The Feed-in Tariff and solar: when is big too small?

As both a homeowner and small business owner, I know I don’t want to see my energy bills go up without benefiting from the solar ‘gold rush’ we’ve all been hearing so much about. But as a journalist writing about our transition to a low carbon economy every day I can also see we need to get a move on if we’re going to meet our renewable energy targets, create jobs and get our green economic recovery underway.

So who is right in the ‘big versus small’ solar subsidy debate currently raging between Government and the solar industry?

Last month, DECC announced it was launching a fast-track review into the Feed-in Tariff (FiT) microgeneration subsidy scheme for solar installations over 50 kilowatt (kW) in size. The Government’s view is that the FiT was set up to encourage small-scale renewable electricity installations on homes, at businesses and community projects, but the pot of money set aside for it risks being gobbled up by large ground-mounted PV arrays being built in the first year of the subsidy scheme ¬– with the taxpayer footing the bill through increased energy bills.

The solar industry argues that setting the level at which to cap the tariff at 50 kW doesn’t even allow for installations in large commercial buildings, schools and social housing projects. “It will cut the industry off at its knees,” said Andrew Lee, international sales manager at solar manufacturer Sharp, this week. (Sharp has just announced 300 new jobs at its production facility in Wrexham and opened up a renewable energy training facility).

The evidence

What do the figures tell us? According to DECC, the Government has set aside £900 million over four years for the FiT, £30 million of which can be spent in year one (the FiT was launched in April 2010).

According to Energy Secretary Chris Huhne, evidence is building that large solar farms are already threatening this pot of money. In the South West alone, eight solar farms have been granted planning permission with another 20 in the pipeline. “Even if only half of these go ahead and start claiming FITs, then nearly a fifth of the scheme’s projected costs for the next financial year will have already been spent, leaving hundreds of homes, small businesses and communities without,” he wrote in the Western Daily Press and the Western Morning News last month.

Is Huhne exaggerating the threat? Over £6 million has been paid out to generators in the first nine months of the scheme, according to Ofgem figures. This hardly looks like busting the £30 million FiT budget for the year, although it’s worth noting payouts due by participating licensed electricity suppliers almost doubled between the third and fourth quarter of last year.

The Government has a duty to protect the taxpayer and needs to show it is being fiscally prudent at a time when energy prices are on the rise. So has its judgment been right on this one or has it bungled the review?

What is you view? Are you small business worried about your energy bills going up without the prospect of benefiting from the Feed-in Tariff? Or do you work in the solar industry and have first hand experience of investment being cut or jobs being lost? Please share your thoughts with us.