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Will the Government Snuff out Solar Subsidies?

New subsidy cuts to solar PV installations have been recommended by the Government, who have launched a consultation on the matter which will remain open until 19th October.

13th September 2012    |     Umer Uzair: Renewables Analyst, Rolton Group

Under these most recent proposals, support for mid to large scale installations will be reduced by 25%, dropping from the current 2 ROCs per MWh to 1.5 ROCs per MWh on April 1st 2013. This is then subject to decrease to 1.3 ROCs in 2014, 1.1 ROCs in 2015, and 0.9 ROCs in 2016.

In October 2011, the Department of Energy and Climate Change's (DECC) consultation on the Renewables Obligation Banding Review (ROBR) proposed maintaining current support for solar PV until March 2015, with a drop to 1.8 ROCs per MWh by 2016, double the latest figure. They now state, however, that costs associated with the deployment of installations between 250kW and 5MW have decreased drastically and that their recommendations must change accordingly to combat the risk of ‘overcompensation for new solar PV at excessive cost to consumers.’ The consultation does admit, however, that figures are based on ‘limited evidence on the deployment of large-scale solar >5MW,’ as none are yet in operation in the UK, and therefore requests relevant evidence from external parties in order to make better informed estimates.

Paul Barwell, CEO of Solar Trade Associations (STA), has responded in opposition of the proposals, saying that the ‘cut is too big and too soon.’ He goes on to state that ‘under-rewarding solar to curtail the industry is definitely not the solution [to issues surrounding the interaction between solar and other renewable technologies.]’ Of course, it is clear that financial support should decline in accordance with the affordability of solar technology, eventually producing a successful industry which no longer requires subsidy or support. With current levels of aid, the solar market has experienced huge growth as capital costs have reduced and the technology has been more widely feasible, but to slash it so abruptly at this point will surely damage what is already an extremely fragile market.

The proposal to revise the rate of solar support comes just days after the European Commission launched an anti-dumping investigation into imports of solar panels from China, responding to recent complaints that solar panels and their key components (i.e. solar cells and wafers) are being imported from China at prices below market value, damaging European industry. Whilst this must be addressed, emphasis should also be placed on catching up with China’s significant investment in renewables, which has helped the technology come close to parity with fossil fuels and enabled the country to produce the technology at a cheaper rate than is currently possible here.

According to BBC news (6th September 2012), China exported nearly £17bn worth of solar panels and components to the European region last year, an amount which is expected to grow even further amid a push by the EU for increased use of renewables. While this is happening, though, the big Western oil and coal industries resist the growth of sustainable energy, seeing it as a threat to business, and are using their influence to slow its development. This simultaneous pushing and pulling comes at the significant detriment of the economy.

By so strongly developing green energy and heavily subsidising the solar manufacturing industry, China is fast gaining world power, becoming a crucial part of the world’s green revolution. This means that the UK is in a race against the clock to ensure our future ability to compete in the green economy whilst at the same time preventing the catastrophic results of climate change. We, and the rest of the world, should look to the Chinese implementation for guidance regarding the successful development of green technology, speeding up the process to develop a competitive European solar market and thus substantially reducing global green energy prices.

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