Solar Power Feed-in Tariffs · 2011-12-22 · 40 Leeds Solar Ev w88 41 Good Energy Ev w89 42 Lark Energy Ev w91 43 Carillion Energy Services Ev w93 44 Bath & North East Somerset Council

Published on 22 December 2011 by authority of the House of Commons London: The Stationery Office Limited

House of Commons

Energy and Climate Change and Environmental Audit Committees

Solar Power Feed-in Tariffs

Ninth Report of Session 2010–12 of the Energy and Climate Change Committee and Tenth Report of Session 2010-12 of the Environmental Audit Committee

Volume II

Additional written evidence

Ordered by the House of Commons to be published 14 December 2011

The Energy and Climate Change Committee The Energy and Climate Change Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Department of Energy and Climate Change and associated public bodies.

Current membership

Mr Tim Yeo MP (Conservative, South Suffolk) (Chair) Dan Byles MP (Conservative, North Warwickshire) Barry Gardiner MP (Labour, Brent North) Ian Lavery MP (Labour, Wansbeck) Dr Phillip Lee MP (Conservative, Bracknell) Albert Owen MP (Labour, Ynys Môn) Christopher Pincher MP (Conservative, Tamworth) John Robertson MP (Labour, Glasgow North West) Laura Sandys MP (Conservative, South Thanet) Sir Robert Smith MP (Liberal Democrat, West Aberdeenshire and Kincardine) Dr Alan Whitehead MP (Labour, Southampton Test)

The following members were also members of the committee during the parliament: Gemma Doyle MP (Labour/Co-operative, West Dunbartonshire) Tom Greatrex MP (Labour, Rutherglen and Hamilton West)

Environmental Audit Committee

The Environmental Audit Committee is appointed by the House of Commons to consider to what extent the policies and programmes of government departments and non-departmental public bodies contribute to environmental protection and sustainable development; to audit their performance against such targets as may be set for them by Her Majesty’s Ministers; and to report thereon to the House.

Current membership

Joan Walley MP (Labour, Stoke-on-Trent North) (Chair) Peter Aldous MP (Conservative, Waveney) Richard Benyon MP (Conservative, Newbury) [ex-officio] Neil Carmichael MP (Conservative, Stroud) Martin Caton MP (Labour, Gower) Katy Clark MP (Labour, North Ayrshire and Arran) Zac Goldsmith MP (Conservative, Richmond Park) Mark Lazarowicz MP (Labour/Co-operative, Edinburgh North and Leith) Caroline Lucas MP (Green, Brighton Pavilion) Ian Murray MP (Labour, Edinburgh South) Sheryll Murray MP (Conservative, South East Cornwall) Caroline Nokes MP (Conservative, Romsey and Southampton North) Mr Mark Spencer MP (Conservative, Sherwood) Paul Uppal MP (Conservative, Wolverhampton South West) Dr Alan Whitehead MP (Labour, Southampton Test) Simon Wright MP (Liberal Democrat, Norwich South) The following members were also members of the committee during the parliament: Simon Kirby MP (Brighton, Kemp Town)

Powers

The constitution and powers are set out in House of Commons Standing Orders, principally in SO No 152 and 152A. These are available on the internet via www.parliament.uk.

Publications

The Reports and evidence of the Committees are published by The Stationery Office by Order of the House. All publications of the Committees (including press notices) are on the internet at www.parliament.uk/eacom and www.parliament.uk/eccom. A list of Reports of the Committees in the present Parliament is at the back of this volume. The Reports of the Committees, the formal minutes relating to that report, oral evidence taken and some or all written evidence are available in a printed volume.

Committee staff

The current staff of the Energy and Climate Change Committee are Sarah Hartwell-Naguib (Clerk), Richard Benwell (Second Clerk), Dr Michael H. O’Brien (Committee Specialist), Jenny Bird (Committee Specialist), Francene Graham (Senior Committee Assistant), Jonathan Olivier Wright (Committee Assistant) and Nick Davies (Media Officer). The current staff of the Environmental Audit Committee are Simon Fiander (Clerk), Edward White (Second Clerk), Lee Nicholson (Committee Specialist), Andrew Wallace (Senior Committee Assistant), Jill Herring (Committee Assistant), Edward Bolton (Committee Support Assistant) and Nicholas Davies (Media Officer).

Contacts

All correspondence to the Energy and Climate Change Committee should be addressed to the Clerk of the Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 2569; the Committee’s email address is [email protected] All correspondence to the Environmental Audit Committee should be addressed to the Clerk of the Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 6150; the Committee’s email address is [email protected]

List of additional written evidence

(published in Volume II on the Committees’ website www.parliament.uk/eacom and www.parliament.uk/ecccom)

1 Edward Burt Ev w 1

2 Niko Miaoulis Ev w 2

3 Simon Davidson Ev w 3

4 Greg Rodger Ev w 4

5 Nicholas Ndhlovu Ev w 4

6 Helen Keith Ev w 4

7 Mary Ross Ev w 5

8 Kevin Hawes Ev w 5

9 Catherine Cannon Ev w 6

10 David Robertson Ev w 7

11 HiS Group Ev w 7

12 Nick Pascoe Ev w12

13 Sunergy UK Ev w13

14 Keep Britain Tidy Ev w13

15 Transition Lavenham CIC Ev w Ev w16

16 National Federation of Roofing Contractors Ev w17

17 Patrick Whitty Ev w19

18 Gareth Williams Ev w21

19 SHAPE Energy Ev w22

20 David Holmes Ev w24

21 London Rebuilding Society Ev w25

22 Local Government Association Ev w27

23 Ofgem Ev w31

24 Freetricity Ev w32

25 Which Ev w33

26 Micropower Council Ev w39

27 Llangattock Green Valleys Ev w41

28 EDF Energy Ev w44

29 Regen SW Ev w47

30 Alan Simpson and Gerard Read Ev w48

31 Consumer Focus Ev w53

32 Office for National Statistics Ev w59

33 Friends of the Earth Ev w59

34 G-CEL Ev w73

35 Electrical Contractors’ Association Ev w76

36 National Housing Federation Ev w77

37 Association for Conservation of Energy Ev w82

38 British Retail Consortium Ev w84

39 Peter Morgenroth Ev w86

40 Leeds Solar Ev w88

41 Good Energy Ev w89

42 Lark Energy Ev w91

43 Carillion Energy Services Ev w93

44 Bath & North East Somerset Council Ev w97

45 E.on Ev w98

46 Low Carbon Developers Ev w103

47 Society of Motor Manufacturers and Traders Ev w105

48 Energy Technologies Institute Ev w106

49 Colchester Borough Council Ev w107

50 Reading Borough Council Ev w109

51 John Husk Ev w112

52 SSE Ev w115

53 Imperial College, London Ev w117

54 A M Borrill & Son Ev w124

55 Transition Town Letchworth Ev w124

56 Sudbury Market Town Partnership` Ev w129

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Environmental Audit Committee: Evidence Ev w1

Written evidence

Written evidence submitted by Edward Burt

Letter to the Rt Hon Oliver Letwin MP from Edward Burt dated 2 November 2011

The announcement made on Monday by Gregory Barker has created turmoil in businesses involved in thesupply of solar photovoltaic systems and consternation in businesses, like ours, which were on the point ofcommissioning schemes. For a government which claims to be small business friendly the way in which this"consultation" has been presented seems astonishingly inept. It is axiomatic that the worst thing for businessis uncertainty but that is exactly what has been created.

We put in a planning application last week (WDDC target to conclusion eight weeks) for a 40kWpinstallation, costing about £100,000 to add to our 10kWp trial system commissioned mid-summer. Ten is theeffective maximum which can be accommodated on a three phase system without additional work by WesternPower Distribution. They have confirmed today that their programme of planned work is such that they areunable to do what is needed until mid-December at the earliest and then it is a "rubber glove job", so weatherdependant. Consequently, I have had to cancel our booking for panels with Bridport based installers as theyneed to confirm orders for scarce equipment and their work schedules with others who think they can meetthis unnecessary and artificial deadline. They will have every possible employee working overtime from nowto end of the first week in December. Many people who need other electrical work done in the next five weeksare likely to be disappointed.

When the cuts were announced for the over 50kWp systems it was said that smaller systems installed by theend of March would remain at the current rate while a review would be undertaken on the rates to be appliedfrom April 2012. Your government appears to have abandoned this undertaking. The "consultation", seemseven more than the majority of public body consultations to consist in saying: "This is what we have decided—Now try to stop us if you can." It seems to me that a proposal in which the consultation period ends after theannounced deadline is no consultation at all but much more like retrospective legislation.

It may well be the case that the previous government had miscalculated but that does not excuse the crassway in which this has been dealt with. An orderly transition is needed to give people time to plan and adaptand a 50% cut in one hit is anything but orderly, a much more gently phased reduction might be reasonable.However uncomfortable it may be for controlling the budget in the short run if the long term objective ofencouraging the use of renewable energy is to be achieved it is important that those who are being encouragedto invest in new technology can trust successive governments to stick to their word and run a sensible market.

I should be grateful if you would do all you can to prevent this abrupt abandonment of an undertaking aswell as forwarding this letter to the Ministers concerned and the Environmental Audit Committee, which Iunderstand is about to investigate this potential fiasco.

Reply from the Rt Hon Oliver Letwin MP to Edward Burt dated 4 November 2011

Thank you for your email of 2nd November about the feed-in tariffs for solar pv.

As someone who very much believes in feed-in tariffs, and who was indeed one of the people who firstsuggested the use of feed-in tariffs in the UK, I am naturally sad to see problems arise in administering thesystem. I completely understand the concerns that a considerable adjustment of this kind is bound to raise.

However, I am afraid that it was inevitable that an accelerated review of the solar pv tariffs should havebeen announced some while back—and equally inevitable that this would lead to a rapid and marked reductionin the level of the solar pv tariff.

I am afraid that, given what has happened to the technology and its costs, the current rates were going tocause profits that simply could not be defended as value for money, and would have given the whole systemof feed-in tariffs (and indeed the whole of our enormous programme of support for renewable energy) anundeserved bad name.

The fact that this review was being undertaken has been known for some time—and I am afraid we reallyhad no option but to conduct it and to implement its findings without delay.

4 November 2011

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Ev w2 Environmental Audit Committee: Evidence

Written evidence submitted by Niko Miaoulis

I am Niko Miaoulis the owner of a small PV installation company called Greenman Solar in Kent, weachieved our MCS accreditation in March 2011. Since the inception of our business in January 2011, we haveinvested £100,000 of our own money in setting up an ethical, professional company, closely following thegovernment mandated MCS and REAL ethos and criteria. As with other similar enterprises, we have notburdened the government at all in claiming, benefits, grants, incentives or any other “carrots”, we just spentthe money, hired the people and grew the business. In following the guidelines and mandatory systems to theletter, we (wrongly) presumed that the government would also follow its well publicised roadmap for solar PV,in gradually reducing the FIT from April 2011 to match the falling price of installations.

In August the government decided to reduce the tariff for 50kw+ systems to 20p. Although this was adecision that cost money and jobs (and upset many big players who had invested millions), it was sold (by thegovernment) on the basis that it had made the difficult decision in order to “protect” the FIT for those smalldomestic installations that it was originally intended for. The plan was always for small yearly reductions (15%ish PA) for new installs starting in April 2012. This swingeing proposal to reduce the domestic FIT to 21p perKWH (more than halving it overnight), would make it totally uneconomical for most people to install solarPV, with payback periods of nearly 20 years.

One of the few growing industries in the UK at the moment is the Solar PV design and installation market.

This industry now directly employs over 30,000 people in the UK and indirectly nearly as many again.

If the government make this very myopic decision, not only will our own fledgling business not be viableafter December the 8th, every other similar business will close down virtually overnight, throwing 60,000+people out of work and killing stone dead one of the few good news stories in the UK at the moment. TheGovernment will also have no possibility whatsoever of meeting its on going green energy commitmentsand targets.

If the governments “consultation” on feed in tariffs cements the proposed cuts, there will be billions lost inredundancies and lost tax/vat receipts and a large number of professional people left high and dry by agovernment that encouraged them to invest and grow their green energy businesses, then virtually immediatelyafterwards pulled the rug from under their feet.

The fact that the government have bizarrely, initiated a “consultation” which concludes on the 21st ofDecember, whilst the proposed changes (which are being consulted on) take place two weeks earlier on the12th of December, strongly suggests a fait accomplish, and is open to some considerable criticism, if not alegal challenge.

It is a fact that the FIT system does not cost the government a penny, the tariff is paid by the electricitycompanies, who are under huge pressure regarding unwarranted price hikes and blatant profiteering. At themoment the FIT adds less than £1 per annum to everybody's electricity bill, which is a small price to pay formeeting our green energy targets.

If the current rate of take up of solar PV was to continue for the next 10 years (highly improbable), FITwould add about £15pa to everyone's electricity bill, a mere fraction of the huge and unwarranted electricityprice rises foisted on customers in this year alone.

Given the vast amounts of money which are regularly invested by the government in order to protect or createa handful of jobs, along with the even more eye watering amounts spent on paying benefits and subsidising lowpaid jobs, the relatively tiny amounts of money paid in FIT have resulted in an unprecedented number of highquality companies and jobs, who are designing and installing worthy and worthwhile technology, resulting invery happy consumers, a vibrant, hi-tech industry and a path to a much greener and energy independent Britain.In one myopic foul swoop the government propose to kill it all, why?

If there was one way to continue growing this currently vibrant “good news story” (which the governmentshould be congratulated on for starting and sponsoring it in the first place), whilst curtailing the number ofinstalls this would be it.

The main reason that solar PV installations have recently grown so dramatically, is due to the practice of“rent a roof” where large organisations (often large players in other industries) actively hard sell a “free solarinstallation” in which the customer receives modest “free” electricity (approx. £200 pa) whilst the, companywho owns and installed the system receives the FIT (approx. £1,400 pa).

As it became apparent how lucrative this 25 year cast iron 10–15%+ ROI was, these large organisationsswamped the UK with an avalanche of junk mail and sent teams of aggressive sales people out knocking onmillions of doors, hard selling solar PV.

The original spirit of the domestic FIT system was intended for the individual property owner, not for largebusinesses (who can buy and install in bulk and aggregate the benefits of multiple installs) to own thousandsof installations on private households roofs and reap the high rewards which were only ever intended for oneindividual household. This practice is morally wrong and has resulted in the current big spike of installations,

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these comparative increase in this type of installation versus an individual domestic install, should be closelystudied and analysed before any decision is made.

The “big idea” of the original scheme for the consumer was the very empowering benefit of having yourown mini power station and being much more aware of your energy consumption and carbon footprint. Askany actual owner of such a system and they will all tell you that their energy savings are at least triple theactual output of the system, due to their much higher awareness. Ask the owner of a rent a roof system andyou will not get the same response.

Similarly, in the MCS ethos, the installers were originally intended to be small start ups like ourselves, whoworked very hard, investing much effort and hard earned funds, in initially qualifying for the coveted MCSaccreditation and then setting up and growing a sustainable small business serving and benefiting the localcommunity. We alone invested over £100,000 in setting up Greenman Solar and following to the letter thegovernment mandated rules. This worthy and well structured system, has created thousands of well run, highlyrespected, ethical small businesses throughout the UK.

The advent of “rent a roof” meant big companies and hard sell moved in, this has sullied the previouslyfantastic image of the industry, from both the “sharp practice” through to the anonymous and unaccountablesub contractors employed to bosh out as many installs as cheaply as possible.

Surely if the government simply legislated against “rent a roof” they would bring the system back to whereit was intended for both the consumer and the supplier.

The myopic and ill conceived announcement has created an unprecedented rush to install before theDecember deadline. this has resulted in blatant profiteering, many suppliers are out of stock of virtually everycomponent needed to install a solar array. There are thousands of installs booked, which will not make thedeadline due to missing components, bad weather, or just running out of time. Who will sort out the resultantmess of half completed installs that the customer doesn’t want any more and the morass of legal claims,especially considering that many of the companies involved will liquidate immediately after the deadline?

As a further related point, the MCS system mandates strict criteria regarding warranty and guarantees forthe consumer. Seeing as most of the installers will not have viable businesses after the deadline, who will sortout the raft of claims for shoddy work hurriedly installed to beat the deadline?

Finally, most companies in the industry, have high quality literature, press adverts and other media published,even in our relatively small business this adds up to many thousands of pounds. Who will compensate for theredundancy of these in this unplanned knee jerk decision?

The whole sorry mess is a disaster and will have a dramatically negative effect on hundreds of thousands ofdecent people from both the business and consumer side.

5 November 2011

Written evidence submitted by Simon Davidson

Summary

I agree that the FIT level is out of balance with the cost of PV installations and needs to be reduced.

The Government should have introduced gradual cuts over a period of time to the FIT to keep the return oninvestment at a level which encourages installation but provides value for money to those who are effectivelypaying for it. Effectively the Government’s handling of the feed in tariff has produced a boom and bust PVinstallation industry.

The announcement of the reduction was intentionally (in my view) leaked on the Energy Saving Trust’s website prior to the official announcement. There are established and proper methods for Governmentannouncements and think that the public at large are sick of this type of behavior by Government bodies.

The Government has introduced cuts to feed in tariff with insufficient notice. Installation companies havebeen forced to bring forward installations to meet the 12 December 2011 deadline, causing extreme supplydifficulties, potential health and safety issues in rushing to meet that date and making life generally impossiblefor installation companies.

There Government has undermined consumer confidence in the FIT scheme with short notice andunannounced changes to the level of FIT payments. There is a serious risk that consumers will lose out if theirinstallations are finished late.

The Government has announced a consultation period to assess the impact of these changes which take placeon 12 December 2011. The consultation period ends on 31 December 2011. The implementation of the changesbefore the end of the consultation period makes a complete mockery of the process. In any case this not



what one would expect to happen in a democracy and reminds one of the way that the former eastern blocwas governed.

5 November 2011

Written evidence submitted by Greg Rodger

I have ordered and paid my deposit for a solar PV system.

