Government warned of potential ‘yo-yo effect’ of six-monthly changes
The government has been told that its proposed rate of reduction for the solar power feed-in tariff is too rapid and steep and may lead to firms going out of business.
The government is proposing to introduce a timetable for reductions in the feed-in tariff (FIT) from July this year that would see it fall by 10% every six months. But industry leaders have told the government this is too fast.
Bill Wright, head of energy solutions at the Electrical Contractors Association, said 10% was too much.
“By the time you have done three years it’s a very large reduction,” he said.
Wright said that cutting the FIT that deeply every six months would lead to booms in demand followed by huge drops.
The cut-off date of 3 March for installations to receive the higher tariff led to installations rising to over 20,000 a week before dropping back to just under 2,000 immediately after the deadline.
The ECA said it favoured a method whereby the rate was linked to cost reduction with regular reviews.
“We’re trying to avoid the yo-yo effect,” Wright added.
Chris Hopkins, managing director at solar installer Ploughcroft, said: “The court case [in which solar firms successfully challenged government plans to cut tariffs for installations after 12 December] destabilised consumer confidence and the best thing the government can do for everyone is leave it at this level for 12 months.”
He said that he had seen a 90% drop in work since the tariff was halved on 3 March.
Hopkins, who also sits on the government’s Green Construction Board representing small businesses, said many had been in touch saying they would close their doors if demand remained at its current level.
Paul Barwell, chief executive of the Solar Trade Association, said that much of the reduction in costs that had happened over the last year would not be replicated over the coming years.
“We hear about manufacturers selling at a loss to the market and I think to say there’s a price war is not unreasonable. We feel the prices have levelled out,” he said.