FITs: Time for a rational response

Would any rational government department announce a curb on large scale solar energy schemes in the summer, incurring the wrath of those companies that had invested and planned on a tariff level for solar of up to 5KW? And then, as soon as the dust had settled, announce another curb, this time by halving the tariff on all solar panels at six weeks notice, when a review, always planned in the scheme and anticipated by developers and investors, was just around the corner?

Once the ink was dry on the agreement, which apparently DECC signed up to sight unseen, it was inevitable that there would be a car crash as far as tariffs were concerned

The answer is no, but of course it has just happened, and justifiably, installers and community schemes are all up in arms about the betrayal they feel of the expectations they had.  

So why has it happened? Forget the bluster about tariffs being set too high and paving the way to a sustainable industry, that’s just post-hoc flannel. The truth at the heart of all this is that the department of energy and climate change signed up to a Treasury imposed cap on all levies that would be charged to company accounts some while ago. Once the ink was dry on the agreement, which apparently DECC signed up to sight unseen, it was inevitable that there would be a car crash as far as tariffs were concerned. The Treasury cap sets an overall limit on how much can be spent on solar panels and other renewable feed-in tariffs, on the renewable obligation for larger renewables, and on the Warm Homes Discount Scheme. No tax changes hands, but the Treasury says it is ‘imputed tax and spend’, and must be curbed.

What the Treasury seems to have done, though, is to insist that variances in totals for each item in each year have to be put right immediately, and not, as even the outline agreement suggests, over the period of the spending round, and within the overall cap total. Instead of bringing feed-in tariff totals down over a period of time, as was envisaged and anticipated by industry, this doctrine means instant, handbrake action every time it looks like one line of the agreement in one year won’t come out exactly right.

It’s a barmy way of managing inevitably elastic and success driven schemes like the feed-in tariff, which has now been a runaway success in its first year with some 78,000 new installations completed.

It could be different, even within the terms of an overall cap. The sums could be rectified and balanced over the lifetime of the agreement. But that would require some form of outside intervention, firstly to get the Treasury off the draconian path it is following, and secondly to get DECC off the hook of signing up to it in the first place.

That was why I asked the prime minister to do precisely that in Prime Ministers Questions this week. He answered an entirely different question of course; but any hope of obtaining a rational response to feed-in tariff costs over the foreseeable future remains with action from the top of government.

Alan Whitehead is a Labour MP and member of the energy and climate change select committee