My solar provider has the capacity to install this system for me, in time for me to probably meet theDecember 12th deadline.

However, the panic created by the government's announcement has ensured that either the prices of solar pvequipment (panels / invertors) has been increased or stock is no longer available.

Net result is that my solar provider can not commit to my installation for fear of not having the stock whichis still on order.

I appreciate their predicament since they cannot commit to something if they feel they are being let downby their own supply chain but this is a direct consequence of the [too short] duration of this grace period until12th December

It requires at least four to six weeks more ideally into Jannuary 2012 for the honest people who have beenplanning this for some months and now been caught out.

7 November 2011

Written evidence submitted by Nicholas Ndhlovu

Upon hearing off the proposed sudden change in the Feed in Tariff I was deeply saddened.

Not only will there be a sharp decrease in solar panel installations, it is a given fact that there will be largescale redundancies across all the board.

Also, due to the surprising nature of the announcement there is now panic among those who have appliedfor solar panels via the FIT scheme, the majority of them being elderly couples and widows who feel like theyhave been backed into a wall with only two options, sign the contract without fully understanding it or don’tsign it and miss out on fantastic opportunity to help them manage their carbon foot print and monthly bills.

A reversal on the proposed changes or at the very least, a delay in its implementation is morally andenvironmentally justified.

7 November 2011

Written evidence submitted by Helen Keith

1. I have recently been looking into installing solar panels.

2. I have spent a lot of time researching the different panels, invertors and different contractors.

3. I was aware that a consultation exercise was due to end on 23 December 2012.

4. Then, during the consultation period, we are informed that the eligibility date has already been decidedas 12 December 2011.

5. What sort of “consultation” means that specific details of the scheme can be changed before the“consultation” period has ended.

6. It is unacceptable to change the scheme during the consultation exercise.

7 November 2011



Written evidence submitted by Mary Ross

I am responding to your call in relation to item c. of the themes you will be considering.

— The speed in implementing the proposals—indeed even before the end of the consultation period—has undermined the principle of making contracts.

— It cannot be good for any business if clients can never be sure that the terms on which they basedecisions may be negated by sudden changes in Government policy.

1. In July this year I decided to invest a large proportion of my life savings in Solar PV panels in order toreduce my energy bills and carbon emissions. Over the course of August I got several quotations and carefullyassessed the systems offered and calculated the returns and payback years. Many suppliers were telling methen that it would be a December installation. I agreed and paid a 25% deposit in September but there is noway they can complete my contract by the 12 December Reference date set in the Comprehensive ReviewConsultation paper.

2. I am, of course, well outside beyond the seven day cancellation period for cancelling the contract, Myinstaller is doing his best but with stock availability, weather delays, MCS accreditation backlogs and the rushof applications to Energy companies I cannot meet the deadline of 12 December. Indeed the Energy SavingTrust states 23rd November is the last date that installations can expect to be registered before 12 December.That is a mere three weeks from publication of the Review.

3. I am sure there is a small but significant group of people, probably pensioners like myself, across thecountry who carefully calculated the returns and payback based on Government supplied figures—the ONLYones available to us at the time. It is therefore no consolation to be told we can still get the 43.3p rate untilApril 2012 when the contract has been calculated over a 25 year term.

4. It must be right that all contracts existing at the date of the Government announcement of 31 Oct. arehonoured on the basis on which they were contracted i.e. 43.3p for 25 years. This would show good faith tothose us of caught out quite arbitrarily by the early Reference date and the finite number involved would notimpact unduly on the available budget. It would be simple enough to supply a copy of contract date and/ordeposit receipt with the registration paperwork to facilitate this.

5. I ask the Committee to consider the wider implications for Contract Law and Business in this country ifthis unreasonable proposal is implemented.

8 November 2011

Written evidence submitted by Kevin Hawes, Nightingale Farm, Hartfield

1. Summary

1.1. The introduction of Feed in Tariffs has provided a welcome incentive to encourage investment inrenewable energy at our farm.

1.2. For those who had a solar PV project under way, the notice period given for the FiT reduction isinadequate and unfair.

1.3. The government should provide some arrangements to allow projects that were already underwayand scheduled for completion by March 2012 to benefit from the levels of FiT that were originallyoffered.

2. Affordability and Suitability of Solar PV Energy

2.1. Nightingale Farm is a working livestock farm of around 100 acres located in the High Weald Areaof Outstanding Natural Beauty. As we have no access to mains gas, electricity is the main form ofenergy used on the farm. Several of our barns have south facing roofs.

2.2. Having considered other options (including a wind turbine and a heat pump), solar PV is the onlytype of renewable energy we have seriously considered investing in.

2.3. The level of Feed-in Tariffs encouraged us to commit to a barn roof installation of approximately30kWp.

3. Government Management of Solar PV FiT and the Consultation

3.1. We viewed government statements as a clear offer to pay us an index linked 32.9p per kWh, on conditionthat we commission our PV array by March 2012, and have acted in good faith, investing time and money inadvancing our project.

3.2. While we recognised that a reduction in FiTs beyond April 2012 was always a possibility, we could notreasonably have foreseen this recent announcement requiring commissioning before 12 December.

3.3. The proposed reduction in FiTs is far greater than any reduction in the installed price of a PV installation.



3.4. Our investment in a PV array will have to be cancelled if we cannot receive the level of FiT that wasoriginally offered.

3.5. The notice period for reducing the FiTs is unreasonably short.

3.6. Our supplier, Ice Energy, had scheduled their workload and purchase of equipment for our project tomeet the March 2012 deadline. Attempting to bring forward our planned installation date has put unreasonablepressure on our supplier, and on the PV installation industry as a whole.

3.7. Although our supplier has confirmed that installation work could still take place before 12 December,approval of the connection by the District Network Operator (DNO) is likely to be the one element that willprevent our scheme. It is unclear what capability or incentive the DNO has to deal with applications in lessthat their usual 12 week lead time.

3.8. Generating electricity using Solar PV is a valuable and sustainable source of diversification for farmers.If the government are seen as not having honoured their promises to those of us who have chosen to become“early adopters”, it will discourage other farmers from investing in renewable energy schemes in the future.

4. Government Actions Required Now

4.1. Government should put in place arrangements to provide a smoother transition from the old levels ofFiT to the new lower rates. In particular it should pay the old FiT rates to those who had made commitmentsto a Solar PV project prior to the latest announcement.

4.2. I recognise that as part of any transition the Government will not wish to make payments to projectsthat only started after the latest statement was made, however I would propose two possible criteria that mightbe applied:

4.2.1. Where it can be demonstrated that an order has been placed or contract entered into with a PV supplierprior to the announcement. Supplier offers and customer acceptances would have been clearly made on thebasis of the original levels of FiT.

4.2.2. For schemes such as ours that required planning consent, evidence can be provided of the date onwhich a planning application was made to the local planning authority. Our own planning application wassubmitted electronically via the Planning Portal on 5 October, so the government would have easy access to aclear “audit trail” to prevent false claims being made.

4.3. Whatever decision is made about transitional arrangements, the Government should provide an incentiveand resources to the District Network Operators (DNOs) to “fastpath” approvals to connect to the NationalGrid, so that no scheme misses the 12 December deadline solely as a result of the DNO.

8 November 2011

Written evidence submitted by Catherine Cannon

— As a home owner, I am horrified by the proposals to slash the Feed-In tariff in such a drastic fashion.

— Feed-in tariffs—the mechanism designed to support solar PV in the UK—have worked.

— It provides energy security, new green jobs and lower energy prices in the long-term.

— Solar costs a fraction of the amount currently being spent on other energy generation technologies.

— Feed-in tariffs add less than £1 per year to the average household bill at a time when the Big 6energy companies are imposing huge increases on their customers.

— There are 4,000 solar businesses across the UK employing 25,000 people. These are at risk if theproposed cuts go ahead.

— This short-sighted move threatens the whole development of solar power in the UK.

— The industry is thriving. As it grows and costs go down, I agree that there should be a gradualreduction in the tariffs. But dramatically cutting them would have catastrophic consequences for theindustry and our green future.

1. On 1 November 2012 I had my Solar Photovoltaic (PV) panels installed on my roof. We have optimumpitch and a perfect south facing roof. We have nine panels and our system is a small 2.1kW system. Our panelswere installed by Southern Solar. We are delighted with our panels, and very excited to be able to generate ourown electricity and make a small contribution to the national grid.

2. We have always been energy-conscious, as we have roof insulation, cavity wall insulation, double glazing,an efficient boiler, energy saving light bulbs, we buy 100% green energy, and adopt energy saving behaviours.We have an energy monitor so we can see exactly what we are using. For us, installing PV panels was thenext natural step. We have a young daughter and she is fascinated by the idea we can get energy from the sun.We will certainly consider other renewables as they become more readily available and easier to retro-fit.



3. As a direct result of seeing our installation one of our neighbours is having solar panels fitted too. Atwork, two of my colleagues have also had solar panels fitted (interestingly, each with a different company andusing different panels) and we are pleased to be able to tell other people about them and explain why we madethe choice, what the benefits are, and how we are able to protect our future. We are modelling real energysaving behaviours and showing that there is a choice.

4. I am absolutely horrified by the proposals to slash the Feed-In tariff in such a drastic fashion. Feed-intariffs—the mechanism designed to support solar PV in the UK—have worked. They provides energy security,new green jobs and will ensure lower energy prices in the long-term. Solar costs a fraction of the amountcurrently being spent on other energy generation technologies. The Feed-in tariffs add less than £1 per yearto the average household bill at a time when the Big 6 energy companies are imposing huge increases ontheir customers.

5. There are 4,000 solar businesses across the UK employing 25,000 people. These are at risk if the proposedcuts go ahead. This short-sighted move threatens the whole development of solar power in the UK. The industryis thriving. As it grows and costs go down, I agree that there should be a gradual reduction in the tariffs. Butdramatically cutting them would have catastrophic consequences for the industry and our green future.

9 November 2011

Written evidence submitted by David Robertson

I believe that the Environmental Audit Committee plan to launch an inquiry into the proposals by theGovernment to slash the Feed-in Tariff (FIT) for solar installations. If I may, I would like to express myconcerns.

Whilst I understand the Governments arguments and reasons for reducing the FIT, I believe that cutting thetariff by so much and so quickly is unreasonable.

My position is this. I have a signed contract and have paid a deposit for my proposed Solar PV installationbut am unable to install the system before January 2012 because I need some work on my roof to be completedfirst. So, under the Government proposals I will receive the new FIT of 21p, a rate at which I would not haveconsidered investing in solar power. I am unable to back out of my contract without a penalty.

The short notice given by the Government is unfair and inconsiderate of the practicalities faced by somehome owners. Every installer I talked to, and who quoted me, said that the Tariff would be dropping by 5p inApril 2012. This was backed up by research on the Internet. I feel cheated by this decision.

I think the Government should either extend the cut-off date and/or allow anyone with a signed contract witha financial commitment already in place to qualify at today's FIT rate, no matter when the system is installed.

10 November 2011

Written evidence submitted by Myles Monaghan, Group Business Development Director, HiS Group

Letter to Gregory Barker MP, Minister of State, Department of Energy & Climate Change, dated 29October 2011

HiS Group is one of the UK’s leading Energy Services Provider, operating in the Social Housing, PrivateDomestic and Environmental markets. With over 27 years experience HiS Group is an SME currently deliveringInsulation, Heating and Renewable Energy measures within Strategic Partnerships and with Private DomesticHouseholders, Social Landlords, and Charities throughout the UK. Our directly employed workforce of over350 Staff & Engineers provides a high quality, efficient service that delivers a best value “right first time”approach. Our success in social housing partnerships has been a direct result of our long-standing customerrelationships, our track record of delivering value through innovation, within the communities in which wework.

HiS Group currently delivers improvement measures to over 100,000 domestic properties per annum, wehave national delivery scale & capability and are well placed to contribute to the delivery of de-carbonisingthe UK housing stock, with a “Whole House” capability that would make a rapid & positive impact domesticcarbon emissions. We have been working with Homeowners, Charities, Commercial Businesses and Landlordswho have an appetite to “green” the existing housing to develop the current opportunity in RenewableEnergy (FIT’s).

We believe that by partnering in a consultative and collaborative way with our broad client base (50%Private Domestic clients) organisations such as ours, can take advantage to make a major impact to stimulatethe economy.

However we have noted with extreme dismay the media coverage concerning the proposed reduction in thedomestic Feed In Tariffs (as leaked by the EST on 29 October) which as I will explain is a huge blow to thefledgling solar sector and is both ill considered and ill timed.



As over 80% of existing houses will still be here in 2050, the low carbon retrofitting of properties is a highpriority and the use of renewable energy tariff schemes will be essential to meet the criteria that Green Dealwill require, in particular the “Golden Rule”. We believe that a buoyant renewables sector will contribute to this.

Feed In Tariffs & Renewable Heat Incentive

The introduction of Feed In Tariffs (April 2010) and the introduction of the Renewable Heat Incentive(October 2011) have been welcome, as was the associated relaxation of the planning regime formicrogeneration. It has been helpful that returns have been closer to the 10% available in other jurisdictions—thus making it more available to commercial business as well as affluent households to install RenewableEnergy solutions.

10% was the original return proposed in the Element Energy report that was a precursor to the renewablestrategy. The tariff levels in particular were originally regarded by many industry commentators as too low,given the potential for employment in the UK, but the development of the sector has driven down costs andwhilst the Tariff is now slightly incoherent with the market, as it has remained static, this is due to an evolvingindustry and market forces.

To make a drastic change (as is now proposed) will create an obstruction to progress and potentially de-raila successful scheme, with no further room for continued evolution. This is a very short sighted approach andis in reality quite incomprehensible as a sharp and severe change in any programme will only produceturbulence, stagnation and an abrupt death!

The Environment Agency (December 2009) stated that ground source heat pumps have the potential tosatisfy 30% of the UK’s renewable heat needs. The Environment Agency stated that ground source heat pumpscould be installed in 320,000 homes and businesses by 2020 if sufficiently attractive tariffs were set, howeverheat pumps and domestic installations have been excluded from the RHI until the start of 2013.

It can be no real surprise given these conditions that Photo Voltaics have become the dominant technology,Micro Wind Turbines require planning consents, which are time consuming and onerous and even the planneddeployment of air source heat pumps (the most user friendly Renewable heating technology) will still requireregulatory consents that will stifle the growth of the technology.

Microgeneration and Renewable Heat are particularly helpful to the fuel poor, and it is important that tariffstructures enable the social housing sector and similar community related organisations to participate.

Longer term, a low carbon economy is untenable without the involvement of microgeneration in the builtenvironment. Although microgeneration is at the higher end of the cost curve for renewable generation:

(a) It helps, when combined with smart grid demand management and with other small scale renewablesto provide embedded generation for grid balancing;

(b) It assists in the democratization of the renewable economy, whereby consumers become producersand more directly participate in the energy market, acting as a strong signal to behavioural change;and

(c) It has a favourable impact on employment as a much higher proportion of costs relate to onsiteinstallation with the UK potentially benefiting from some manufacturing presence in the sector.

There has been obvious progress since April 2010, DECC reporting 100,000 installs (OFGEM recording65,000 addresses), progress which would not have been made (in this timescale) without investor fundsassisting and supporting the growth of the sector.It was not helpful that some organisations made statementsto the effect of delivering 100,000+ Renewable Energy systems, which would have created a massive imbalancein the deployment of Photo Voltaics, however having spoken to other contractors and suppliers alike, it wouldappear that most of the deployment is coming from smaller SME’s and installers who have developedbusinesses on the back of the FIT—which was after all the original intention.

The Funding Landscape

The current funding provisions (CERT, CESP & Warmfront) do not lend themselves to straightforwardaccess by householders, with a general lack of transparency for the energy bill paying public. A high proportionof CERT money has been directed towards “easy to secure” carbon measures (light bulbs, insulation, etc) ratherthan specifically targeting the homes of the fuel poor, currently estimated at circa 5 million households inthe UK.

The current FIT has had the effect of broadening access to the funding streams from being exclusively“utility company” managed, to enabling common householders to benefit from private fully funded schemes,which has to a degree focused help on the fuel poor by the use of a transparent scheme, giving direct accessto programmes for Social Landlords and Private Individual Householders.

At present the financing of schemes directed at the fuel poor is dependent on an amalgam of funding sources(Including Carbon Emissions Reduction Target “CERT”, Community Energy Savings Plan “CESP” Funding).Only 40% of CERT funding is directed towards the disadvantaged, and following the introduction of therenewable heat incentive and feed in tariffs, which benefit the general community, this proportion should be



increased—with a focus on integrated renewable electricity and renewable heating schemes; which to datehave accounted for a very low proportion of the CERT spend.

There is a concern that if the proposed changes are implemented the balance of power shifts back to theutility companies who do after all profit from this set of proposals. The average individual will now have amore uphill task to install and operate microgeneration technologies as the private equity funding will beeliminated and the returns will be much less attractive (estimated @4%). Bank finance will therefore benecessary and it is unlikely that people will invest at a rate lower than the cost of capital.

The threat of fuel poverty is increasing—Ernst and Young reported that the past five years have seen an100% rise in electricity prices and 150% rise in gas prices, clearly on current trends and evidence these willhave risen significantly further by 2020.

The Proposed Changes (As per EST)

A reduced rate of 21p/kWh for solar PV installations <4kW—tariffs will be introduced from 1 April 2012and will affect all installations with an eligibility date on or after 8 December 2011. See definition of eligibilitydate below. This tariff rate is designed to provide householders with a rate of return of around 4%.

Having considered the system costs we are currently working with, a drop to 21p makes it impossible tofinance the technology. Using a 7% cost of capital (which is what the general public can borrow at), the NetPresent Value of a system is around 55% of the cost —there is no financial sense to invest in Renewable Energy.

New domestic energy efficiency requirements—from 1 April 2012, domestic installations must beaccompanied by an Energy Performance Certificate (EPC) with a level C or above/which has completed all“Green Deal” measures. Where a domestic property does not meet these energy efficiency requirements, theSolar PV installation may receive a lower tariff.

