Bloomberg News

U.K. Signals Solar Tariff Cut Due to ‘Unacceptable Returns’

October 27, 2011

(Updates with comment from Barker from third paragraph.)

Oct. 27 (Bloomberg) -- Energy Minister Greg Barker signaled the U.K. government will cut support for the solar photovoltaic power industry, saying some investors were earning “unacceptable returns.”

The Department for Energy and Climate Change will announce plans for adjusting the so-called feed-in tariff granting above market prices for solar energy in the next few days, Barker told reporters today at a conference in Birmingham. That’s to prevent the rich from monopolizing the subsidies, he said.

“The subsidized returns we have seen on solar PV investments, funded from consumer energy bills, are unsustainable,” Barker said in a speech. “PV costs have plunged since the tariff levels were set, down by as much as 70 percent in two years. The tariff levels need to reflect these new prices.”

The government on Aug. 1 cut subsidies to the biggest solar plants as much as 71 percent. That spurred developers including Octopus Investments Ltd. and Solarcentury Holdings Ltd. to complete their projects, leading in the third quarter to a near- doubling of capacity of renewable energy projects registered to receive feed-in tariffs, according to the ministry.

The Financial Times today reported that the tariff for small solar projects will be cut to 20 pence per kilowatt-hour from 43 pence. Barker declined to say what the planned new tariffs will be. He also said that from April 1, buildings that are “energy inefficient” won’t be eligible to receive them.

Solar Subsidy

After its early review of tariffs for the biggest solar projects, officials are revising subsidies for smaller PV projects and other technologies to ensure the subsidies don’t exceed a budget of 867 million pounds ($1.4 billion) for the four tax years through 2015.

As of Sept. 30, 316 megawatts of wind, solar photovoltaic, hydro, anaerobic digestion and small-scale combined heat and power projects had sought the guaranteed prices, up from 164 megawatts at the end of the previous quarter, DECC said today in a statement on its website. Of the new installations, about 93 percent were solar power.

“Much of the growth in PV has been as much about consumers accessing the government-backed tariff as accessing the technology,” Barker said. “High net-worth individuals chasing returns which are now easily reaching double figures at a time when interest rates for savers have collapsed to an historic low. That can’t be right.”

--Editors: Reed Landberg, Randall Hackley

To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net; Marc Roca in London at mroca6@bloomberg.net.

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net


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