Is The UK Solar PV Industry Now Broken?
With the announcement last week by DECC of significant Feed In Tariff (FIT) subsidy cuts to domestic solar installations, the solar industry understandably is now reeling after a tumultuous summer of subsidy cuts across the board which has left many asking “Is the UK Solar PV Industry now broken?”
It is now widely understood and reported across a range of media channels that small scale and domestic solar PV FITs will be cut by as much as 87% in January 2016. I must admit I felt physically sick having read and digested the news, knowing exactly what pain the last poorly planned tariff slashing exercise had on the sector.
In raw numbers this planned tariff reduction means somebody receiving 12.47p/kWh at the end of the year would receive nearer 1.6p/kWh in January 2016.
At present for domestic installations realistic returns for an average 4kWp (12 panels) domestic installation are around 13% taking into account tariff income and electrical energy savings in the home. But with the announced cuts the return falls to a pitiful 6%-7% first year return assuming you use all of the produced electricity from the array.
In my experience other than the massive negative PR shock waves which will inevitably spread like wildfire (like when the feed in tariff rate halved from 43p to around 27p back in 2012) is the fact that with returns down at 6% people are simply not interested in investing in the technology.
We will have to wait again for panels and inverters to become cheaper still for rates of return to get back to “interesting” levels. Of course no doubt they will but how long will this take? Last time it took the sector a good 2-3 years to recover with many job losses and heartache along the way.
The likely tariff cuts this time could, it is projected, also cost the industry dear with an estimated reduction in employment rates of 75% or more.
And just how will this likely lack of interest affect the emerging battery sector? Solar PV was seen to be a useful partner for this new golden child technology.
Whilst the sector widely acknowledges that a a self-sustaining, subsidy free landscape is a must for the long term health of the industry, it is not quite there yet and simply pulling the plug now will have far reaching consequences.
We wait with baited breathe as to the true scale of the changes this time round but it sure as hell won’t be pretty.