This is yet another increase in regulation—with associated costs, which was not the expected modusoperandii of the coalition government.

This year, the UK Government has been reviewing the FITs scheme in the comprehensive review process.FITs are a UK Government subsidy for small-scale low-carbon electricity generation. The costs of FITs arefunded through energy bills.

The first phase of the UK Governments Comprehensive review has found that, since the scheme started, theglobal costs of PV panels have fallen significantly. This, combined with other factors, has meant that the returnsavailable from PV are now far higher than originally intended. Originally the plan was to provide generatorswith a rate of return of around 5–8%. Actual returns were much higher (around 10%). UK Government is nowproposing a rate of return of 4%.

As an industry installer we would dispute this conclusion which appears to be mis-informed.

The UK Government said previously that “We’ve made clear that tariffs will remain unchanged until April2012 unless the review indicates the need for greater urgency”. It was a combination of the rapid rise in solarPV installations, rapid decrease in solar PV costs and the need to provide value for money which lead to thisfast track review. UK Government also said that “The FITs scheme is paid for by energy consumers throughtheir bills and has a fixed budget. The scheme’s proving popular with households and we’re continuallymonitoring the take up of the scheme to make sure that we stick to budget.”

CERT funding costs each consumer more than the FIT but there is to be no let up in that particular levy!

The original target was for 750,000 homes to benefit from a tariff driven scheme (by 2020) but the coalitiongovernment now appears to be chronically adjusting the scheme with a stated 100,000 installations in twoyears—which at this rate would deliver a total of 500,000 by 2020.

Presumably the “Budget” should fit the task at hand and we should not be restricting deployment if thebudget is mis-matched?

Speech of 27 October

Five years ago I wrote Power to the People. A pamphlet urging a radical shift to a far more decentralisedlocal energy economy.

A shift away from the dominance of a few energy giants towards a diverse, innovation rich energy sector.A new vision of energy generation that empowers homes, businesses and communities.

Since then, all that I have seen and all that I have learned, first as an Opposition spokesman and now as aMinister in Government, has reinforced my strongly held belief that the successful energy models of the 21stCentury will be far more decentralised, local and flexible.

Decentralised energy drives innovation. Decentralised energy fosters a wide range of low carbontechnologies. Successful decentralised energy economies promote choice and competition.



Power to the people, I called my pamphlet in Opposition. Power to the people we are determined to deliverin Government.”

No-one would disagree with anything here, however the FIT has been very successful at giving householdersthe opportunity to really reduce the energy demand of the home and the tariff level has made this affordable.The proposals are a complete reversal of the progress towards a decentralised energy market and quiteunbelievable in the context of 20% energy price rises recently.

This Government is walking the walk.

This appears a hollow sound bite in the context of these proposals

But this is just the start. I’m personally committed to ensuring that your industry can prosper in the longerterm, sustaining green jobs at a critical time for our economy, jobs that people can build a career on. Jobs thatcan help drive the recovery and show that Britain can lead the way in low carbon innovation and smallscale renewables.

Solar PV has delivered by far the most installations through FITs so far, and I hope that the other technologiescan learn from the incredible growth your part of the industry has seen. I am a strong advocate of solar in theright locations but I also want to see a strong spread of UK renewable technologies benefiting from the FIT.

Planning issues and associated time & cost delays will affect the widespread deployment of othertechnologies—surely that would be an appropriate change to encourage other technologies rather thanattempting to stifle the use of PV?

But let’s not kid ourselves. Much of the growth in PV has been as much about consumers accessing theGovernment backed tariff as accessing the technology. High net worth individuals chasing returns which arenow easily reaching double figures at a time when interest rates for savers have collapsed to an historic low.That can’t be right. And I know responsible voices in the industry have been worried about this for some time.

However the Government is encouraging private individuals to spend more, in the teeth of a recession andBanks to lend more to individuals & businesses, but when Private Investors are putting up the finance, you aredisplaying some concern? The public outcry against bankers has been huge and yet we are encouraged toborrow and spend? Most of the investors are people like me, moving their savings into Solar investments andsaving for their retirement!

It seems incomprehensible that private investors are being penalised in favour of banks!

The Green Economy does not exist in a bubble. Yet the subsidised returns we have seen on solar PVinvestments—funded from consumer energy bills—are unsustainable at a time when National Savings havepulled their index linked bonds, interest on savings accounts has plummeted and the stock market has dropped.

And of course, we will all be watching our energy bills this winter. This is the new reality, and it is in thislight that we must consider the future for this industry. We have seen boom and bust in solar right acrossEurope. We have to make sure that UK solar has a steadier, clearer, sustainable growth path, that justifies thesubsidy from all consumers, demonstrates clear value for money versus other low carbon forms of generationand can show a clear path to grid parity.

The cuts to the tariffs in other European countries have come after operation of the schemes for a muchlonger time period than that of the UK and also amidst the reduction of costs due to technologicalimprovements. Ironically, the reduction of European tariffs have created a surplus of supply of PV hardwareand this has also fuelled the cost reductions we are now seeing. However it is ridiculous to assume that thistrend will be maintained—it has been a market correction, but supply and demand will stabilise and plateau.It would therefore be prudent and intelligent to make amendments to the tariff scheme against a backdrop ofmarket stability and not whilst unique conditions are pre-eminent across Europe.

I know that that Solar PV is a transformative technology, easy to understand, quick to install and completelyreliable. But critically, PV costs have plunged since the tariff levels were set, down by as much as 70% in twoyears according to Bloomberg.

There have been significant cost reductions since the scheme started, but as an organization intrinsicallyinvolved in delivery on the ground, we cannot see a 70% cost reduction anywhere. True, the hardware hasreduced in cost, but this has in principal been due to the development of the UK Solar industry and the UKmarket gaining some momentum on the global stage. We are a very small importer, but as volumes haveincreased, prices have come down—but the proposed cut will not only stifle this progress, but will also deterthe development of UK manufacturing

At rates like that, this sector should demonstrate clearly and openly that it is passing on these exciting anddramatic price reductions to consumers. So the tariff levels need to reflect these new prices. By using theseincredible cost reductions, the most dramatic of any energy generating technology, you can build a compellingcase for grid parity, not as a concept but as a reality. I believe solar is already well on the way to that destination.



I do not think that the majority of people would disagree with this assertion, but your proposed level ofreduction is hugely in excess of the cost reductions and appears to be a deliberate policy to restrict theprivate individual.

The Coalition inherited a slow, unresponsive and misinformed scheme but I still believe passionately thatFeed-in tariffs are essential.

The coalition government inherited a policy agenda that had been in place for a considerable period andschemes that had their birth in Labour politics. However at the first opportunity the coalition has reducedROC’s and is now shaping up to kill off an emerging sector? This does not support the “Green Credentials”that are promoted by the government and appears to be designed to focus efforts from schemes that are working(arguably too well) into future schemes (Green Deal) which is still under development and at this time a totallyunknown quantity.

We will consult later in the year on how we respond to market changes and assess PV costs and take up ona regular basis, and revise our tariffs accordingly. Industry is critical to this process. We want to work withyou to agree the future path of tariff reduction, take politics out of the sector and deliver what I believe theindustry needs and what the last Administration’s scheme failed to deliver: T.L.C. not tender loving care buttransparency, longevity and certainty.

This appears to be completely hypocritical based on the leaked proposals from DECC. This is not aconsultation, but a statement of intent.

We fought hard and won a good settlement of over £860 million in the spending review to subsidise smallscale FITs, an extraordinary achievement as we grapple with the deficit and consumers struggle with risingenergy bills.

The challenge now is to use that public investment to obtain the widest possible deployment. I don’t want atariff that gives bumper returns to a lucky few but a tariff that incentivises sensible deployment, in the rightplace, on the right buildings in the greatest numbers.

You appear to suggest that this is not the case? Investors have achieved traction in mass domesticdeployment—the people benefitting from energy cost reductions are predominantly those who cannot actuallyafford Renewable Energy systems on their properties, the older generation, Social Housing, amongst others.People who can afford this technology will still be able to afford it (post a 50%+ cut) but you are forcing outthe finance providers who invest where individual householders. You are removing their opportunity to reducetheir energy bills most likely amongst a segment of the population who are the most fuel poor in the UK!

This comes at a time when you, the government want expenditure to kick start the economy, and from everyaspect this seems like madness!

The FITs Scheme has to live within the budget, so while I welcome the fantastic success of the scheme,with over 100,000 installations representing more than 305 MW of installed capacity you don’t have to be aNobel prize winning economist to realise that solar is burning through the budget at an unsustainable rate.

Solar has accelerated from a standing start in April 2010, but the industry is still in its infancy and muchless mature than comparable sectors in the rest of Europe. I think that few would disagree that a step changein the tariff is appropriate, but to slash any scheme by over 50% after less two years, once again throws afledgling industry into disarray and in all likelihood will choke the sector by killing off the access to financethat has caused the positive and accelerated deployment of Solar Microgeneration at a domestic level.

Yes, the decisions we need to take are tough. I know that many of your businesses depend on the FITs levelsfor your success, at least in the short term. But we cannot escape reality: this is a different world to the one inwhich FITs were launched. In particular we must provide value for money to bill payers. I cannot preside overa scheme which allows a solar panel installation in some of the least sunny locations in Britain to generatereturns of more than 12%.

To compare solar investment returns with normal returns is invalid because after 25 years you have noresidual asset (or investment) value with free solar—with normal investments you get your money back.

Being sensible with tariffs means there will be more money to go round, to spread more widely and thusallow more people to benefit. In the long term this should mean more customers for your companies, not fewer.It should also mean more interest in your products and the solutions you provide and that are on show heretoday and more opportunities for diversification.

The removal of private equity finance, with such a severe cut in the tariff will obviously reduce the marketsize and customer base! To suggest the reverse is somewhat bizarre.

I am also keen that we should establish FITs as part of a whole-house approach which prioritises energyefficiency and supports the right low-carbon heat and electricity technologies, so the consultation will look athow we can use the scheme more smartly to drive this holistic approach.

The use of FIT’s will be essential to make Green Deal work—without an appropriate tariff level, this willnot occur and Green Deal will be unworkable.



It cannot be right to encourage consumers to rush to install what are still expensive electricity generatingsystems in their homes before they have thoroughly explored all of the sensible options for reducing theirenergy consumption first.

I do not think anyone would disagree with this and we would support this process.

I also want to say a few words about solar thermal and the host of exciting heat technologies that will besupported by the world’s first Government programme to support renewable heat: the RHI. The fact is the UKis leading the world in renewable heat, completing the picture.

How can business have any confidence in the government with another tariff scheme, when you are proposinga catastrophic and unplanned implementation of changes to the first tariff scheme in the UK? Why would weinvest in Jobs, training and equipment when we are left feeling let down by the government and in a positionwhere we will be forcibly downsizing if these proposals are executed—and with an accelerated timescale!

There are opportunities for smart, agile companies to take advantage of a brand new market, creating greenjobs and helping to drive forward the growth this country needs. Let me be absolutely clear, I haven’t comehere to kill the tariff scheme, I want to fix it, enhance it and put the whole industry on a sustainable, credibleeconomic path to a bright and exciting future.

This proposal is regressive and inconsistent with the stated objectives of the coalition government; I cannotsee any possible way or recall any other case where an immediate, unplanned and severe change of anyprogramme can produce anything other than negative results.

We have all invested in our businesses to service and support the Solar industry and it is hugely disappointingto see the proposals from DECC.

We would agree that a change is appropriate, costs have genuinely been reduced, but you cannot fix thiswith a drastic and sharp change to the scheme—rather a considered change and possibly a further review inanother 12–24 months would achieve the same results, without the immediate turbulence and an unavoidableloss of jobs.

I would urge the DECC & the government to reconsider these proposals and to set upon a more reasonedcourse that maintains a healthy industry sector with planned and targeted tariff changes that accurately reflectthe market conditions.

I am currently a member of NEA, the All Parliamentary FP & EEG, formerly a director of eaga and EnergyDirector of Connaught. I would welcome any opportunity to present the case from an industry perspective andI can be contacted as listed below.

29 October 2011

Written evidence submitted by Nick Pascoe

1.1 The Impact assessment released yesterday has some interesting information,

— DECC estimate that installations will reduce by 95% as a result of the proposal (or putting it morebluntly, 95% * 25,000 jobs to be lost).

— That the current cost of FiTs to bill payers is just £1.40 per year.

— In the “do nothing scenario” (just drop Fits 9% each April) that the addition to your electricity billwould reach £25.80/yr by 2020 (but no one is arguing for this unsustainable scenario).

— No account is taken in the IA of the loss to the Revenue of 25,000*95% lots of PAYE orconsequential state support costs of those redundancies.

— No account is taken of the electricity savings made by the 100,000 “hard working families” thathave had PV installed and how many now will miss out on similar opportunity to reduce their energybills- particularly the poorest in society where the take of the “free solar” option has proven afantastic way to reduce fuel poverty.

1.2 The impact assessment shows the [partial] impact of widely differing proposals for the future of theFiT. For me, there seems to be missing a scenario, a middle ground position that the Solar Industry has longbeen calling for. One in which the FiT is cut 35% by end Dec; hard swift but palatable. This should have beenmodeled to see how many fewer jobs would be lost and how the Solar PV sector could have ended up as beingsustainable rather than demolished. The fact that only the highest case and the devastating current case weremodeled points to some of the purposeful intent behind destroying the UK’s Solar industry.

1.3 Right from the moment that Treasury / DECC were persuaded by the big6 Energy companies to put aCAP on the FiT, it was doomed. The mass roll out of Solar PV has grown to become a threat to the establishedorder of the big power generation monopolies in other EU countries. The big six, behind 99% of all UKelectricity, do not want it here. They asked the Govt. to squash it and supported that with prolonged non-factbased rhetoric about green taxes pushing up energy prices. Did you know the Big6 have a seat on the boardof the Renewable Energy Association



1.4 The reality is that DECC are Nuclear focused. Post Fukushima Nuclear is too expensive for EDF / RWEto make the returns they’re seeking. They’re dawdling whilst ministers are ever more desperate to please themso that they’ll get on and build the nukes. We’ll see many more nuclear and gas power generation supportivepolicies coming through in coming months / years whilst any realistic threat to that dominance is purposefullycontained by Govt. Policy.

3 November 2011

Written evidence submitted by Scott Styles, Sunergy UK

Not sure if this is the right place to voice my concerns over the extreme short notice of the feed in tariffreduction.

A farmer I have been dealing with since around January 2011 ordered a 50 kw solar pv system on the Friday28 October 2011. Then on the 31 October I saw the release that the tariff will be cut on December 12 2011.

Due to the nature of this size of PV installation it requires planning permission and also has to be submittedto the utility supplier who has responsibility for the cables for them to determine that 50 kws can be fed backin to the national grid. (This was initially a quoted period of 45 days for this process to be completed, Nowthe same department is quoting three months to complete this procedure because of all the applications suddenlyreceived when the feed in tariff news came out).

This means that it is impossible to get all the relevant permissions by the cut off date.

Originally the farmer was going to order a 100 kw system but the maximum size system was reduced to50kws after a fast track review earlier in the year.

The farmer was not in a position to order earlier as he was focusing on harvesting his crops in September /October.

Also it should be noted that this farmer currently receives all paper / wood waste from his local authorityand recycles it. He wants to be green minded but this change I believe will affect him more than most and itseems to me to be very unfair and that not enough thought went into such a major decision.

Personally speaking I also feel that my confidence and also my trust in the government has now beendestroyed. Our industry was assured that there would be no back tracking on the agreed feed in tariff ratesover the period that they were set out for. Also after the bigger systems were reduced to 50 kws it was statedthat no further changes would be made and that change had only been necessary because farmers had startedinstalling big systems and the feed in tariff money was being eroded to quickly and that these tariffs were onlyever really intended for consumers. This was also an ill thought out plan in the first place because if that werethe case why was there a tariff in place for bigger systems that could only have ever been for use by farmersand never the public.

The rate of 32.9 drops to 15.2 as I understand it and therefore with the Barclays green loan that the farmerhas been granted it makes it uneconomical to proceed.

Is there any way that a special consideration could be given so that the relevant permissions can be obtainedand still get the higher rate tariff.

7 November 2011

Written evidence submitted by Keep Britain Tidy

1) Summary

— The proposed Feed-in Tariff proposals will have a significant negative impact on the Eco-Schoolssolar programme.

— School, educational establishments and public buildings should be placed on a higher rate tariff inany new system of Feed-in Tariffs as is the case in France and Italy.

— We believe that behaviour change is inadequately considered in the Feed-in Tariff review in reducingenergy usage and increasing the benefit of energy efficiency measures.

— The Feed-in Tariff consultation process timescales are too short and pre-judge the outcome of theconsultation through a proposed reference date which enters into force before the end of theconsultation.

— The accompanying Impact Assessment omits a number of social, environmental considerations.

2) Response to Theme B—The balance between affordability and delivering the objectives of the Solar PVFeed-in Tariffs, including factors to consider when setting the rate of small-scale Feed-in Tariffs including jobscreated, emissions reductions and energy-saving behavioural change;



3) Keep Britain Tidy operates the Eco Schools Programme in England. Eco-Schools is an international awardprogramme that guides schools on their sustainable journey, providing a framework to help embed theseprinciples into the heart of school life. Over 16,500 schools are registered as an Eco School which promotespro- environmental behaviours to over five and half million pupils. Joining the Eco-Schools programme is freeand it makes tackling sustainable issues manageable and easy for all schools, whether they are children’scentres, nurseries, primary schools, secondary schools or schools with special status. Once registered, schoolsfollow a simple seven-step process which helps them to address a variety of environmental themes, rangingfrom energy and litter to waste and biodiversity. Schools work towards gaining one of three awards—Bronze,Silver and the prestigious Green Flag award, which symbolises excellence in the field of environmental activity.Bronze and Silver are both self accredited through the Eco-Schools website and Green Flag is externallyassessed by Keep Britain Tidy.

