guardian.co.uk,
John Vidal, Wednesday 21 December 2011
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| The government had wanted to cut the feed-in tarriff - paid to households with solar panels installed - with only weeks' notice. Photograph: Simon Burt/PA |
Government
plans to slash incentive payments for householders who install solar panels
were ruled "legally flawed" by a high court judge on Wednesday. The
ruling opens the door for a judicial review that could force the government to
delay its plans, and let thousands more people claim the higher subsidy.
Friends of
the Earth and two solar panel companies argued that the government's decision
to cut the feed-in tariff – the amount paid to those with solar panels
installed – with only a few weeks' notice was premature and unlawful, and had
led to unfinished or planned projects being abandoned. The tariff was cut from
43.3p to 21p per kWh of energy generated.
Thousands
of individuals, farmers, councils and community groups had applied to install
photovoltaic panels. The subsidy was set high to encourage people to invest
when the scheme was launched in April 2010. But the government announced in October that it would cut the subsidy from 12 December, arguing that the cost
of solar equipment had fallen sharply. This was 11 days before the consultation
ended.
The
judgment, by Mr Justice Mitting after a two-day court hearing, was hailed as a
victory by green campaigners and the solar industry, after firms warned that
the scale and pace of the proposed cuts could cripple the sector and cost
thousands of jobs.
Mitting
said the minister was "proposing to make an unlawful decision".
Friends of
the Earth's executive director, Andy Atkins, said: "These botched and
illegal plans have cast a huge shadow over the solar industry, jeopardising
thousands of jobs. We hope this ruling will prevent ministers rushing through damaging
changes to clean energy subsidies – giving solar firms a much-needed confidence
boost."
Lawyers for
the Department of Energy and Climate Change are seeking permission to appeal
against the judge's ruling.
It came as
a report by MPs on two select committees said the cuts were clumsily handled
and may have fatally damaged a growing industry which could provide tens of
thousands of jobs.
By giving
consumers and companies just a few weeks' notice that it intended to halve the
payments, the government has created uncertainty among investors and undermined
public confidence in energy policy, said the MPs. "There is no question
that solar subsidies needed to be urgently reduced, but the government has
handled this clumsily. Ministers should have spotted the solar gold rush much
earlier. That way subsidy levels could have been reduced in a more orderly way
without delivering such a shock to the industry," said Tim Yeo, chair of
the energy and climate change committee.
In
addition, plans to require homes to meet a C-rated energy efficiency standard
before they can receive subsidies will limit access to wealthier households and
could have a "fatal impact" on the industry, the MPs warn. Eighty six per cent of homes would need to be better insulated to qualify for the scheme –
increasing up-front costs for homeowners by between £5,600 and £14,000, even
before the panels are purchased, they said.
Joan
Walley, chair of the environmental audit committee said: "It doesn't make
economic sense to let the sun go down on the solar industry in the UK. As well
as helping to cut carbon emissions, every panel that is installed brings in VAT
for the government and every company that benefits from the support is keeping
people in work. The Government is right to encourage people to focus on saving
energy before fitting solar panels, but these proposals will stop nine out of
ten installations from going ahead, which will have a devastating effect on
hundreds of solar companies and small building firms installing these panels across
the country."
Rising
energy bills and the falling cost of solar panels made the original subsidy
rates so attractive that tens of thousands of households, companies and community groups have rushed to install photovoltaic (PV) systems since the
scheme was introduced last year.
The
government had evidence that solar panel prices were falling significantly as
early as March 2011, but ministers did not act to stem rocketing levels of
small solar installations until the end of October.
The MPs say
the consultation then announced by the government was based on an inadequate
impact assessment and unfairly set a 12 December deadline for changes to come
into effect before the consultation closed on 23 December.
The scale
and pace of the changes proposed was a shock for the solar industry and the
suddenness of their introduction has damaged investor confidence across the
whole energy sector, the MPs said. The government has proposed an even lower
tariff (80% of the new rate) for generators who have more than one solar system
registered for FiTs, in recognition of the economics of scale such aggregated
schemes can achieve. This, said the MPs, will have an adverse impact on
community solar projects.
"This
could have a disproportionate impact on disadvantaged and poorer communities
for whom such schemes are a good way of accessing the benefits of renewable energy and reducing electricity costs. The social housing sector and community
owned schemes are going to be particularly hard hit by the reduced tariffs
being brought in by the Government retrospectively," said the MPs.
The MPs'
report and court ruling follows the decision by BP to close its solar division,
blaming the "commoditisation" of the sector. It emerged this week
that Mike Petrucci, chief executive of BP Solar, wrote to his remaining 100
staff last week to say that "the continuing global economic challenges
have significantly impacted the solar industry, making it difficult to sustain
long-term returns for the company."
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