Government loses Feed-in Tariff appeal, but what next?

While the Government failed to overturn last month’s ruling that its rushed cuts to the Feed-in Tariff  (FiT) for solar PV are unlawful last week, the uncertainty over FiT rates still exists. As soon as the unanimous verdict was announced in the Court of Appeal, the Secretary of State for Energy and Climate Change, Chris Huhne announced that his department would seek permission to appeal to the Supreme Court.

What does this mean?

As a result, businesses that want to install solar panels before March 3 2012 still do not know what rate of FiT they will get from April 1 2012. However, if the government loses it will be 43.3p until 31 March this year, then 21p for the remainder of the scheme. The 3.1p per kWh export rate is not affected. See here for rates for larger installations, and full information on the feed-in tariff.

Why is this happening?

Good question: on the day of the Court of Appeal judgement , Greg Barker, Minister of State at DECC tweeted: “Win, lose or draw today, important we move forward together, drive down costs + step up deployment.” Then his department moved swiftly to ensure that the uncertainty that faces consumers and the industry will continue. Judging by the contents of tweets he’s received since, the industry doesn’t class this as “moving forward together”!

My analysis is that it’s a move to protect the (already overspent) FIT budget from another mini boom. If the rate had been confirmed to be back at 43.3p from yesterday, solar installers’ phones would have been ringing off the hook with people trying to get a system installed in the next 38 days. With the uncertainty continuing, it’s not such an appealing investment. If I were a betting woman, I’d put some money on the Government quietly withdrawing its appeal sometime after the cut off date of March 3.

Is now a good time to buy solar PV?

Prices of solar panels have fallen considerably since the FiT was introduced, so while the tariff has halved, the rate of return hasn’t fallen by the same amount. The Government says the 21p tariff is intended to give a four to five per cent return on investment. Many installers are claiming a much higher figure. I suggest you do your own calculations, and factor in the cost of replacing the inverter once during the 25 year life of the tariff.

What factors should I take into account?

There are a number of things to take into account. One is how much electricity your business uses while the sun is shining. The higher that usage is, the more savings you will make on your electricity bills. So if you’re a tourism business with highest costs during the summer daytime, when the panels are generating most, you’ll do better than, say a nightclub, which will export most of the electricity it generates.

It will also depend on your attitude to risk. Four judges have now declared the way the cuts were introduced illegal, and it has also been slated by two Parliamentary Committees. If the Government fails to succeed in the Supreme Court, everyone who installs solar PV between December 12 2011 and before the March 3 2012 will get the old rates. However, it would be unwise to go ahead unless you are happy with the return you get from the 21p FiT rate, as you may end up with that.

There are a vocal minority of dodgy installers with big marketing budgets that are claiming to guarantee a rate of 43.3 pence for installations done now. Five of the UK’s leading green media, including GreenWise and YouGen, have joined together to impose a voluntary blackout of renewable energy companies looking to exploit consumer confusion surrounding the Feed-in Tariff (FiT). I suggest that if you come across any of them you report them to REAL Assurance and the Adverising Standards Authority, and don’t touch them with a bargepole. You can search for recommended installers on YouGen.

Given the overspend on the FiT budget, it is possible that the feed-in tariff rate will be cut again from  April 1. The Government has also announced an intention to introduce strict energy efficiency criteria, which will mean fewer businesses are eligible for the scheme without significant investment in energy efficiency.

What next for solar PV?

The Government is expected to publish the results of its solar consultation on February 9, and to set out plans for further changes to the FiT scheme, which could start from April 1 2012.