Will UK Feed-In Tariffs Survive Cuts?

Weeks after REW’s story about how the UK’s “feed-in tariff” was boosting that country’s solar industry the whole scheme is under threat.

As part of a plan to cut government spending 10% (and reduce its deficit) the UK is reviewing its plans for tariffs on all projects over 50 kW. The government claims huge “solar farms” are soaking up the money, and that the government’s financial commitment is uncapped.

The tariff was designed by former energy and climate change secretary Ed Miliband, now leader of the Labour opposition, and was aimed at a goal of having 2% of national energy needs met by small renewable systems by 2020. At the time environmentalists called it insufficient.

The plan is based on a successful Feed-in Tariff system in Germany, but that country recently negotiated subsidies downward, saying the market is over-heated.

All this makes for interesting politics. The nascent British solar industry insists jobs are threatened, saying hundreds of projects at schools and hospitals are now at risk. Legal action is being threatened if the cuts are enacted.

It’s all based on simple math.

Solar and wind projects are not currently cost-competitive with fossil fuels. Editor Stephen Lacey writes that California claims parity with natural gas, when seen from a 20-year perspective. The Department of Energy’s SunShot program sees grid parity being achieved by 2020.

But it’s not there yet. And clearly solar, which is more expensive than other technologies supported by the tariff, needs more support. That’s why the tariff cuts are so alarming to solar supporters in the country.

Government needs to invest ahead of parity to assure parity arrives. You can plot the way forward on a graph, but industry growth will still depend on government support for years. That’s where the rubber hits the road.

For more on how the FIT cuts will impact the industry in the UK, read today’s feature, “UK FIT Fires Up Solar, But Also Creates Uncertainty.”

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Dana Blankenhorn has covered business and technology since 1978. He covered the Houston oil boom of the 1970s, began making his living online in 1985, and launched the Interactive Age Daily, the first daily coverage of e-commerce, in 1994. He has written for a host of off-line and online publications including The Chicago Tribune, Advertising Age, and ZDNet. He has covered PCs, networks, telecommunications, cable technology, Internet commerce, the Internet of Things, Open Source and Health IT, He began covering alternative energy at his personal blog, Danablankenhorn.com, in 2007.

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