4) Since May 2011 Keep Britain Tidy, in partnership with Winch Energy has operated an innovative solarenergy programme which allowed schools to apply for free solar energy in lieu of rent. The scheme allowsschools to have solar panels installed, maintained and decommissioned at no cost to either the school or thelocal authority. In addition, the electricity generated is made available for the schools’ use without charge andthere is an annual income for the schools from renting out rooftop sites, funded from the surplus power soldto a utility arranged by the Eco-Schools Solar programme which can fund energy efficiency improvements. Weestimate that each school could save an estimated 25 tonnes of carbon every year, reduce their energy bill byan average of 13.5% and save themselves up to £5,000 per year.

5) The Feed in Tariff review notes that a saving of 10% would be found in the year 2014–15 Feed in Tariff(paragraph 21) but this view fails to take a strategic Government approach to spending. The Feed in Tariffprovides reduced energy bills and can lead to long term behaviour change through pro-environmentalbehaviours which not only benefits the Department of Energy and Climate Change but also the Department ofEducation and Department for Environment, Food and Rural Affairs. Therefore, these unintended consequenceshave not been considered and, therefore, this policy proposal appears disjointed with wider Governmentpolicies.

6) We believe the creation of an elevated Feed in Tariff for schools and public buildings provides a usefulframework around which the proposals highlighted in the Feed in Tariff review regarding what more could bedone to enable community projects to fully benefit from Feed in Tariffs. We believe the definition of communityshould include schools, educational establishments and public buildings. However, the proposed reference dateof 12 December 2011 may have the unintended consequence of curtailing a number of community projectsbefore this issue is considered in the second consultation on the comprehensive review of the Feed in Tariff islaunched towards the end of the year.

7) The Eco-Schools programme delivers energy generation direct to young people thereby influencing thelow carbon behaviour of the next generation. Furthermore, to support our Eco-Schools Solar programme weare launching teaching resources and lesson ideas that support the use of energy and light as a renewable energysource and which provide priceless learning opportunities of energy generation, use, conservation and security.

8) The roll out of solar PV into schools provides a unique opportunity to teach young people about theimportance of renewable energy in a school environment which can lead to long term behaviour change inattitudes to renewable energy. This supports a key aim of the Feed in Tariff scheme to “use decentralisedenergy to empower people and give them a direct stake in the transition to a low-carbon economy” (paragraph17 of the review consultation). As stated in paragraph 60 of DECC’s Impact Assessment of the review“engagement with energy generation could lead to behaviour change by individuals and communities in relationto energy use which will further reduce carbon emissions”.

9) We believe that any reform of the Feed in Tariff should be weighted in favour of renewable schemesbenefitting public buildings such as schools and educational establishments. This scheme works well in Franceand Italy and we believe would have maximum impact in any reformed system of Feed in Tariff. We suggestan elevated rate of 25p/kWh would reflect the recent falls in equipment and installation prices whilst stillsupporting the roll out of solar PV on school buildings.

10) School buildings should be treated differently to commercial buildings for a number of reasons including:

— Roof complexity and access. More often than not each school has 2/3 roofs that need to take themodules;

— Trenching and overhead cabling costs;

— Export meter requirements over 30 KWP;

— Poor state of repair of school roofs, due to lack of investment over the years;

— School closure rates.

11) The policy review consultation proposes the use of multi-installation tariff rates which we believe is ablunt policy tool given the wide variety and size of multi installation schemes. We believe that different sectorsshould be disaggregated and weighted in favour of renewable schemes benefitting public buildings such asschools and educational establishments.



12) During this time of austerity school capital budget reductions means that schools do not have the upfrontcapital to deploy solar PV. It was for this reason that we established the Eco-Schools Solar programme toensure schools can use the energy generated to reduce energy bills for schools. The high level of support fromschools suggests this is a model which provides an alternative mechanism for schools to install solar PV.

13) The vast majority of schools signed up to the Eco-Schools Solar programme fall into the 10–50kWcategory of tariff and in our experience it can cost up to one hundred and twenty five thousand pounds for aschool to install a 50kW solar PV system. The review document recognises the role multiple installationschemes can play in enabling those who cannot afford the upfront capital costs of purchasing a PV installation(paragraph 38).

14) We welcome the broad policy of integrating increased energy efficiency with the roll out of solar PV asproposed in the Feed in Tariff review. Indeed, we actively promote energy efficiency as one of the nine Eco-School themes and the Eco Schools Solar Programme promotes the use of revenues generated from excessenergy being used to improve energy efficiency in schools. However, school buildings are very different to bothdwellings and non-domestic buildings due to their variety. From those constructed in the Victorian buildings tothose constructed in the sixties right up to the most energy efficient buildings constructed in the last five years.From our experiences running the Eco-Schools programme the energy performance rating of the majority ofschools is between E and G.

15) We believe it is important that the Feed in Tariff proposals regarding increased energy efficiency alsolooks beyond buildings to the behaviours of those people using such buildings. The installation of a numberof energy efficiency measures may require significant capital outlay. However, it is our experience, thatbehaviour change in schools environments can achieve significant savings in the short term as relatively lowcost compared to changing the physical fabric of the building. Simple good practice such as turning offelectrical equipment can save a minimum of 10% on schools’ energy costs per annum. The best improvementwe are aware of is where an in-school behaviour change campaign achieved a reduction in their energy bill of64%. The energy theme of the Eco-schools programme is designed to develop such pro-environmentalbehaviours in students at an early age through structures such as Eco-councils, lesson plans and the creationof an environmental action plan in order to achieve a coveted Green Flag award.

16) The Feed in Tariff review proposes a requirement to make eligibility for the standard tariffs proposedcontingent on a minimum energy efficiency requirement being met. It is our view that given the poor energyperformance of most school buildings there is a the challenge in creating funding streams for the installationof energy efficiency measures due to the significant decrease in capital funding for schools in the light of theComprehensive Spending Review. We would support a relative rather than absolute approach we recommendthat an alternative proposal would be to make it a condition on schools to move up one energy class over afour year period. A relative approach could also include measures financeable under the Green Deal but alsoinclude a requirement for schools to achieve at least an Eco-School silver or Green Flag award within twoyears of the solar PV being installed. This would not only increase energy efficiency but would also achievethe behaviour change aims of the Feed in Tariff scheme as stated in paragraph 60 of the Impact Assessment“engagement with energy generation could lead to behaviour change by individuals and communities in relationto energy use which will further reduce carbon emissions”.

17) Response to Theme C—The way in which the Government has managed the Solar PV Feed-in Tariff,the impact this has had to date, including the management of the Consultation;

18) The Government’s management of the Feed in Tariff review will adversely impact on the Eco-SchoolsSolar programme. Specifically, we strongly oppose the proposed reference date of 12 December 2011 andstrongly recommend its delay from to April 2012. This is to ensure that we can deliver the Eco Schools SolarProgramme to those schools which have been working with us on their applications during 2011. These schoolshave been anticipating their solar panels being installed this academic year and will be deprived of an importanteducation tool and a source of cost savings in a tough economic climate.

19) In paragraph 48 the Feed in Tariff review notes that the 12 December 2011 is six weeks after thepublication of the Feed in Tariff review will allow many prospective generators who have made a financialcommitment to installing solar PV to complete their installations and receive the current tariffs. Whilst thismay apply to domestic properties this is not the case for the schools in our Eco-Schools Solar programme wherea number of schools have struggled to gain planning permission from local authority planning departments forthe installation of solar PV on their buildings. Due to these delays it is likely to have taken most schools fivemonths to get to the stage of being certified to be eligible for the Feed in Tariff.

20) The unintended consequences of the introduction of a 12 December 2011 reference date would be todeprive schools, through the Eco Schools Solar Programme of a free, low carbon source of energy and toactually increase costs to schools through likely future increases in energy prices with carbon emissions acrossthe school estate at least remaining the same. Additionally, applicant schools would have anticipated and,therefore, included the potential savings from the solar installations in their budget forecasts for 2012/13. Onthe assumption that 400 schools have their panels installed this financial year and a 50kW system can save aschool up to £5,000 a year, the Government’s proposals would deprive schools of a cost saving of at least twomillion pounds a year.



21) In terms of the management of the Feed in Tariff review the proposed reference date of the 12 December2011 is six weeks after the publication of the review document. Yet, this six week period is inconsistent withthe Government’s own code of practice on consultations which notes that consultations should normally lastfor at least 12 weeks with consideration given to longer timescales where feasible and sensible such as meetinginternational obligations. When timing is tight other options should be considered through which people canexpress their views. However, at no point in the review document is there a clear explanation why the 12December 2011 was selected as the reference date—only six weeks after the launch of the consultation.Furthermore, no explanation is offered why the reference date comes into force prior to the end of theconsultation itself which is only eight weeks in total. These factors seriously undermine the credibility of thisconsultation process.

22) We believe the Impact Assessment supporting the Feed in Tariff review has failed to consider the impactof the proposals across a number of policy areas.

23) Firstly, the impact assessment has failed to take into account the impact of these proposals on sustainabledevelopment. Whilst we agreed the broad Feed-in Tariff policy does result in a positive impact on sustainabledevelopment the introduction of a 12 December 2011 reference date will have a negative impact. Paragraph44 B notes that “sub-4kW uptake is projected to be 70% lower under the proposed new tariffs, while uptakefor 4–50kW installations is 95% lower. Therefore, the proposals will significantly impact on the aim of theFeed in Tariff as outlined in paragraph 71 of the Feed in Tariff review “increasing the deployment of small-scale renewable electricity generation in order to move the UK away from fossil fuel dependency towards alow carbon economy…”.

24) Secondly, the issue of deprivation is not considered by the impact assessment under social impacts(paragraph 70). We would suggest that schools located in areas of high deprivation are less likely to be ableto raise capital through share issues than more affluent areas and are, therefore, more likely to turn to multi-installation programmes. A reduction in the tariff rates of such schemes could jeopardise the future delivery ofsuch programmes and thereby impact on the roll out of solar PV in schools located in the most deprived areas.

25) Finally, there appears to be an omission in paragraph 73 of the impact assessment with regards to theimpact of the proposed reference date in reducing current market confidence leading to increased redundanciesand the societal costs associated with unemployment in addition to a reduction in potential job opportunitiesin future years.

26) Response to Theme E - Experience of similar incentive mechanisms for renewables in other countries:

27) Our proposal that any reform of the Feed in Tariff should be weighted in favour of renewable schemesbenefitting public buildings such as schools is based on existing incentive mechanism which work well inFrance and Italy and we believe would have maximum impact in any reformed system of Feed in Tariff. Forexample, in France schools and hospitals have rate of 32p/kWh whilst in Italy the use of grants raises the basic22p/kWh rate to 44p/kWh for school system.

16 November 2011

Written evidence submitted by Carroll Reeve, Chairman, Transition Lavenham CIC

I would make a special plea for community groups. Most such groups, certainly the ones I am associatedwith, are run by volunteers. By definition voluntary groups take longer to get their act together. It is not anefficient process, it takes time to fund raise (longer now as grants have but all dried-up), to enjoy a meeting ofminds, agree achievable outcomes and then get the thing done—because we all giving of our time.

The consultative document makes only passing reference to schemes for the benefit of communities. TheMinister made a bigger play of protecting community schemes on the Today programme (on the Fridaypreceding the issue of the consultative document), than the document does. In addition, a cut-off date precedingthe end of the consultative process is at best suspect. Moreover, here in Suffolk we have had bad experiencesof so called consultation.

I know of two schemes in South Suffolk to put PVs on village halls that have now been dropped and a thirdthat is likely to go that way.

Letter to Greg Barker MP and Tim Yeo MP, dated 14 November 2011

The purpose of this submission is to obtain a concession for the installation of solar PV on public buildingsin that the current FiT rates will be held until at least 31 March 2012, when it had been anticipated that ratereductions would be applied.

In Lavenham there are three planning applications in progress for installation of solar PV, viz., on the VillageHall and on two public lavatories, the operation and maintenance of which will be divested to Lavenham ParishCouncil by Babergh District Council (without any funding, transitional or otherwise).

It is proposed to install 10 kW solar panels on the roof of the Village Hall. This will eventually be used tosupply reversible air source to air heat pumps able to supplement the space heating and to provide cooling in



the Summer, when solar gain is creating discomfort in its Main Hall and Function Room. The solar power willbe at a maximum, to provide a necessary measure of cooling.

Lavenham Community Council, the owner of the hall is a not for profit limited company, any surplus isinvested back into the community. It has decided to fund the installation of the solar PV panels on the lowerroof of the hall from its own resources and is in the process of applying for planning permission—the buildingis in a conservation area. Any benefit arising from this local form of electricity generation will therefore accruesolely to the benefit of the local community.

Lavenham Parish Council plans to take over the maintenance of its two public lavatories due to localauthority budget cuts and is looking for savings in running costs. Electricity is needed for lighting and handdryers: solar PV would reduce the bills.

Lavenham is striving to support community action in the framework of the coalition government’s “BigSociety”. This arbitrary reduction in FiTs from 12 December 2011 represents a huge setback to its potentialcontribution.

Moreover, as the change over date precedes the end of the consultation period, one questions the value ofconsultation, an experience we have recently endured with Suffolk County Council and now our district council.Lavenham Parish Council has previously written to the Secretary of State for Communities and LocalGovernment in March this year giving support for localism and our willingness to participate.

ransition Lavenham CIC supports the “Big Society” with community action at its heart, and requests thatfor public buildings at least, there will be a concessionary extension of the current FiT rates until 31 March2012, and a more stable environment thereafter, so as to enable the current plans for the hall and lavatories tobe fulfilled to the benefit of the local community.

18 November 2011

Written evidence submitted by the National Federation of Roofing Contractors

Summary— The National Federation of Roofing Contractors (NFRC) commends the growth in the solar industry

since feed-in tariffs (FITs) were introduced and feels that this industry has much to contribute indriving the transition to a low-carbon economy.

— The NFRC is disappointed however with the way in which the Government has handled the issueof Solar Photovoltaic (PV) FITs. While we recognise that current tariffs are unsustainable in the longterm, we are particularly concerned about the speed at which proposed changes will be implemented,as this will strangle the industry and upset business planning.

— A good balance between affordability and delivery of objectives has not been struck in the currentFITs Consultation proposals. Affordability has been given precedence at the expense of meeting thescheme’s objectives and this is likely to dent consumer confidence and prevent wider uptake of greenenergy installations.

— The NFRC feels that in future there should be greater transparency from Government and bettercommunication with the solar industry to help drive sustainable growth in this sector.

The NFRC

1. The NFRC is the UK’s leading trade association for the roofing industry. The Federation has over athousand contractor and associate members and is an active member of the International Federation of RoofingContractors. With a turnover of £1.6 billion, NFRC members represent in excess of 70% of the UK roofingmarket by value. Companies vary from the very smallest local companies to some of the largest in the country.The NFRC is a key member of the National Specialist Contractors’ Council, the National Home ImprovementCouncil and the Construction Products Association.

2. Roofing is a key component of the construction industry and the NFRC has become the active voice ofthe roofing industry. To this end, it sponsors and advises the All-Party Parliamentary Group for the RoofingIndustry, chaired by Rt Hon David Hanson MP to ensure that roofing matters are adequately represented.

3. The NFRC is committed to promoting small-scale renewable energy and believes there is enormouspotential to generate energy from solar PV. The NFRC offers support and guidance for those involved, bringingdesigners, suppliers and roofers together. This ensures standardisation and regulation within the sector. TheNFRC and ConstructionSkills have initiated a training course for the installation of solar collectors on roofs.The course aims to foster skills for roof-integrated and roof-mounted systems and to build a database ofreputable and trained roofers. There are currently 90,000 solar thermal systems installed in the UK with 5,000new domestic systems installed every year. Manufacturers of solar panels and trained roofers have been broughttogether through the NFRC's ActiveRoof programme to minimise risk and ensure proper installation andtraining. For roof-installed or mounted systems, such as PV or solar thermal systems, the specialist skills ofthe roofer are needed, both for safe working at height and vital weather-proofing knowledge.



Response to the Call for Evidence

The impact of Solar PV FITs and the state of the solar energy market

4. The UK has steep targets to reach for renewable energy, needing to produce 15% of its energy fromrenewable sources by 2020. While it is widely believed that these targets will not be met (for reasons includinglack of public conviction and lack of financial incentives to install microgeneration facilities, as well asuncertainty over the Government’s commitment to this sector), there is a growing realisation that the UK’senergy must not rely solely on one or two sources. In order to meet legally binding EU targets, renewableenergy must be utilised.

5. The UK’s solar energy market has rapidly taken off since the introduction of the FITs scheme in April2010. In particular, solar PV has been hugely successful in increasing popular take-up of low-carbon solutions.According to Government figures, between 8,000–14,000 gross full-time equivalent jobs have been supportedby solar PV since the FITs scheme was implemented and the solar industry as a whole now currently employsan estimated 25,000–30,000 people.

6. Given the scheme’s success both in encouraging consumers across the country to become involved inlocal, clean green energy generation and in promoting employment growth in this sector, it is disappointingtherefore that it is this very success that now threatens those working in the solar industry.

Affordability vs. delivery of objectives

7. The FITs scheme was designed to promote take-up of small-scale low-carbon electricity technologies,within affordable limits set by the Department for Energy and Climate Change (DECC). Whilst we recognisethat solar is not one the eight technologies included in DECC’s “Renewables Roadmap” as having the greatestpotential to meet 2020 carbon emissions targets, we nevertheless argue that this is not adequate reason forremoving the floor from the solar industry by hasty reductions in the generation tariffs. As uptake figuresdemonstrate, solar has been very popular with the public. Thus, while solar may not at present be seen to haveas much potential as other technologies, the accessibility and popularity of solar could well be higher. For thisreason, the option of installing solar PV should remain accessible for the public.

