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UK Government to Cut Solar Panel Subsidies

By Laura Elahi on March 23, 2011

The UK’s Coalition Government – the same administration that promised to be the ‘greenest ever’ last year – has announced plans to introduce a 70 per cent cut to the Feed-In Tariff scheme (FIT) for large solar energy enterprises.

Due to come into effect on August 1, 2011, the move would reduce payments made to landowners, farmers and commercial property owners under FITs. The proposal affects any solar installation that produces 50kW of solar-generated electricity, whilst the full 70 per cent reduction would apply to installations producing 250kW to 5MW of power. Understandably, the solar industry has reacted with dismay and anger to the proposal, which remains subject to consultation.

Ben Warren, of Ernst and Young, said: “The whole investor market was totally disengaged as a result of the Feed-In Tariff being ripped up.” Meanwhile, Ray Noble, of the Renewable Energy Association, commented: “It’s an absolute disaster. No new projects will start after this comes into effect.”

Attempting to explain how the proposal would benefit the solar industry in the UK, Climate Change Minister Greg Baker said: “I want to make sure that we capture the benefits of fast-falling costs in solar technology to allow even more homes to benefit, rather than see that money go in bumper profits to a small number of big investors.”

Unfortunately, the proposal is more likely to dissuade large corporations from investing in solar technology than it will encourage new solar panel developments on a scale large enough to benefit a significant number of homes.

The Government did, however, make the point that the reduction would result in greater funds being made available for domestic solar panel projects. As funds are collected through consumer energy bills, it is perhaps only fitting that more money is reserved for domestic solar PV projects.

The Feed-In Tariff works by enabling homeowners and companies to generate electricity from solar photovoltaic panels, which are typically installed on rooftops, before exporting it to the National Grid. Under FITs, around 41p per kilowatt hour is paid for such electricity, making solar panels an important investment in the home. Whether solar technology remains a viable opportunity for larger companies after the Government’s proposal is implemented remains to be seen.