Is the sudden FIT cut entirely bad news?

The sudden announcement by the Government that it is cutting the feed-in tariffs for small-scale solar installations by more than 50 per cent has caused a storm of outrage across the renewables sector.

There have been many cries this week that the move, reducing the FIT from 43p per kWh to 21p per kWh, will “kill the UK solar industry”.

To a large extent this anguish is understandable. However, from our perspective at Organic Energy, we don’t consider it a totally unexpected move. In fact, many people might be surprised to hear that we don’t even consider it as an automatically bad thing.

We won’t, perhaps, be entirely popular with some of our industry colleagues for taking such a position, but it is our contention that it is better to have this still fledgling sector on a realistic footing from its early days of strong growth, rather than dash people’s expectations in the future or end up with a many-tiered system in which the early adopters are better rewarded than those who come to small-scale renewables later.

The fact that the Government has felt the need to slash the FIT for small installations is indicative of the popularity of such projects already. That popularity has given pause for thought regarding how much the whole thing is looking like it will cost.

That is not to say that it could not have been handled better. These sudden changes of direction are good for no-one and if businesses, and the many thousands of people who work in them, are left out-of-pocket by this move, there may be greater questions for those in power to answer.

As to the future of the sector, our view is that people who are committed to the concept of renewable power, be it a wood pellet boiler or solar PV (or both), are committed for ethical reasons as much as financial ones. They will proceed with the project if it meets their cost expectations with regard to initial outlay and we believe they will accept a longer return-on-investment period.

Looking from another perspective, the higher the FIT, the greater the risk of people entering the sector with a view to making a quick profit, regardless of whether they are giving good advice to customers or have the proper experience to ensure people are not wasting their money on inappropriate installations.

There was, and perhaps still is, a distinct danger that renewables could become the next double glazing; a marketeers dream that becomes saturated with fly-by-night operators standing behind their own versions of lies, damn lies and statistics…

As a company with genuine belief in renewable energy as something far more than a business opportunity, and with the benefit of more than a decade-long view of the sector by our pioneering and passionate leader, Andy Boroughs, we would much rather see somewhat steadier, more sustainable growth in the industry. Technology will improve constantly, bringing down equipment and installation costs and renewable power at the small scale will begin to converge more with the costs of grid power.

This might all take some time, but it is imperative that it happens in a more organic way than being forced along by too-high incentives and people who care only about their next commission payment.

Harsh words? Yes, perhaps. But this is all far more important to all of us than political point-scoring or short-term dividends. Let’s take it steady and get it right.


One response to “Is the sudden FIT cut entirely bad news?

  1. By making the payback period c.10 years the old fit rate made the installation qn easy decision – I can certainly envisage being in the same house in 10 years when it starts to make a profit. By putting the payback period to c.18 years this is much harder (impossible). Obviously the rate should go down over time – that was always going to be the case but the way that the rates have been halved ahead of the previously published timetable is contemptible. The company I was about to sign up with is now frantically trying to put together a proposition with cheaper, order, less efficient panels which could still look attractive…if this works we’ll be putting less energy into the grid using Chinese panels – where is the long term benefit to the UK in that? I don’t believe that this move will drive out the cowboys, rather it will lead to lower quality installations. A sad day and one that will undermine all future green domestic technology undermined by government “promises”.

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