8. As costs of installing solar PV have fallen dramatically since the FITs scheme began and energy priceshave risen, the NFRC appreciates that changes need to be made to keep the scheme within budget. However,we would stress that cuts to the generation tariff of over 50% are too deep and too fast. Cuts should beimplemented gradually over a longer time period so as not to destroy the solar industry just as it has begun totake off. This is especially the case given the role which DECC states that solar could play in larger scalerenewables deployment in the future if costs decrease by predicted levels of 47% by 2030.1

9. The FITs Consultation Document outlines the three aims of the FITs scheme. These are: to empower thepublic and give them a direct stake in the transition to a low-carbon economy; to help develop a supply chainthat offers households a wide range of cost effective measures to lower their energy use and carbon emissions;and to assist public take-up of carbon reduction measures and in particular measures to improve the energyefficiency of buildings. Convincing consumers to invest in renewable energy has long been a difficult task forgovernments to achieve, yet the numbers of people who have installed solar PV under the FITs scheme (whichby the Government’s own admission far exceeded estimations) attests to the success of the scheme. Thispositive change in public attitudes towards renewable installations must not be undermined by constant changesin the Government’s commitment to this sector which are sure to have a detrimental effect on public confidence.

10. The Government’s consultation proposes that homes should meet category C energy efficiency ratingsto be eligible for the tariffs. The NFRC feels that this will further impact on the delivery of the above objectives,again skewing the balance away from delivery of objectives and towards affordability. Figures suggest that theconsiderable investment needed to bring houses up to this level would prevent around 90% of homes fromdeploying solar technology, as currently 86% of properties are below this threshold.2 While the NFRC agreesin principle that energy efficiency standards are an extremely important part of overall carbon reduction, urgentclarification is needed on how this will be financed so that these extra costs do not further restrict people fromentering this market.

The Government’s management of Solar PV FITs

11. The issue of solar PV FITs has been poorly handled by the current Government. This shows in the ratherperplexing situation whereby the new reference date for FITs eligibility (12 December) comes before the endof the consultation period (23 December). The major concern felt by those in the industry is over the speed atwhich changes to the generation tariffs are being enforced, as this will have huge implications for those workingin the industry. Business planning will be severely effected, with costs incurred including contract cancellations,stock cancellations, redundancy payments, write downs, site surveys, financing fees, business developmentinvestment, wasted local depots for material storage and sales and marketing costs. Together these are expectedto run into lost revenue totalling millions of pounds; already the NFRC has learnt of one large manufacturing1 DECC (2011) Renewables Obligation Banding Review, p. 522 Murray, J (2011). “Solar industry prepares response to feed-in tariff crisis”:

http://www.businessgreen.com/bg/news/2123578/solar-industry-prepares-response-feed-tariff-crisis



company which is set to lose £12 million pounds from committed contracts. Conversely some smallercompanies are struggling to buy modules and inverters to fulfil current orders, due to the huge surge that theearly reference date has created.

12. Industry has invested a lot of time and money into training qualified solar providers so that they willbecome Microgeneration Certification Scheme (MCS) qualified, especially as solar was seen to provide awidening of business opportunities for the construction sector in an already depressed market. Since April2010, over 3,000 installation companies have been certified to install solar PV that could be eligible for FITs.3

However, many working in this sector will now be faced with redundancy; in a recent survey of 139 solarcompanies, 33% of respondents stated that their company may be forced to close and an initial impactassessment suggested employment in this sector could fall by 42%.4 If on the other hand the Governmentintroduced changes incrementally to the current tariffs from 1 April, this would substantially lessen the burdenon industry at minimal cost to consumers.

13. Consumers are also set to suffer as a result of changes to the tariffs being implemented from 12December. Minister of State for Climate Change Gregory Barker MP confirmed that there were over 32,000sites at the end of October where small scale solar systems had been installed but had not yet registered forthe FITs scheme. However as the registration process for new projects takes up to seven weeks, the likelihoodis that some households and businesses that completed solar installations ahead of the launch of the GovernmentConsultation will be unable to register for FITs payments until after 12th December when the proposed cuts tothe incentives come into effect. This is not fair for households that had budgeted for returns on investment,who will now have to wait twice as long to see full returns. A perceived lack of Governmental support forgreen initiatives will only dent public confidence in the merits of clean energy generation which could alsomake it harder to attract investors to other Government-backed schemes such as the Renewable Heat Incentiveand the Green Deal.

14. It is fair to say that no industry could adapt to such change in six weeks. The NFRC strongly urges theGovernment to push back the eligibility date to give solar firms more time to complete projects currently inthe pipeline and avoid any backlash caused by householders who have paid deposits for installations but willnot be able to complete them before the current 12th December cut-off, leaving them with half the return oninvestment they had been expecting.

15. Like any growth industry, solar needs Governmental support. With production and manufacturing costsdecreasing in price over the past year, and a typical installation now only taking one day instead of two, itstands to reason that the 41p FIT rate was unsustainable in the long term. Those involved with the solar andPV industries would be happy to work with Government to cut the generation tariff in a way that would helpboth industry to develop and Government to fulfil its Green objectives. For this to happen however, theGovernment must be sensitive to the industry’s not unreasonable need for transparency, longevity and clarity.

18 November 2011

Written evidence submitted by Patrick Whitty

Reducing the FiT; Impact on the Solar PV Industry.

1. At 43.1p the FiT has encouraged many people to adopt solar PV and reap a wide range of benefits

2. Solar PV FiT reflects both high cost and potential for technological advance

3. The FiT at 43.1p has resulted in the emergence of companies fitting free solar panels and to hard salestactics by double glazing companies

4. Reducing the FiT to 21p at short notice has lead to unprecedented sales, placing the industry underintense pressure

5. The government has unwittingly created the boom and bust scenario which it sought to avoid. Manycompanies will be unable to survive, leading to loss of employment opportunities

6. The cost of solar panels has come down, but not enough for the industry to absorb a 50% reduction inbenefits occasioned by the reduced FiT

7. The sudden change in policy has lead to loss of confidence in the government and in its commitment itsown carbon reduction policy

8. Reduction in the FiT could have been staggered over a longer period to ameliorate the effect

9. The damage to the industry could be offset by other measures.

1. The solar PV feed in tariff, originally set at 41p rising to 43.3p per kW in April 2011, has provided apowerful incentive to adopt solar PV technology, often by people who would not normally have considered soa radical move. While the financial rewards offered by the feed in tariff were sufficient to overcome objectionsand inertia, the actual benefits have been much wider, increasing awareness of energy use, home insulation3 Gregory Barker MP, in answer to a Parliamentary Question on Feed-in Tariffs: Business (no. 79332)4 Renewable Energy Association & Solar Trade Association (2011). “Solar Industry Survey November 2011: Anticipated Impact

of Proposed FIT Changes”:http://www.r-e-a.net/document-library/press-releases/REASTASolarIndustrySurveyFITChangesFINAL.pdf



levels and the advantages in selecting more efficient domestic electrical equipment to maximise the benefitfrom the panels. Solar PV is a high visibility technology and the appearance of solar panels on an increasingnumber of roofs has improved public awareness and perception of solar technology, and of renewabletechnology as a whole.

2. While the FiT rate for solar PV was set much higher, and for a longer period, than for other technologies,this reflected the higher initial cost, but also reflects the potential for development in solar PV technologyincluding, for instance, multi junction and organic solar cells. Increased uptake of solar PV will inevitably fueldevelopment of newer technology as companies strive to maintain their market position, leading to greaterpower output per unit cost or area. The potential to improve the efficiency of solar panels is enormous.

3. The high rate of the FiT for solar PV has lead directly to the emergence of companies fitting free solarpanels purely to reap the FiT rewards, and to double glazing companies adding solar panels to their portfolio.While the pros and cons of free panels are often clearly presented and do allow people who are unable toafford to fit panels for themselves to reduce their demand on the national grid, there are inevitably othercompanies who are less trustworthy. Double glazing companies who have jumped on the solar PV bandwagongenerally rely on selling ‘on the night’, employing direct sales procedures which can do much to harm thesolar PV industry. While the high sales volume sought by these companies has done much to increase awarenessof solar PV, their prominence may be taken as evidence that the FiT for PV was, initially, set at too high a rate.

4. The unexpected decision to reduce halve the FiT for solar PV at short notice has placed potentialpurchasers in a situation closely resembling the unpopular ‘buy now’ direct sales technique so beloved bydouble glazing reps. The resulting surge in sales has placed the solar PV industry under intense pressure,unprecedented demand for panels and inverters resulting in companies fitting any equipment available so thattheir customers will qualify for the 43.3p FiT. Inevitably, as demand outstrips supply, lower quality equipmentwill be substituted to the customer’s potential disadvantage.

5. Companies risk financial hardship where shipments of equipment, placed before the announcement of thereduced FiT, are not expected to arrive until after the 12 of December, leaving them with stocks of materialsfor which there will be limited demand. As a result of the proposed change many of the companies fitting freesolar panels are no longer taking orders. With the approaching deadline companies are no longer selling panelswhich they know cannot be fitted in time to qualify for the higher rate FiT. For many the solar PV industrywill no longer offer potential for employment and large numbers of jobs will be lost within the industry at atime when unemployment figures are very much in the public eye.

6. It has been suggested that the industry can counter the lower FiT rates by reducing the cost of fitting solarpanels and that the cost of panels has plummeted There is no doubt that there are very cheap solar panels nowon the market, but then every commodity has its budget options. It also true that developments in manufacturingtechnology have enabled the cost of panels to be reduced, but the cost of panels is only part of the cost of asystem. Transport and labour costs continue to rise. The actual cost of a solar panel system of reasonablequality has reduced by around 12% between November 2010 and November 2011.

7. Quite apart from reducing the incentive to fit solar panels, the government’s change of heart has lead toloss of confidence in it’s commitment to carbon reduction and will inevitably blunt enthusiasm for fitting notonly solar PV but also other domestic scale renewable technology. Doubts over whether the government canbe trusted to stand by the 25 year period of the FiT will also reduce the incentive to select solar PV for longterm investment.

8. If, as may well be the case, the current FiT for solar PV is unsustainable then it could have been reducedin, perhaps, two stages over the next two years, limiting the shock to the industry and reducing appearance ofpanic and lack of forward planning. Even if the government back tracks on its proposed reduction, the damagehas now been done; with the loss of confidence people will be reluctant to invest heavily in solar PV. It willtake a long time to regain public confidence.

9. One way forward could be to proceed with the proposed reduction, making it absolutely clear why thishas been necessary, but then to reduce the damage by, for instance, extending the interest free loans currentlyavailable to SMEs to members of the public, perhaps covering a percentage of the purchase price.Encouragement could also be offered by further relaxation of planning control, for example in the case ofground mounted solar PV systems and ASHP.

22 November 2011



Written evidence submitted by Gareth Williams, Caplor Farm

At Caplor we have a diversified rural business that is involved in 700 acres of mixed farming, in additionto property we also have a renewable energy business (Caplor energy) that designs and installs PV equipmentfor Business, community and domestic. Please see our web site and blog for more company info—link at ende-mail.

1. The date change on PV means that a 20Kw extension to our existing 40kw PV project will now beat a much lower rate of return. This said the financial rate of return is still acceptable, but any lowerand it certainly would not allow me to borrow money from the AMC or bank to facilitate theinvestment—they will not lend on business investment that cannot repay the loans and so theyshould not.

2. Our PV investment has resulted in a significant reduction in our energy bills. It effectively caps partof our power expenses which is excellent and for once gives us some control over spiralling andsoon to be crippling energy costs. The current investment will return about £15,000 per annum toour farm business, so financially this is massive for a small rural business. In addition from anenvironmental perceptive we are now being challenged by our customers to address carbon andclimate issues and effectively being able to run our Potato cold stores on renewable energy is anexcellent way in which to address these raising issues. Our next PV system is going to run a cerealcrop drying system instead of our existing one that uses LPG gas and diesel—it will save us 1000’sper year on not having to buy in fuel. Again our customers are very pleased. Obviously there is agreat carbon footprint benefit from this type of generation.

3. Socially whilst perhaps not creating new jobs—having this form of income is certainly helping tomaintain the 5 full time equivalent posts on the farm—As stated the income and the opportunity tokeep our customers happy is what will maintain a struggling rural community. PV can offer a genuinebenefit to rural income whilst tackling the macro issues of reducing dependency on imported fossilfuels that have an increasingly negative effect on the whole countries balance of trade.

This said, in our sister energy company—this week we are employing over 30 people on a routinebasis. 8 of these are under 25 and last year we took on some 6 graduate placement students—as youcan imagine in rural Herefordshire this is absolutely vital to a sustainable rural economy. I think wenow have over 1 million under 25’s unemployed in the Uk—if the Govt do not get behind the solarindustry long term, this will raise massively. In the Uk 25–39000 people have jobs because of solar,it is suggested that short term 10,000 of these will lose jobs. If FIT is not kept high enough to sustainthe industry until it reaches grid parity in 5–7 years then all of these will be out of work. If supportedthen it is believed that over 100,000 will be involved in this industry in the next few years.

4. What we have noticed in our business is that since having started generating our own electric—ithas led to a substantial change in our behaviour and attitude towards energy conservation generally.We have reduced fuel consumption in tractors through training and equipment choice, reduceddependence on artificial fertiliser that is hugely demanding on fossil fuels, changed electric use withventilation and lighting to name just a few. To such a degree has this been the case that we havewon several awards—http://www.caplor.co.uk/about-caplor/awards/

5. The govt handling of the FIT review—leaves a lot be desired to say the least. A consultation that isimplemented only 6 weeks after it is announced and before the end date probably sums it up really.Agreed the level was too high but this is no way to go about things in a democratic country surely?Also and more important is what it says about our “green govt” and “big society govt” genuinedesire to address energy and climate issues and put “power” back in the hands of individuals andcommunity—we surely lag woefully behind the rest of the world. These issues are genuine threatsand thus huge opportunities that we seem content to talk about and do very little, whilst countrieslike S Korea even put us to shame—see http://caplors-blog.blogspot.com/ for more on these typesof issues. They must support the FIT until we reach grid parity and be VERY clear about it—simpleas that. I genuinely believe they have currently lost massive support over this issue. 61% ofhouseholds have support for renewable initiatives, that’s a lot of votes!!

6. Pv is great because it is easy to do. Very simple and at all sorts of scale and very unobtrusive. Wehave a windmill here only 15kw and the fuss and hassle that it has created compared to 40kw of PVis like chalk and cheese. Most people can be involved in PV—24million households—if half couldprobably be used then wow! and not to mention the number of business premises, communitybuildings and farms……….. by contrast there are only 26,000 suitable sites in total in the uk forsmall scale hydro if the people wanted / could do and if the E agency would allow it. Nobody seemsto want windmills in the back yard and A D plants whilst great can hardly be done by any one. PVis fair for all and is physically, socially, environmentally and economically possible which is whythe govt need lend more support.

7. In other countries—well, just have a look at a few examples in our BLOG—I could write chapterand verse on this. 50 countries around the world find this the best way forwards and supported byFIT payments



100

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90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

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Feed-in Tariffs

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REN21: Renewables 2011 Global Status Report, pages 84-85

Paul Gipe, wind-works.org

Cumulative Feed-in Tariff

Programs Worldwide

To answer the specific points on the consultation review -I attach the consultation response from CaplorEnergy solar company, part of the Caplor group on the FIT Review—This has been circulated and sent toDECC. I’d be interested to hear your thoughts.

Our feeling at Caplor Energy is that

1. The new tariffs as proposed are just about workable if maintained and renewed only in line withpanel costs—to give 8% plus return to people who invest in these projects.

2. We feel the damage has already been done with effectively bringing the date forward to 12 Decemberand there is little point spending effort and time discussing.

For us, the big are;

1. A backtrack on the EPC proposal as (if included) this will remove opportunity for some 90% of UKhouses without significant investment in the region of £5–7K per house. How could people affordthis. Also insulation and energy generation should not be linked.

2. The size of the scheme must be increased the current tiny budget is doomed to run out way beforeany meaningful quantity of PV is installed in the UK. We have got a little too excited as we haveinstalled several hundred MW—yet internationally we now lag woefully behind other countries, inthe states as one example there are single plants with more capacity than the whole of the UKcombined. In terms of investment a German single investment into Morocco of some 400 billioneuro makes our total FIT for solar at £860 million rather an international embarrassment. For us todevelop this industry in the next 5–7 years so that it can reach grid parity we must make a sensiblebudget available to give people confidence and motivation to invest.

22 November 2011

Written evidence submitted by Shape Energy

Thank you for this opportunity to make a representation about the impact of the management, the date ofchange and the proposed changes to the Solar Feed in Tariff.

1. In summary, the Solar FIT was an excellent mechanism for distribution of energy companyoligopolistic super-profits to increasing economic activity, distributed local generation and thealleviation of fuel poverty. The mechanism enabled the creation of real jobs for normal people andalleviated the national fuel burden and dependency on foreign and not-stable suppliers such as theRussia and the Arab States. The management of the FIT since inception has been marred by continualtacking by DECC and ministers linked heavily to a spurious linkage of FIT to UK PLC balancesheet and taxation and a CSR cap unrelated to real opportunity, cost and value. The issue seemspolitical and ideological as opposed to economic or pragmatic. Solar FIT is creating jobs and taxreceipts ahead of its cost; and its cost is marginal and potentially not even incremental to theinflationary impact of increasing fuel costs such as oil and gas, the cost of nuclear power etc. Finally,



the manner of FIT management has damaged the UK sovereign reputation as a safe and predictableharbour, likening the UK to Italy and Greece as a sovereign risk and raising dark allegations ofcorruption and self interest. The effect of the change and the process of change is and will continueto prove detrimental to the General Economy as follows;

(a) Increased investor perception of sovereign risk; the UK has gone from pragmatic, practicaland under the rule of law to a fiefdom based on inconsistency, ideology and retrospectiveactions; and

(b) Increased bank risk and therefore reticence to lend as demonstrated by a complete pull back byLombard, Santander and others on debt for solar projects.

(c) An increased risk that the UK will suffer from energy “blackouts” or a pull back ondecommissioning of “dirty” power stations

(d) A major set back on poverty alleviation; the aggregation led degression means that socialinvestments and free to house solar which favoured those unable to afford the capital for theirown solar investment is penalised and not sustainable; and

(e) The effect on poverty is exacerbated by the political nature of local government and theircorporate organisation where investment and change decisions [as can be witnessed over thepast two years since FIT introduction] can take a inordinately long time and regularly stutter toa premature end. The approach taken by DECC has forced Local Government back in toits enclosures.

