UK solar cuts will cost country in the long run, says REA

The Renewable Energy Association (REA) of the U.K. has studied the potential impact of the government’s proposals to cut the feed-in tariff (FIT) by as much as 87% by January 1, 2016, and found that the move could result in a net loss for the country’s coffers.

In estimating how much money will be lost in terms of tax, national insurance revenue and welfare payments from the 15,000 jobs that are predicted to go if the government’s cuts are enacted, the REA has found that the HM Treasury will miss out on £94 million ($145 million).

When set against the proposed savings to the Department of Energy and Climate Change’s (DECC) proposed budget cut until the end of the incentive, this works out as a net loss for the government – and is further evidence of a confused, short-sighted and ideologically driven assault by the Conservatives on the U.K.’s solar industry.

The 15,000 job losses is a conservative estimate, with some projections suggesting that as many as 25,000 jobs could go following the latest changes to the solar support scheme. The estimates from the REA do not include the loss of business rates for local councils, nor VAT and corporation tax paid by solar companies that may have to downsize or struggle to survive.

The REA said it was "disappointed" that after a decade of government support for the expansion of solar power, the industry is in danger of "being tripped at the final hurdle" before it can reach grid parity, which is expected in 2020 according to a REA/KPMG report.

"The government’s sudden reversal of support for solar and other emerging renewables technologies ignores the substantial benefits that a healthy renewables industry provide to U.K. employment and the public purse," said REA head of policy and external affairs, James Court. "Our recent solar report shows how the technology can reach grid parity, but this relies on continued government support."

Another strand of the REA’s attack on the government’s decision is the negative impact it will have on further U.K. innovation – a secondary benefit of a thriving solar industry. With solar suppressed, recent strides in the U.K.’s storage sector will suffer, slowing further development in innovation and cost reduction, warns REA’s senior policy analyst Frank Gordon.

"Not only do the government proposals risk a damaging boom-and-bust scenario that might see the [FIT] scheme shut early, but they also damage the prospects for energy storage, which ministers have said they support," said Gordon. "Storage and renewables together will aid local communities to make independent decisions around their energy supplies and save money. Cutting government support now jeopardises this innovative future."