By Rab Bruce’s Spider

Among the many announcements shovelled out by the UK Government last week was one that reduced the Feed In Tariff (FIT) paid to owners of solar panel installations. The FIT is to be slashed to only a third of the current amount although, to be fair, that is rather better than the Tories’ first thoughts on the matter which was to cut it by nearly 90%.

What is FIT and why does it matter? And why are the Tories cutting it?

The Feed In Tariff is a Government scheme designed to reimburse owners of solar panels for the extra energy they feed back in to the National Grid. It’s a fairly basic formula to give some incentive and reward on what is actually quite a complex matter. The thing with solar panels is that you never know when the sun is going to shine. If you are a domestic user, you may be in and be running a lot of electrical equipment and so using up al the power your panels are generating. However, if you happen to be out or not running much more than your fridge, that excess power is fed back to the Grid. FIT is designed to recompense you for that.

It is one of the selling features used by Solar Panel companies when trying to gain business from domestic users. The trouble is, it has been so successful that the scheme is now over budget and the Tories have decided to cut back quite drastically. It should be noted, however, that this will only affect new users, not those already tied in to agreed FIT payments. Still, the announcement has caused howls of outrage from the Solar industry, with claims of resulting job losses.

The Tories justify their decision on the basis that the scheme actually benefits middle class homeowners who can afford the cost of installing solar panels which can be in excess of £10,000 depending on how many panels you fit. This is perfectly true for reasons I will come to shortly but it does seem odd that the Tories, who derive most of their voting support from well off middle class voters should shut down a scheme which helps those people. Perhaps the Tories have developed a social conscience? OK, probably not, although their assertion is correct.

The problem with installing solar panels is the up front cost. Some companies promote a loan scheme where the loan repayments are more or less met by the net saving in electricity bills and the receipt of FIT payments. The income is obviously uneven, with FIT producing more in the summer and less in winter, with savings on electricity bills also unpredictable because of the uncertainty over how often the sun will actually shine. However, by and large, the companies installing solar panels get their calculations more or less right and homeowners are not out of pocket. The problem with this sort of scheme, though, is that the loans are taken out over an extended period, perhaps as long as 15 years, so the owners, while not being out of pocket, are not likely to see much return for as long as the loan is running. This means that, by and large, people on lower incomes have less incentive to install solar panels since, in purely financial terms, they are not going to see any real return for 15 years. Anyone who can afford to pay for the installation costs from their savings can, however, see an immediate benefit which is significantly greater than leaving funds in a savings account which currently pays a very low rate of interest. This is why the scheme has benefited middle class homeowners to a greater extent than envisaged.

Of course, finances are not the only issue. Being Green counts for a lot these days and some people look to solar as a way of doing their bit for the environment. It should also be remembered that the attractiveness of the scheme keeps solar companies in business and creates and sustains jobs. Some of those jobs will certainly be at risk if demand for solar panels reduces as a result of the cut to FIT. What the Tories don’t seem to have appreciated is that reducing FIT means that less well off homeowners are now even less likely to be able to afford to install solar panels, thus exacerbating the problem they cite as being one reason for cutting the FIT.

As for the claim that the scheme is over budget, this is a reasonable argument but it confirms that the decision is ideological because, as I’ve mentioned many times before, every Government chooses which industries and sectors to subsidise and encourage. The Tories have decided to cut funding for renewable energies and concentrate on nuclear. This is fair enough given the electoral mandate they received at the General Election but one wonders how many voters would prefer to have a nuclear reactor in their neighbourhood rather than solar panels on their roof. The decision to focus on nuclear is, though, a strange one when you consider the Tories’ pledge to be the Greenest Government ever. OK, nuclear power can generate a lot of electricity while solar panels on a roof can’t even provide all the power a single house needs but if more houses were equipped with solar panels, the demand for power from the Grid would be significantly reduced. It should also be noted that some industry commentators have claimed that the subsidy paid to the Chinese operators of the new nuclear power station at Hinkley Point is so huge that a single month’s payment will be greater than the subsidies paid to the entire solar industry in a year. This rather suggests that the cost of FIT is not the overriding concern and that the decision is driven by the Tories’ illogical detestation of renewable energy sources.

When a country like Denmark can produce over 100% of its electricity needs from renewable sources, it surely cannot be impossible for the UK in general and particularly Scotland, to match this. Scotland’s ability to produce wind, wave and solar power is unrivalled in Europe and the need for alternative sources of energy is vital considering the Tories’ policy of closing down Scottish coal and gas generating stations by penalising them with fines for connecting to the Grid. Going for nuclear when alternative sources are available is a bewildering stance but the slashing of FIT confirms that the Tories are hell bent on going nuclear at the expense of renewables. Let’s hope it doesn’t result in the lights going out.