(f) A set back in economic growth sorely needed today; the cost of Solar FIT is about 7p a dayper household (the £26 DECC claim) and is negligible or potentially a positive step in relationto the increasing costs of Siberian Gas, Australian Coal and Arab oil. The real inflationaryimpacts are input raw materials costs, nuclear power commissioning and the Smart grid whichwill more than likely effect fuel prices by over 100% in the next 10 years.

(g) Destruction of real jobs for real people; electricians, surveyors, roofers etc. Unlike centralisedenergy that is specialised and automated, oft-times foreign, solar promotes local jobs; and

(h) A loss off taxation receipts of about £375 million pa in PAYE and NI contributions

(i) A major risk to meeting the 2020 carbon reduction targets due to points 1a, 1b, 1c and 1e above.

2. We have been working in the solar sector for three years. We have been born of experiences of ourpast and current team in European, Chinese and American solar. Our relationships cover internationalinsurance and bonding, manufacturing and engineering and finance. Shape energy was a pre-FITpioneer in green deal type of energy reduction thinking with proposals to local government. Our andour partner teams have experience in development of projects globally, central and local governmentin the UK.

3. Cause and effect are heavily inter-related. This submission is simplified as much as possible anddiscussions on inter-relations avoided. This submission refers to the manner and approach to FITmanagement by DECC and current ministers.

4. The date of change and the way it precedes the conclusion of the consultation process has had thefollowing negative effects;

(a) The consequence of the retrospective change in tariffs (ahead of conclusion of consultation)affect are as follows;

(i) A loss of faith in UK sovereign processes and as such a detrimental recasting of risk ofinvestment in the UK. We work with foreign investors and the UK’s sovereign risk beingperceived as low is a major benefit. Our and our contemporaries’ foreign investors havelost faith due to the retrospective and regressive nature of the consultation and change;and withdrawn from negotiations and, in some cases, withdrawn funds.

(ii) UK and UK based bank branches have pulled lending from solar funds and solar installersdue to the tightness of the change date and the previously stated retrospective (toconsultation- conclusion) date of change. The government claims to want banks to lend toindustry and for entrepreneurial/small business growth but have killed this.

(iii) There will be investment ramifications for other technologies as trust [based on a historicalappreciation of the way the UK works] is lost.

5. The effect of multiple degressions over and beyond the initial cut in FIT linked to achievement ofenergy certificates and aggregation of installed [FIT] sites are as follows;

(a) The degression caused by aggregation of the FIT adversely effects Social schemes, communityfunded schemes and free to house offers; and are as such a regressive change where the lowerincome family will not benefit from solar capital investment, but instead bear the full brunt ofexpected energy inflation and pay for the wealthier parts of society who can afford the capitalto benefit from solar energy.

(b) Creates greater complexity for investors and service providers. The carbon equations has twosides; reduction of consumption vs production of zero carbon energy. Both reduce carbon andscarce fuels consumption. Reduction in consumption takes time and there are existing [and



proposed mechanisms] to incentivise change. Confusing the two sides of the equation as theproposition has complicates change and creates greater opportunity for laggard-ly people andorganisations to avoid change for longer.

6. The linking of Utility and consumer funded FIT to the Government CSR and the setting of this at alow level is detrimental; the FIT is not tax funded but an alternative charge on utility companies (highprofit oligopolies) much like existing CERT and CESP monies. This is the same for all FIT payments.

(a) The tax receipts (PAYE and NI) is about £375m pa in the solar sector. This will be heavilycompromised

(b) The sector is a rare pocket of growth in the UK economy and this will be reversed

(c) The treasury accounting for FIT smacks like an episode of “Yes, Prime Minister”; the argumentis not how much is required but an extension of the treasury demand for how much it couldraise. The treasury see FIT as a potential for taxation and therefore in the UK balance sheet.However, even if this was the case, the cost benefit analysis between one form of taxation andinvestment vs the other is not revealed. The Solar FIT creates normal jobs, stimulatesentrepreneurial activity, brings energy strategy to the individual household [and leads to crucialand democratic participation] and generates annual tax receipts over and above incrementalcosts [of Solar FIT]; for instance,

(i) The cost of Solar Fit is about 7p pday per household; whereas

(ii) The consumer cost of raw materials input inflation, investment in the SMART grid andnuclear power is significantly greater than solar FIT; and

(iii) The strategic cost of centralised energy is massive with national subservience to Arabs foroil, Russia for gas and the French for nuclear invest and build.

7. The debate between centralised and distributed energy production is false and seems to be a drivingfactor on FIT management. The demand for energy requires multiple strands of development and ablended approach of centralised and distributed generation will provide supply and grid securityover time.

(a) The environmental cost of centralised energy is high e.g. cement and waste disposal for nuclearpower and carbon for coal and oil transportation.

(b) Centralised energy strategy supports large companies and excludes small companies andentrepreneurs. This is counter to short and long term growth aspirations by devaluing theentrepreneur.

8. The approach to communication and market relations has been poor at best; investors andcommentators are left with a corrupted view of government with the new joke being that this changeis to ensure certain ministers and their advisors secure employment post-the-end to a coalitiongovernment. True or not, the effect on perceptions of UK sovereign risk for investors looking at theUK and the ambition of entrepreneurs is negative.

We hope that our submission is valuable and supports the debate that is crucially required by UK government.If any clarifications or ancillary questions arise, please do not hesitate to contact us.

22 November 2011

Written evidence submitted by David Holmes

— I believe that the current changes to the FITs tariffs as announced on the 1st of November 2011 areunfair, and will put my family in finical hardship.

— In addition to this the proposed changes to the application process in the future will remove amassive proportion of the UK households from the low carbon agenda.

1. We entered into a contract in good faith with a local supplier of Solar PV on the 15th of October 2011,paying them a deposit for the work to be completed. I was aware that there were going to be changes to the FITspayments in April 2012, but was assured that I would have the system fitted before then. All my calculations onpay back of the system were based on information provided by a reliable source the DECC, it would appearthat on reflection this was a less than reliable source. We took out a small loan to cover the differences betweenwhat we have saved over the last 18 months to do this project, and the cost of the system £12,000. Thesecalculations now are invalid and put us in a position where we may not be able to afford the loan repayments.

2. We have been looking to do this project on our house for a number of years, but because of the cost couldnot afford the installation of a system, which would be viable for us. The FIT system made it viable so weentered into the system in good faith. The supplier that I am working with gave me an initial installation dateof the 18th of December 2011, but after the announcement on the 1st of November he said he would work toa new date before the 12th of December.

3. However due to the weather conditions at this time of year and the now rush for inverters and panels mysupplier is finding tit very hard to source the system that he originally contracted for. We have already had tochange the panel, which was going to be installed, due to the total lack of them in the UK and Europe.



4. The time frame that has been imposed on the changes to the system is simply unrealistic, since my currentinstallation time from when I originally signed the contract, was over 8 weeks. Where the DECC get their 6weeks from is anyone’s guess, it is not reality. In addition to this the rush that they have imposed has led to ashortage of equipment, thus further increasing the installation time. To cap it all how the DECC can still beconsulting on the changes on the 23rd of December when changes are made on the 12th of December leadsme to think that they have made changes that are not based in reality.

5. We believe in the green agenda, and therefore believe that we should be looking to increase the efficiencyof our houses to lower our Carbon output, this is why we decided to go ahead and install a solar PV systemon our 300-year-old house. We have made changes to the house increasing the efficiency of the house over thetime in which we have lived there, by insulating and installing low energy appliances. However our house willnever meet the level C on the efficiency charts, so this monitor for future application to the FITs system wouldnot work for us and many other houses pre 1900, which is a massive proportion of the UK housing stock. Oneway in which we can change our CO2 output is to install low carbon technologies so that even if our housesare not the most efficient at least they are reducing their carbon output. This way of looking at the solutionleaves the door open for everyone to be part of the low carbon agenda, and is not exclusive to those that arelucky enough to live in areas where new high efficient houses have been built.

6. The cost of Solar PV systems have reduced, and this is testament to people like myself who have beenearly adopters of the system, and the FITs system which has made this possible. The proposed changes to theFITs system will.

— Make may more people unemployed

— Put people like myself in financial hardship

— Reduces competition in the market place and drive costs back up after an initial dip.

— Remove many peoples ability to enter in the low carbon agenda

7. I am aware that changes have to be made in our current austere environment, but these changes shouldnot be made, if they are going to

— Cost more in the long run

— Reduce peoples ability to access low carbon technologies

— Put people in more financial hardship

— Make massive changes to a system, which people were expecting to change, but not to the extent,or at the speed of change.

8. We find ourselves in awkward position where we want the technology; believe in the technology, and allit benefits. Having made informed decisions on information available, only to have this information drasticallychanged. In addition to this being unable to exit a contract that is signed with a supplier, due to us beingoutside the cooling off period, we are in a no win situation which has been imposed on us by ill thoughtthrough rushed policies. I hope that the DECC sees sense and sees what it is doing to a developing sector andpeople like myself.

22 November 2011

Written evidence submitted from London Rebuilding Society

The Committees will examine the factors Government should consider when setting the rate of the Feed-inTariffs in future, including the impact on electricity bills, “green jobs”, take-up of other renewables and energy-saving behaviours. The Committees are interested in receiving written evidence that looks at the followingthemes of the inquiry:

Summary— We agree there must be a change in the rate

— But this should enable social and community benefit to be linked to fuel poor households and toshared FITS and not for profit schemes (i.e. where the FITS revenue is recycled to support widerenergy efficiency and renewable energy for the benefit of vulnerable people).

— Those who are too poor to benefit from FITS should not be expected to subsidise those who arewealthy enough to

— We request the rate be increased from 16.8p for social schemes, to 30p to enable this to happen.

(a) Impact to date of Solar PV Feed-in Tariffs and the state of the solar energy market1. Our scheme—Shimmer—is a shared FITs model that uses surpluses to reinvest in domestic energy

retrofit for the poorest households. See attached document.1

2. This scheme would never have been funded unless FITS was present as a business driver. Thesuccess of the 18 home Shimmer Pilot put us in the position of being able to raise finance for a10,000 home project.



3. Delivering SHIMMER to 10,000 homes would have delivered a substantial economic impact on thelocal and wider economy. EST estimate that from the installation of solar PV alone, the directeconomic effects of our scheme will generate around £127.5 million worth of sales, will directlysupport local employment equating to over 684 full time positions and potentially generate around£55 million of Gross Value Added (GVA). Every year the installations are estimated to save nearly11,500 tonnes of carbon dioxide and the aggregated fuel bill savings come to over £1.7 millionper year.

4. Furthermore, the indirect effects of the solar PV installations resulting from the increased demandand increased money being spent by employees and the businesses will generate over £250 millionworth of sales, create the equivalent of nearly 1,400 full time employment positions and inject anestimated £50+ million of GVA into the local economy from the supply chain.

5. This has now been put at risk even though our financial model was based on FITS rate of 30pnot 43.3p.

(b) The balance between affordability and delivering the objectives of the Solar PV Feed-in Tariffs, includingfactors to consider when setting the rate of small-scale Feed-in Tariffs including jobs created, emissionsreductions and energy saving behavioural change

6. New tariffs overstate the drop in real “install” prices by some 20% evidenced by the fact our not forprofit rent a roof model for social benefit requires a rate of 30p to allow social investors to take partnot 16.8p

7. Our fuel poor clients gain £140 pa from solar which more than repays the 7p per day FITs adds toenergy bills and we feel FITs should be reduced to a level which lets the poorest benefit. To deliverthe benefits of our scheme to vulnerable fuel poor households we would require a FITS rate of atleast 30p.

8. The proposed new tariff does not acknowledge the role of FITS as a business driver. Our approachto transitioning to an inclusive low carbon economy was based on the ability to recycle the benefitsof FITS to deliver whole house retrofits for some of the very poorest people and to gear up for theintroduction of RHI and Green Deal. The cut means we will not now be able to deliver the supplychain and skills training needed to make RHI and Green Deal work for stakeholders such as privateand social investors, local authority/social housing partners, installers and customers.

9. The cuts are putting at risk the emergent low carbon economy before RHI, Green Deal, GreenInvestment Bank and Green Deal Finance Corporation are in place.

10. Seen in context, FITS, for all its flaws, has kick started the development of the industries and jobsof the future at no cost to government. For example, after ten years, the German renewables industrynow supports 340,000 jobs and replaces €5 billion (£4.3 billion) worth of energy imports per annum.

In a single year of FITs operating, the UK solar PV industry has created 25,000 jobs, many of whichare now at risk.

11. FITS has created an interest and appetite for renewable energy and retrofit amongst early adoptersand an aspiration for friends and neighbours to follow.

(c) The way in which the Government has managed the Solar PV Feed-in Tariff, the impact this has had todate, including the management of the Consultation

12. Two major unintended consequences of FITs were exploitation of the scheme by big rent a roofschemes and exploitation of the mechanism to drive social benefits to the very poor.

13. DECC has, probably unintentionally, interpreted the FITS regime in terms of cost per household,ignoring the jobs created, reduction in fuel poverty, increased local economic activity, the increasein tax generation to the treasury, and, the irrelevance of the FITs levy to our poorest householdscompared to free PV power worth £140 pa when compared to their more pressing problems like theongoing rise in utility energy prices.

14. Social enterprise schemes benefiting our poorest households require stability and certainty in orderto achieve their objectives. The constant fluctuation and uncertainty of DECC policy does notenable this.

15. A major concern of ours is FITS, in our experience, became a driver towards household retrofit viaRHI and Green Deal. DECC policy risks putting the whole house retrofit agenda back by severalyears until government changes or is trusted to delivery stability.

(d) Affordability of Solar Photovoltaic energy versus other renewable energy (given the overall levy-fundedcap for energy bills) and the impact of feed in tariffs on energy bills and

16. Taken in isolation, individual PV installs in domestic households are inefficient compared tocentralised power production/distribution. However, as a driver for whole house retrofit, gaining theinterest of households in RHI and Green Deal, and in local jobs creation, it is unsurpassed. And all,at a cost to government of £0.



17. Our fuel poor clients gain £140 pa from solar which more than repays the 7p per day FITs adds toenergy bills. UK households have seen utility bills rise in 2011 by £175 on average. DECC, probablyunintentionally, is ignoring the commonsense impact of “cash”. All of us would willingly pay 7p perday in return for £140 per year.

18. It is, of course, only right that FITs should be minimised to reduce profiteering and the cost to thepoorest. But DECC should balance the cuts so as “not to throw the baby out with the bath water”.

e. Experience of similar incentive mechanisms for renewables in other countries.

19. No comment.

Reference1 http://www.energysavingtrust.org.uk/scotland/Publications2/Energy-efficiency/SHIMMER-Smart-Homes-Integrating-Meters-Money-Energy-Research

22 November 2011

Written evidence submitted by the Local Government Association

1. Summary

1.1 The feed-in tariffs (FITs) are an essential financial tool for councils to allow them to support solar energyschemes for public buildings and for their lowest income communities, because they mean the council cancover their costs.

1.2 Any additional income raised by the FITs was to be reinvested into further local community initiatives,such as further energy efficiency programmes.

1.3 The handling of the consultation has had a significant impact on local government finances, and mayend up costing local taxpayers money. Of the councils that have made representation to the LGA, the majorityare axing their schemes.

1.4 Council-led schemes mean that our lowest income and vulnerable residents, who are paying for the FITsprogramme but are unable to benefit without intervention, could have some advantage from the scheme.Council-led schemes are also installing solar panels on public buildings, reducing the cost to the local taxpayerfor energy and increasing the visibility of renewable energy sources, helping improve public awareness andacceptability, and providing an educational resource.

1.5 Where councils have borrowed in order to deliver local solar energy schemes that meet the outcomes setout above, the pace of the change has put councils at financial risk. Collectively this is in the order of hundredsof millions of pounds.

1.6 The LGA signed a Memorandum of Understanding with Department of Energy and Climate Change(DECC), which was intended to develop a partnership between central and local government on tacklingclimate change. This included a commitment from DECC to consider the impact to councils of any changes inpolicy. The LGA has received no materials relating to a consideration of the impact on councils from theproposed changes to the solar FITs.

1.7 The LGA recognises that the FITs rates for solar power needed to be reduced, but the manner in whichthis has been carried out that has damaged local confidence.

2. Introduction

2.1 The Local Government Association (LGA) is a voluntary membership organisation with 422 memberauthorities covering every part of England and Wales, and includes county and district councils, metropolitanand unitary councils, London boroughs, Welsh unitary councils, fire, police, national park and passengertransport authorities.

2.2 The LGA lobbies and campaigns for changes in policy, legislation and funding on behalf of our membercouncils and the people and communities they serve. Together they represent over 50 million people and spendaround £113 billion a year on local services.

2.3 The LGA has had significant representation from councils on the consultation seeking to change theFITs for solar energy. In our response to the consultation we will be asking the Government to:

2.3.1 Extend the proposed deadline for projects to qualify for the existing tariff from 12 Decemberto the end of the financial year, and to work with councils and the solar industry to establish atimescale for the future rate of degression.

2.3.2 Enable a higher feed-in tariff to be available for schemes that can demonstrate a communitybenefit, including council-led schemes.



2.3.3 Remove the additional reduction that applies for the owner of multiple systems for communitybased schemes.

2.3.4 Investigate the option of raising the budget cap placed on the scheme.

2.4 To reflect the representation that the LGA has had from councils across the country and across thepolitical spectrum, this submission will include quotes and information gathered directly from our memberauthorities.

3. Impact of the Solar PV Feed-in Tariffs

3.1 Solar PV feed-in tariffs have brought the issue of climate change, renewable energy and energy efficiencyup the agenda of the local government sector. Arguably more effective than performance target-setting, theFITs have made investment in solar energy on public buildings and for local low-income groups pay for itselfand where possible raise finance for re-investment in the local community. It has engaged the decision-makersin local government on renewable energy and climate change.

