MPs: 'Solar subsidy cuts undermined industry confidence'

The government was clumsy in its handling of the cuts to solar subsidies and undermined confidence in its energy policy a report by MPs has concluded.

On 31 October the government published plans to cut the feed-in tariff (FIT) paid to homeowners installing solar panels for the electricity they produce in half for all installations registered after 12 December.

But this gave only six weeks for industry to react and left many firms saying thousands of jobs would be lost and businesses closed.

A report into the handling of the cut published by the energy and climate change committee today concluded: “The scale and pace of the changes now proposed was a ‘shock’ for the industry and the suddenness of their introduction has damaged investor confidence across the whole energy sector.

“This damage would not have occurred if the government had recognised the unsustainable rate of the expansion of solar installations at an earlier date, something which ought to have been identified by Ministers and officials sooner than it appears to have been.”

The committee said the government should introduce a trigger mechanism for reviews when the number of installations rose above a sustainable level and also set out a timetable for regular reviews. It said this would allow longer lead times for changes and reduce the negative impact on the industry.

Tim Yeo, chair of the energy and climate change committee, said: “There is no question that solar subsidies needed to be urgently reduced, but the government has handled this clumsily.”

The report comes just a day after a High Court judge ruled the government’s deadline of 12 December for installations of solar panels to qualify for the current feed in tariff was illegal.

The report also criticised the government’s proposal to link eligibility for the FIT to the installation of energy efficiency measures in homes to bring them up to energy efficiency level C.

It said this would “have a fatal impact on the take-up of the scheme after 2012” and reduce the number of homes able to take up the scheme by 92%.

It said this would only allow those already meeting that standard, which are likely to be wealthier households, to access the tariff.

It also said the government should reconsider it proposed cuts to feed-in tariffs for larger installations because they are often used by housing associations or community groups for the benefit of low income households.