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Is the future bright for solar power?

By David Holmes on May 29, 2012

The British Government has announced that Feed-In Tariffs (FITs) will be reduced from 21p per kWh to 16p, a drop of almost 25 percent.

The news comes after the government was taken to court earlier in the year over its decision to slash FITs from 43p per kWh to just 21p with almost immediate effect. The decision caused uproar in the solar PV industry, which argued that halving FITs would effectively destroy one of the few sectors in Britain that was experiencing sustained growth.

The High Court ruled in favour of the solar industry, ordering government ministers to implement the tariff change from April 2012. Just two months later, the government has declared that the time is right to further reduce solar subsidies, with the 16p rate effective from 1st August 2012.

Minister of State for Energy and Climate Change, Greg Barker said: “The sector has been through a difficult time, adjusting to the reality of sharply falling costs, but the reforms we are introducing today provide a strong, sustainable foundation for growth for the solar sector.

“We can now look with confidence to a future for solar which will see it go from a small cottage industry, anticipated under the previous scheme, to playing a significant part in Britain’s clean energy economy”.

Government austerity measures were always likely to target renewable energy subsidies, but the extent to which FITs have been cut in recent months will surprise many who believed Prime Minister David Cameron’s pledge to run the ‘greenest ever government’.

Whether manufacturing and installation costs have fallen sufficiently to justify a 63 percent reduction in FITs over a period of five months remains unclear. Whether FITs was a good idea in the first place remains even less clear. There is growing concern that domestic renewable technology can only be accessed by the wealthiest in society, yet subsidies are paid by all energy users, including those who are mired in fuel poverty.

Reducing FITs could help to resolve this incongruity by ensuring that market conditions restore competition in the sector. If this does not happen, however, the lights could go out on Britain’s domestic solar energy dreams, taking with it one of the country’s brightest industries in recent years.