3.2 The FITs were presented to councils as the “only good news story” at a time of reductions to councilbudgets. Councils were told that while their core finances were being restricted, the FITs would be a newinnovative financing mechanism that would allow councils to help contribute to meeting the Government’srenewable and CO2 targets and also raise revenue.

3.3 In good faith, the LGA even undertook a joint press release with DECC, “town halls as powerhouses ofthe future”, encouraging councils to install renewable energy. This was picked up in many nationalnewspapers.5

3.4 Councils have been installing solar PV in ways that benefit the local community, including installationson sheltered housing, social housing, libraries, swimming pools, public buildings, schools, etc.

4. Factors to consider in setting the Feed-in Tariffs

4.1 Community benefit and re-investment

4.1.1 The LGA wants to see councils receiving either a higher FITs rate, or for councils to be exemptfrom the additional 20% reduction for multiple schemes, as part of the “demonstrable community benefit”being proposed.

4.1.2 Council-led schemes provide community benefit by:

4.1.2.1 Enabling those who cannot afford PV, but pay for the FITs on their bills, to benefit fromsolar panels;

4.1.2.2 Enabling social housing tenants to have free electricity, helping to maximise their income;

4.1.2.3 Reducing bills—Warrington Council had expected to help their residents vulnerable to fuelpoverty save up to £190 per year (based on average current energy costs and average housesize) on their energy bills;

4.1.2.4 Providing an educational resource. In Northumberland, the county council has employed aqualified teacher to work specifically with schools getting PV under the council’s programmeto maximise the learning opportunities associated with installation of renewables and the widercontext of energy saving / climate change;

4.1.2.5 Reducing their own energy bills and the cost to local taxpayers;

4.1.2.6 Reinvesting into other local schemes, particularly energy efficiency programmes.

4.1.3 We assert that the Government has not examined in enough detail the costs to council-led and socialhousing schemes to justify the reduction in FITs, and particularly not the additional 20% reduction.

4.1.4 There are several up-front and on-going costs that schemes on public buildings and social housingneed to consider, in addition to the cost of the solar “kit”. These include:

4.1.4.1 Maintenance costs;

4.1.4.2 Community-engagement costs;

4.1.4.3 Improvements to roofing materials;

4.1.4.4 Costs being applied by District Network Operators (DNOs) to connect to the Grid, to ascertainthe effect on the Grid of the solar panels, and to upgrade the Grid. We have been informed thatone company is charging £250 per post code for the analysis and then additional costs if theydetermine an upgrade to the grid is required.

4.1.4.5 Planning costs;

4.1.4.6 Legal costs.5 http://www.independent.co.uk/environment/green-living/councils-to-sell-electricity-to-the-national-grid-in-green-initiative-

2044814.html



4.1.5 We believe the Return on Investment (ROI) figures being heralded by Government are also notrepresentative of council-led schemes. Whilst local schemes vary, their payback period for a scheme (withoutthe use of borrowing) has been in the region of 6—12 years. The shorter timescales are usually for publicbuildings, where the council, and therefore local council taxpayers, benefit from the lower energy bills. Thelonger timescales are for social housing projects, where the tenants rightly claim the benefit of having lowerenergy bills. The latest estimates for payback periods are now in the region of 12 years for a scheme on apublic building and 20 + years for social housing schemes, making most of these not financially viable.

4.1.6 The payback figures used here usually exclude cleaning, inverter replacement and the cost ofborrowing. As a commercial proposition based on Public Works Loan Board (PWLB) rates the payback onmany council buildings is still around or beyond the life of the asset.

4.1.7 Councils, such as Eastbourne Borough Council, have expressed to the LGA how concerned they areabout how they communicate the change, and the possible cancellation of schemes, to their community.

4.1.8 The FITs should not be viewed in isolation from other Government-backed schemes. For example,Dover Council was using the FITs to support a local Community Energy Saving Programme (CESP) scheme.A pilot project to fit 250 social homes was supporting the CESP funding for private sector and social homesin the Lower Super Output Area of St Radigunds and £2.2 million of CESP funding. Unfortunately, thereduction in FITs will mean that this scheme will probably not proceed.

4.1.9 The FITs for solar were also providing councils with a springboard for more ambitious localenvironmental projects with community benefit. For example, Bristol City Council has been planning to set upa municipal energy services company with technical assistance of a total value of £2.5 million from theEuropean Investment Bank, and has been developing proposals over the last year to deliver an investmentprogramme of a total value of £300 million in Bristol and the surrounding area. As the case in many otherEuropean countries, the energy services company is designed to be owned by local residents and to develop,implement and finance several energy efficiency and renewable energy projects, using the stream of incomefrom the energy savings and renewable energy to meet the financing and operating costs. The project is agood example for improving energy security and reducing fuel poverty in the city, creating new employmentopportunities and reducing the city’s carbon emissions.

4.1.10 Banks are only willing to invest in large-scale investment programmes e.g. £70–100 million. Thesuggested review of the feed-in-tariff will probably result in Bristol not being able to reach this threshold andthe necessary economies of scale. Bristol may have to abandon its locally-led plan for a large scale energyefficiency and renewable energy investment programme, which could also lead to a massive knock-on effectin terms of the implementation of the Green Deal and the wider energy agenda at the local level.

4.2 Additional behaviour change

4.2.1 Councils have reported that solar panels have enabled them to start the conversation with their localpeople about energy and climate change.

4.2.2 For example, Warrington Borough Council said that “in particular, our programme of social housingsolar gave tenants the opportunity to have a solar PV system that would provide them with free power. Wehave only recently started rolling out this programme, however we are finding early indications that the PVwas a sufficient incentive for them to start to engage with us on energy efficiency. Many of these tenants arevery hard to reach and in many cases we have not been able to engage them on these issues previously.”

5. The Consultation and the Impact on Councils

5.1 The most significant impact that the consultation has had on councils is the announcement of the 12December cut-off date. This timetable is totally unreasonable for local public sector organisations that havebeen diligently developing their schemes, to adapt to or change course. Many will have to scrap their schemesat a cost to local taxpayers.

5.2 The timetable is unreasonable because:

5.2.1 Councils have to undergo a democratic decision making process;

5.2.2 Councils work in partnership with multiple agencies, including community groups andvolunteers;

5.2.3 Councils have to act responsibly and go through the appropriate procurement and legalprocedures;

5.2.4 Councils are unable to secure District Network Operator (DNO) approval for their schemes in6 weeks. Even applications that were in before the announcement of the consultation will notbe able to make this timetable. The DNO has 45 working days (9 weeks) to respond to anapplication to connect to the electricity grid. The information they require is detailed, includingthe MPAN number for each property.

5.2.5 Councils are unable to secure planning permission within 6 weeks. Even applications madebefore the announcement of the consultation will not be able to meet this timetable. Forexample, Cambridge City Council submitted planning applications in mid-October, but with a



usual timeframe of 8 weeks for approval, this does not give them enough time for installation.The additional DNO timeframe of 9 weeks has led to this project being shelved.

5.3 The actual reduction in FITs would not have as serious an impact if it were introduced in the new financialyear. Councils were expecting an announcement on degression and had developed their local investment plansaccordingly, but did not think the government would do this before the end of the financial year.

5.4 In particular, the additional 20% reduction for multiple schemes will make any social housing schemesvery unlikely. As set out earlier, the Government has not considered the costs that councils take on to ensuretheir social housing tenants can benefit from solar energy. It is misguided to want the FITs to be for singleinstallation owner-occupiers, when all householders are paying for it on their energy bills. Tenants on lowerincomes will suffer the most from the proposed changes.

6. The Green Deal

6.1 The Green Deal is the Government’s flagship environmental programme, aimed at improving the energyefficiency of homes and businesses across the country. Councils were expressing significant interest in theGreen Deal, and an enthusiasm to support this Government initiative. However, councils have said to the LGAthat the conduct of DECC in this consultation has undermined their confidence and trust in the Green Deal andother DECC-led initiatives. Councils have been positioning themselves as partners to central government onthe climate change agenda, leading on from the Memorandum of Understanding on Climate Change (section9). The announcements on the FITs is destabilising this partnership approach.

7. Fuel Poverty

7.1 We accept that the FITs as currently developed places an additional cost onto the bills of householders,and that this needs to be managed responsibly. As such, we support the Government in its review of the feed-in tariffs, but the timescale, severity of reduction and the additional 20% for multiple schemes will mean thatlower income groups, who are most likely to be experiencing fuel poverty, and who cannot afford the upfrontcapital, will now continue to pay for FITs on their bills but will be unable to benefit from the initiative.

7.2 Councils were viewing their solar programmes as fuel poverty initiatives because it lowered theelectricity bills of their tenants, reducing the overall proportion of their income spent on their energy bill, andalso because it was a “springboard” for energy efficiency programmes.

7.3 The budget cuts to councils have put pressure on local energy efficiency programmes that seek to supportthe Government’s wider goals on carbon reduction and fuel poverty. Councils were looking to their solarprogrammes to help financially support their fuel poverty and energy efficiency programmes, at a time whenno other funding is being made available.

7.4 It is difficult to convince people to install energy efficiency measures. People are much more interestedin solar energy, which can provide an opportunity to improve the whole property.

8. The Low Carbon Economy and Jobs

8.1 Councils are acutely aware about local unemployment and are seeking to support local job creation.They are extremely concerned about the effect of this change to, what was an emerging job creation market.Warrington has expressed its concern to the LGA for the businesses longevity of over 150 companies withsolar MCS registration within 20 miles of Warrington.

8.2 The solar industry is an important growth market, and if it is able to continue, it will provide many goodquality jobs in the UK and keep us at the forefront of technology development.

9. The Memorandum of Understanding (MoU)

9.1 On 16 March 2011, the Secretary of State for DECC signed a MoU with the Local Government Group(LGA), setting out a partnership agreement between the two organisations.

9.2 The LGA is disappointed that DECC has not publically made any recognition of the investment madeby councils to develop local renewable energy programmes.

9.3 The way the consultation has been conducted has led to councils with contracts that cannot be viablydelivered and programmes benefitting some of our most vulnerable residents that cannot now be completed.

9.4 Councils have said to the LGA that they no longer have confidence in initiatives that emerge fromDECC, and that it will be very difficult to engage decision makers climate change programmes, and particularlydifficult to persuade them to invest.

9.5 Much debate was had recently as the Energy Bill was taken through the parliamentary process about therole of councils on climate change and energy. Councils are being asked to act, but the tools to enable them todo so are being taken away with little warning, undermining their local strategies, investment and good will.

24 November 2011



Written evidence submitted by Ofgem

Inquiry into Solar PV Feed-in Tariffs

Thank you for your letter of 3 November 2011. You asked for information from Ofgem to assist with yourjoint inquiry with the Energy and Climate Change Committee into Solar PV Feed-in Tariffs (FITs). I haveprovided responses to your four questions below.

1. Ofgem’s role(s) in regards to Feed-in Tariffs, how Ofgem works with DECC on Feed-in Tariffs, includingOfgem’s role in the Government’s ongoing review

Response: Our administration of the scheme falls into three main areas: providing and maintaining a CentralFITs Register for suppliers to register all FITs installations (and also fraud prevention activity); accreditationof all stations over 50kW capacity and all AD and hydro stations; overseeing supplier compliance and carryingout levelisation.

The other parties involved in the administration of the scheme and their roles are as follows:

— Specific licensed electricity suppliers (FITs Licensees) are responsible for the front-facing role ofaccepting new installations under the scheme and making payments.

— Energy Saving Trust and Carbon Trust provide advice for domestic householders and businessesrespectively.

— Gemserv/MCS are responsible for approving PV and wind installations with a capacity of 50KW orunder and all eligible micro-CHP installations for the scheme with a capacity of 2kW or under.

Ofgem has monthly meetings with DECC to discuss the FITs scheme. Ofgem provides feedback to DECCon the administration of the scheme and any issues arising from this; on their part DECC provides inputon policy intent and future policy changes. This informs improvements to the scheme usually by means oflegislative changes.

An example of where DECC and Ofgem have worked together is to provide further clarification on thetreatment of grants and state aid under the scheme. This culminated in the first Amendment Order to FITs inMay 2011.

Ofgem has been in regular discussion with DECC since the Comprehensive Review consultation waspublished. We have provided our opinions about the options proposed by this. We have also seconded staff ona part-time basis to DECC, to provide readily on the spot advice and contribution to discussions on the impactof the proposals on the administration of the scheme.

2. Ofgem’s assessment of the solar energy market, in the context of the renewable energy market and theimpact Feed-in Tariffs have had to date.

Response: Ofgem’s role is the administration of certain aspects of the Feed-in Tariff scheme as described inthe response to question one above. Our role and expertise does not extend to an assessment of the solar energymarket and therefore we are unable to respond to this question. However, we do publish a quarterly newsletterwhich provides the up-take of feed-in tariffs and gives trends and analysis of numbers of installations, installedrenewable capacity and also a breakdown of these figures by technology and geographical location.

3. Ofgem’s perspective on the factors that should be considered when setting the rate of the Solar PV Feed-inTariff, including a target rate of return that should be delivered to investors in solar energy

Response: Ofgem’s role is the administration of certain aspects of the Feed-in Tariffs scheme as describedin the response to question one above. We also have a primary duty to protect the interests of current andfuture consumers and, as with other government schemes, note the need for government to strike a balancebetween the impacts on different consumer groups. Our role and expertise does not extend to an assessment ofrate of returns for the scheme and therefore we are unable to respond to this question.

4. The elements of a residential consumer’s electricity bill and their proportions, including the impact ofFeed-in Tariffs on energy bills, and if possible, split by technology type (i.e. technologies eligible for Feed-inTariffs)

Response: Ofgem published a factsheet in January of this year, which showed that 10% of an electricity billand 4% of a gas bill was made up of environmental costs. A copy of this can be viewed at the link below:

http://www.ofgem.gov.uk/Media/FactSheets/Documents1/updatedhouseholdbillsjan11.pdf

As it was the first year of the FITs scheme the cost of the scheme for 2010–11 was £14.4 million. Based on26.3 million domestic customers, and domestic supply representing 38% of total electricity supply, this wouldhave added approximately 21 pence to a domestic consumer’s annual electricity bill for 2010–11. However,the number of installations has increased markedly from about 30,000 at the end of March 2011 to over 100,000at the date of this letter. So the cost of the scheme will be much higher in this year and subsequent years.



I believe DECC have done some projections of the future cost of the scheme and I would suggest youcontact them for further information.

24 November 2011

Written evidence submitted by Freetricity plc

(1) The drastic cut in the Solar PV FIT scheme will result in

— Up to 25,000 job cuts, Freetricity alone has created around 400 new jobs(office, surveyor, architectsinstall teams, electricians, roofers, scaffolders etc) and was to create many more. Our subcontractedinstallers have already started laying people off and we have cancelled all new hirings.

— Serious financial issues for many companies who have invested risk capital under contracts throughto April 2012 on the back of the government commitment. “Grandfathering” obligations has noteven been considered.

— Curtail drastically the overall ability of the UK to produce its own clean energy and reduce itsreliance on fossil fuels

— Through new technology shortly to be introduced seriously undermine the enablement of microgeneration storage (every home and business being a micro power station) thus reducing dependenceon large scale and foreign owned energy plants. Freetricity will introduce this world leadingtechnology in 2 years time.

— bring the governments commitment to a “green agenda” into question

— Stop new major private sector investment into other new green technologies(eg air sourced andground based heat pumps) when it is perceived that the government cannot be trusted to honourits comittments.

(2) The figures on which the cut are based are fundamentally flawed

— The claim that Solar panel prices have reduced by 70% is based on a Bloomberg estimated figurefrom early 2008 to date. The FIT scheme commenced in April 10. Actual panel prices have reducedby around 36–38% in the FIT period. The only Uk/Irish manufacter of panels Dimplex can confirm.

— The cost of installing a Solar PV system is made up of only 40% equipment, the rest is labour whichhas not reduced in cost.

— The “budget” is not central government expenditure as suggested by politicians but merelyreallocation over energy bills and this “budget” could easily be increased to support jobs and cleanenergy. The cost to delay the tariff change to April would amount to little more than £1 on allenergy bills.

(3) The proposal to reduce the tariff by ano 20% for “free solar” and to add energy efficiency criteria wefApril 2012 will hit the poorest households the hardest

— Freetricity marketing of “free” and paid for solar (7300 applications in October 2011) produces99.8% applications for the free option.

— Most households other than upper middle class larger houses do not have the available cash topurchase a system or pay for energy efficiency measures

— An 18 year pay back and 4.5% return under the proposed new tariff is not attractive enough topersuade even the rich to pay for a system and there is no debt finance available

— Any continuation of the installation of solar PV will only work for large houses/businesses in thesouth of the Uk who least need this technology.

Suggestions

— Delay the current cut until preferably April but at least until after the review is completed

— Take steps to increase the FIT budget now at least for up to 30KW systems which will helpthose who most need it eg households and small community buildings.

— Plan for a phased reduction with ample warning to the industry to allow business planning andcertainty so that a world class industry can be built from the new SME’s in the market as wasdone by the Germans over 4 years and who are now leading the world in Solar PV exportingall over Europe the Far East and USA.

24 November 2011



Written evidence submitted by Which?

Introduction

1. Which? is an independent, not-for-profit consumer organisation with around 1.3 million subscribers andis the largest consumer organisation in Europe. Which? is independent of Government and industry, and isfunded through the sale of Which? consumer magazines, online services and books. Which?’s mission is tomake individuals as powerful as the organisations they have to deal with in their daily lives by empoweringthem to make informed decisions and by campaigning to make people’s lives fairer, simpler and safer.

2. The cost of energy is consumers’ number one financial concern. As households face gas and electricitybill increases of 18% this winter, Which? launched the Affordable Energy Campaign in September to press forchanges to the energy market so that consumers spend as little as possible on energy. The campaign aims tohelp people to buy the cheapest energy they can; to stop hidden or rip off energy costs; and to help people touse less energy.

Summary

Which? agrees with the need for tariff reductions

— The high returns from small-scale solar have led to too rapid market expansion, with our investigationrevealing problems with quality of advice.

