Rushed cuts in solar electricity tariffs 'could cost councils millions'

9 Nov 11
Government plans to fast-track a 50% cut in the tariff paid for electricity generated by solar panels could cost councils hundreds of millions of pounds, the Local Government Association said today.

By Nick Mann | 10 November 2011

Government plans to fast-track a 50% cut in the tariff paid for electricity generated by solar panels could cost councils hundreds of millions of pounds, the Local Government Association said today.

Solar panels

Local authorities were planning to install solar panels by the end of the financial year to take advantage of the Feed-In Tariff at current levels. But, late last month, the Department of Energy and Climate Change brought the deadline forward to December 12 after a higher-than-expected take-up of the subsidy. It said that otherwise the scheme’s entire £637m budget for the next four years could be used up by 2012/13, if not sooner.

Under the scheme, small-scale renewable energy installations receive a guaranteed payment for the electricity they generate. The earlier deadline left councils with just six weeks to install solar panels and register them with energy regulator Ofgem before the tariff payments are halved.

As a result, they could be forced to pay inflated prices to speed up their installations, the LGA said.

It added that local authorities were concerned that Ofgem might struggle to process the ‘deluge’ of applications pouring in to meet the new deadline.

And it warned that the change could ‘condemn vulnerable families to fuel poverty’ by cutting off the average £120 a year that social housing tenants could save off their electricity bills through solar panels. This was particularly important given recent increases in energy bills, it added.

The LGA cited examples of council-led solar panel installation schemes that it said had been put on hold or threatened as a result of either the decision to bring the registration deadline forward or the decision to half the level of support the FIT offers.

Among these are a scheme planned by Leeds City Council to install at least 1,000 solar panels on its homes. The council estimated that the scheme, which has now been put on hold, would have saved tenants £120 a year on their energy bills.

It also highlighted Cambridge City Council’s likely abandonment of a scheme to install solar panels on council offices, sheltered housing and swimming pools. According to the LGA, this would have generated revenue to protect jobs and increased energy efficiency on council homes.

Dave Parsons, chair of the LGA Environment Board, criticised the government for its ‘mistakes’ with the scheme, which he said local authorities and residents were now paying the price for.

Alluding to the December 12 cut-off date coming before a consultation on the plans to cut the subsidy has ended, he said: ‘Rushing through these cuts before the consultation has even finished is going to leave local authorities stuck between a rock and a hard place.

‘Solar panel schemes that were commissioned based on the promise of the previous rate of subsidy will be jeopardised, with many councils unable to meet the shortfall.

‘To expect councils and the solar industry to deliver projects and have them registered by Ofgem within six weeks is unrealistic and unacceptable. As a result, many projects will now be stopped immediately.

‘The costs incurred to councils as a result of this could run into hundreds of millions of pounds.’

Responding to the LGA’s comments, a DECC spokeswoman stressed that the tariff was never intended to generate ‘windfall profits’ from solar power installations.

‘Our proposals allow social housing and local authority organisations to claim a tariff which would provide a 5% rate of return on the investment, which is what the Feed-in Tariff scheme was originally designed to generate,’ she said.

‘The Feed-in Tariff scheme was never intended to provide windfall profits. We are considering whether more could be done to further help genuine community projects and we’ll be looking at this in more detail in the next consultation.’


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