutionary” deal to cut emissions, government advisers were holding meetings in back rooms at which they flagged up potential cuts to the feed-in tariffs (FITs).

Installations of solar panels and other domestic renewables soared after the FITs – which guarantee householders a price for their energy well above market levels – were introduced in April. Householders could make £900 to £1,100 a year on systems costing about £10,000 to £12,000 – a higher return than most investments.

More than 10,000 domestic renewables have been installed since April. Solar companies and utilities began hiring staff to deal with the flood of demand, and Sharp announced it would double the size of a Wrexham factory building solar components.

FITs were supposed to be set firm until March 2013, at which point a review could have resulted in changes. That understanding gave companies and householders an incentive to invest.

But at meetings this week, according to people present, government advisers and officials strongly signalled to renewable businesses that the current generous subsidies offered under the FITs could be reduced well before 2013.

Dave Sowden, chief executive of the Micropower Council, a trade association for domestic renew­ables, said: “We are alarmed to hear the coalition may be considering the unprecedented move of unravelling policies that were not only its idea, but have only been in place for six months, and against which thousands of jobs have been created and hundreds of millions of pounds invested.

“Backtracking now would have a profoundly damaging effect on investor confidence and seriously jeopardise [UK] ability to meet climate change targets.”

Daniel Green, chief executive of HomeSun, a solar company, said his business had received 60,000 expressions of interest in the past six weeks from consumers wanting to install panels. Any change to FITs would be deeply damaging.

The Department of Energy and Climate Change confirmed that the Treasury was examining FITs as part of the comprehensive spending review, even though the subsidies’ cost comes not from taxpayers but consumer energy bills.

An adviser to Mr Huhne said no decisions had been taken ahead of the review.

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