— The key issue for Which? is limiting the impact that solar PV will have on electricity bills. Ourresearch has found that energy prices are consumers’ number one financial concern. And around sixmillion UK households are already in fuel poverty.

— Although the impact per electricity bill is believed to be low at present—£1.40 in 2011, the costs toconsumers are escalating quickly.

— Under the “do nothing” scenario this increases to around £12 in 2015 and £26 in 2020 (£135over the period). Under DECC’s proposals that reduces to £2.50 to £2.90 in 2015 and £2.60 to£3.20 in 2020.

— Payments are for 25 years therefore lifetime costs are significant—amounting under the “donothing” scenario to the huge (and excessive) sum of £42 billion, reducing to £4.4—£5.5 billionunder the proposals.

— Cutting the rates will reduce the subsidy from people who cannot afford solar panels or who cannotbenefit from the scheme due to the type of property they live in, but we recognise that socialhousing and community schemes have benefitted from FIT. An analysis of its impact on fuel povertyis needed.

— We recommend that DECC also consider reducing the tariff lifetime for solar PV from 25 years to15 to 20 years to further reduce the lifetime cost.

But the tariff reductions must be carried out in a much fairer way

— The 12 December deadline means people rushing to meet it could end up disappointed. It is especiallyunfair on households who had already signed contracts and paid deposits at the date of DECC’sannouncement. They must be protected and given the higher rate which they were expecting.

— At a minimum, DECC should reframe this “reference date” so that it excludes consumers who hadalready signed contracts at the date of the announcement.

— The proposal is also unfair on consumers who have already started the process but not yet signedcontracts. Putting back the reference date until February 2012 would help these households. It wouldalso mean the reference date would be after the end of the consultation, as it should be. The currentproposals also give businesses too little time to plan and adjust to the changes.

— The proposed energy efficiency requirements go too far. Requiring an EPC Level C rating or thetaking out of the Green Deal are both unreasonable and disproportionate.

Better evidence is needed on the impact of solar PV on behaviour change

— In 2010 solar PV generated a fraction of one per cent of UK electricity from renewable sources, andeven less of total UK electricity. It remains an expensive technology in terms of achieving carbonand energy saving too.

— DECC needs to present evidence on the impact on energy behaviour by households who installmicrogeneration technologies to justify the often cited assertion that microgeneration encouragespeople to change their behaviour and use less energy. The current evidence we are aware of isinsufficient.

— Forty per cent of consumers who had installed microgen said they would not have gone aheadhad FITs not been available. How motivated they would be to reduce energy usage is debatable.



— Having two separate consultations is not helpful to assess the cost-effectiveness of FIT across alltechnologies. Which? considers that proportionately more support should be allocated to technologiesthat give most “bang for their buck”.

— Which? consider it is appropriate that the FIT budget is capped, that costs are kept under tight controland that cost-effectiveness is closely reviewed, including through the Phase 2 consultation.

Theme (a): Impact to date of Solar PV Feed-in Tariffs and the state of the solar energy market

3. The Feed in Tariff has driven rapid (probably too rapid) market expansion in solar PV and has helpedbring costs down for consumers installing solar panels. DECC’s consultation estimates that the capital cost ofinstalling a typical 2.6 KW system has come down from £13,000 at the launch of the scheme to £9,000 now.6

4. The Which? magazine undercover investigation earlier this year7 into the quality of advice given bysolar PV companies found issues with the quality of advice. Posing as customers, we asked 12 certifiedcompanies to survey a house and quote for installing a solar PV system. Key findings included:

— Seven companies didn’t take into account the fact that part of the roof was in the shade, so puttingsolar panels there was questionable;

— Using the government methodology, eight companies underestimated the time it would take for thesystem to pay for itself

— Two companies offered discounts in a way that breached the industry code.

5. We cannot make firm, national conclusions on the basis of this single investigation. But, commenting forus, the Chief Executive of the Energy Saving Trust said that the worrying results from our investigation werenot entirely unexpected.8 His view was that the rapid growth has placed the market under pressure, with thesupply chain scrambling to keep up and stretching the capabilities of the Microgeneration Certification Schemeand REAL Assurance to safeguard the consumer against poor installation and customer service. He alsohighlighted the variable quality of training and the consumer calls to Energy Saving Trust advice centres abouthigh-pressure sales from installers.

6. Which supports microgeneration in principle but for installations to be worth the investment and worthsubsidy from peoples’ energy bills, what is needed is better quality advice and information for consumers,robust accreditation and enforcement of standards and cost-effectiveness of the FIT and RHI.

Theme (b): The balance between affordability and delivering the objectives of the Solar PV Feed-in Tariffs,including factors to consider when setting the rate of small-scale Feed-in Tariffs including jobs created,emissions reductions and energy-saving behavioural change

The need for a cost-effective FIT

7. Microgeneration must not be supported through public subsidy at any cost. Subsidies through the FIT(energy bills) and RHI (taxation) must be reasonable and proportionate, and deliver on their objectives in acost-effective way. Which? has argued for much greater clarity on what the objectives of FIT are, whether tocontribute to EU renewable targets, to generate energy and improve security of supply, to save energy andcarbon or to reduce energy bills.

8. Which? agrees with the objective of the FIT review to ensure value for money for consumers, taking amore responsible and efficient approach to public subsidy.

— In April 2011 we responded to DECC’s call for evidence on the comprehensive review of FIT. Wehighlighted the need to measure and assess the impact of the FIT on energy bills and keep thisunder control.9

— In May 2011 we supported cuts to large scale solar schemes primarily because without themconsumers would be facing much higher bills in the future.10

A reduction in solar small-scale PV rates is reasonable

9. We agree with the principle of making reductions to the solar PV tariff rate for small-scale solar, althoughwe are not in the position to say whether 21p per KWh is the appropriate rate. The financial rate of return isfar in excess of the interest rates on savings accounts and bonds, for example. It has led to high cross-subsidy(in terms of the amount received per installation and in aggregate) from all consumers including those peoplewho cannot afford to pay for solar panels. Which? is concerned at the future impact on bills and therefore6 See Table 3 of DECC Impact Assessment dated 2 November 2011. At http://www.decc.gov.uk/assets/decc/11/consultation/fits-

comp-review-p1/3416-fits-IA-solar-pv-draft.pdf7 Solar electricity investigation, Which? Magazine July 2011.8 Renewable Energy Installers need help to up their game, guest post by Philip Sellwood on Which? Conversation, 23 June 2011

http://conversation.which.co.uk/energy-home/renewable-energy-installers-energy-saving-trust/9 Which? submission to DECC on the FIT Comprehensive Review 12 April 2011 http://www.which.co.uk/documents/pdf/first-

review-of-feed-in-tariffs-which-response-252501.pdf10 Which? consultation response to Fast Track FIT Review 6 May 2011 http://www.which.co.uk/documents/pdf/review-of-feed-in-

tariffs-for-small-scale-low-carbon-electricity-which-response-252922.pdf



supports the need for tariff cuts (see Theme (d) below). But this must be done in a fairer and more orderlyway than DECC proposes (see Theme (c) below).

10. Another reason for reducing the tariff rate is that installation costs have come down significantly thereforethis enables the rate of return originally aimed for to be maintained. DECC continues to aim for a 5% rate ofreturn for well-sited installations (4.5% for small-scale solar).11

Microgeneration technologies remain costly and subsidy must be tightly controlled

11. The Committee on Climate Change (CCC) stated in its report in May 201112 that “given the currenthigh costs, it is appropriate that solar PV, and microgeneration more generally, makes only a very limitedcontribution to achieving the UK’s 2020 renewable energy target. Significantly increasing ambition formicrogeneration technologies would escalate associated costs considerably”.

12. The CCC report did not give a view on what that contribution should be and nor has the Governmentset out what role microgeneration should play towards meeting the 2020 target. When launching the FIT theprevious Government estimated the FIT would deliver around 1.6% of final electricity consumption in 2020.13

But the UK Renewable Energy Roadmap (July 2011) did not identify solar PV as one of eight technologieswhich have either the greatest potential to help the UK meet the 2020 target in a cost-effective and sustainableway, or offer great potential for decades to follow. Up-to-date solar PV projections are needed from DECC.

The benefits of solar PV must be evaluated carefully and not overstated

13. The contribution of all renewables to UK electricity generation was 6.8% in 2010, and, of this renewablegeneration, solar PV (at all scales, not just domestic) generated only 33 out of the 25,734 GWh electricity fromrenewable sources,14 i.e. 0.0012%. Its contribution to total UK electricity generation was even smaller still.As a percentage of installed generation capacity it was 0.8% from 76.9 MW in 2010. Even allowing for thesignificant increases seen in 2011 (with registered capacity at September 2011 as 255 MW, and DECCestimating over 400 MW installed), the contribution of solar PV to electricity generation and security of supplyis still negligible.

14. Solar PV is also one of the most expensive energy generation technologies, even at the less costly non-domestic scale.15 At the launch of the FIT it was recognised that the scheme would be a very expensive wayof saving carbon too, and at an estimated £460t/CO2 significantly more expensive than carbon abatement underthe EU Emissions Trading Scheme.16 This will now have reduced somewhat with the falls in costs but willstill be high.

15. For consumers who install them, solar PV systems are still expensive, with a typical installation costing£9,000 according to DECC’s consultation. Most households cannot afford this sum of money, and manyproperties are unsuitable for solar PV, such as flats or houses with north-facing roofs. We recognise some fuelpoor households have benefited from community and social housing schemes, and DECC should include ananalysis and evaluation in the Review of how many such schemes have benefitted from the FIT. Many of theseconsumers have had solar panels installed through “rent a roof” or free solar schemes under which they get nobenefit from the FIT because the company takes all the FIT income. Which? has been calling for these schemesto be required to be fairer, such as through sharing FIT income with the occupier.

16. Those who can afford the panels could save more on their energy bills by installing insulation. Forexample, cavity wall insulation can save up to £135 a year17 at a cost of £0 to £350. The EST estimates atypical solar PV system could save £90 a year on electricity bills but the amount of saving depends on manyfactors, and DECC has estimated £140 a year.18 We consider that DECC’s Review of FIT must include a fullassessment of actual savings achieved on energy bills in homes from solar PV and other technologies.11 Paragraph 41 of DECC’s Consultation Document: Feed in Tariffs scheme: consultation on Comprehensive Review Phase 1—

tariffs for solar PV, October 2011.12 The Renewable Energy Review, the Committee on Climate Change, May 2011. http://hmccc.s3.amazonaws.com/

Renewables%20Review/The%20renewable%20energy%20review_Printout.pdf13 Impact Assessment of Feed in Tariffs for Small-scale, Low Carbon, Electricity Generation. DECC 1 February 2010.14 See DUKES Energy Statistics 2011 Table 7.4 Capacity of, and electricity generated from,

renewable sources http://www.decc.gov.uk/assets/decc/11/stats/publications/dukes/2309-dukes-2011-chapter-7-renewable-sources.pdf and https://restats.decc.gov.uk/cms/assets/Uploads/Regional-Statistics_2010/Regional-spreadsheets-2010v1.xls

15 See for example Figure 4 of the UK Renewable Energy Roadmap at http://www.decc.gov.uk/assets/decc/11/meeting-energy-demand/renewable-energy/2167-uk-renewable-energy-roadmap.pdf. Solar PV is by far the most expensive of the technologieslisted in terms of £/MWh (estimated levelised cost ranges in 2010).

16 See footnote 7 above. The period covered for the FIT is 2010 to 2030. £460/tCO2 compares with an estimated £57-£75/tCO2for the RHI and £115 for the RO: see Greg Barker response to Parliamentary Questions Hansard 21 October 2010.

17 Energy Saving Trust estimate http://www.energysavingtrust.org.uk/In-your-home/Roofs-floors-walls-and-windows/Cavity-wall-insulation

18 Such as the amount of energy generated (influenced e.g. by location and orientation) and energy usage patterns: households athome during the day will save more on their bills than those who are out during the day. Not all the energy generated will beused, the rest will be exported to the grid. Energy Saving Trust estimate for a typical 2.9KWh systemhttp://www.energysavingtrust.org.uk/Generate-your-own-energy/Financial-incentives/Feed-In-Tariffs-scheme-FITs DECCestimate from press release of 1 February 2010.



17. Without FIT subsidy, the simple payback period on solar PV could be around 100 years (on currentenergy prices, assuming a typical cost of £9,000, and the £90 annual bill saving from above) although this willvary considerably. By contrast, loft or cavity wall insulation can often pay back in less than 3 years and evensolid wall insulation can payback in around 12 to 27 years.19

18. We recognise that some consumers, such as households off the gas grid, can get greater benefits frommicrogeneration. The FIT has benefited many social housing and community schemes too and can have fuelpoverty benefits for those who have panels on their homes. We recognise that the FIT has created many jobstoo, and the changes should have been made in a fairer way to give businesses more time to plan and adjustto them. Yet the inescapable fact remains that the FIT takes money from everyone’s bills, including the fuelpoor. DECC must include an evaluation of the impact of the FIT on fuel poverty in its Review.

Better evidence is needed on the impact of solar PV on energy usage behaviour

19. Which? also believes that better evidence is needed to measure the impact on energy behaviour byhouseholds who install microgeneration technologies. A key justification for microgeneration that is often citedis that it is a way of engaging the public (households and communities) in their energy use and behaviour andencouraging them to reduce their energy consumption. The argument goes that solar panels may be veryexpensive and so cannot be justified on economic grounds but there are these wider engagement benefits.

20. However, the evidence for this appears to be largely anecdotal. Forty per cent of consumers who hadinstalled microgen said they would not have gone ahead had FITs not been available,20 suggesting that thefinancial income is the key driver for many. How motivated they would be to reduce energy usage is debatable.Although there is some evidence of a beneficial effect from solar PV microgenerator behaviour,21 we considerthere is a serious lack of solid, empirical evidence and we would like to see DECC’s Phase 2 Consultationaddress this issue. This would enable policymakers to be better able to continue to justify subsidy from people’selectricity bills for FIT. Yet, even with very strong evidence here, microgen remains an expensive way toengage people and contribute to reduction in energy bills. It will still be necessary to weigh up how muchmoney should be allocated to FIT versus the RHI or energy efficiency programmes, which are alternative waysof supporting jobs and tackling fuel poverty.

Theme (c): The way in which the Government has managed the Solar PV Feed-in Tariff, the impact this hashad to date, including the management of the Consultation

Lack of procedural fairness

21. Although we support the principle of reducing the tariff rates, we think that the proposed way of doingthis is unfair to many consumers. Consumers and installers should have been given more notice of changes toenable them to plan for the change and to readjust. We appreciate that DECC is in a difficult position as theFIT budget is running out quickly due to much higher than anticipated demand. We have two main concerns.

22. First, that by rushing forward the effective cut-off date to 12 December at only six weeks’ notice, thiscreates a surge in demand which has many adverse impacts on consumers and businesses including:

— To be eligible for the higher rate of tariff, installations do not just need to be installed, but they mustbe registered with the Microgeneration Certification Scheme (MCS) and the paperwork must havebeen sent to the electricity company by 12 December. Given the likely rush, bottlenecks in thesystem must be a concern with an increased risk that many systems do not get registered in time.

— Which? is recommending to consumers that they must be very aware of this risk, and not rely oninstaller promises that may not be met. We recommend that people do their research and do not rushto panic buy.

— Even if installers do their best to complete by then, there is the risk of bad winter weather that wouldput a stop to roof installation work.

— As well as giving companies the opportunity to put up prices in this period it offers mis-sellingopportunities to unscrupulous companies. There must be vigilant monitoring and enforcement of therules in this period by REAL, MCS, the certification bodies and UKAS.

23. Second, rushing this through is particularly unfair on householders who have already signed contractsand paid deposits for solar PV panels. Applying DECC’s estimate of average cost of a typical system, ahouseholder would have paid out the significant sum of £9,000 in the expectation of getting the current FITrate. Any consumers who knew about the possibility of future cuts would have expected this to happen inApril 2012, not December 2011.19 EST estimates for solid wall insulation at http://www.energysavingtrust.org.uk/In-your-home/Roofs-floors-walls-and-windows/

Solid-wall-insulation20 DECC and EST consumer research referred to in Chapter 4 of DECC’s Microgeneration Strategy June 2011.21 For example, Good Energy recently conducted a survey of its small-scale renewable generators. 65% said they had changed

their consumption pattern to match their behaviour and nearly 55% claimed to have reduced their energy consumption (The linkbetween microgeneration and energy usage, October 2011). However, we consider that it is important to be able to measureenergy usage “before” and “after”—and preferably in a way which removes results being skewed by people knowing theirmeters are being monitored—to show the exact extent of behavioural change and to ensure there are not differences betweenactual and claimed behaviour.



24. Shortly before the announcement, Which? conducted a straw poll of solar installers on the Which? Localwebsite (which helps Which? members find recommended traders in their area) on their level of activity. Nearlyall reported a big increase in demand in recent months. Some had a waiting list and some were already bookedup into January or February. Given the widely reported high levels of activity since the announcement theremust be real difficulties for many consumers in meeting the 12 December date.

What needs to change to make the proposals fairer

25. Which? has urged DECC to change the proposals to ensure that all consumers who have already signedcontracts or committed to installations at the time of the announcement are protected by getting the higher rate,regardless of whether their system is registered by 12 December. We have written to the Minister, Greg Barker,about this.

26. At a minimum, DECC should reframe this “reference date” so that it excludes consumers who hadalready signed contracts at the date of the announcement (or possibly even shortly thereafter). If they havesigned contracts and are beyond the seven working day cooling off period they may well not be able to cancelthe contract even though they could end up getting a return which is significantly less than they bargained for.

27. The proposal is also unfair on those consumers who have already started the installation process (butnot yet committed to a contract or signed a deposit) or have started their research in planning to get a systeminstalled before April 2012. Putting back the reference date until February 2012 (recognising DECC need toeffect changes earlier than April 2012 due to budgetary reasons) would give these households more time. Itwould mean the reference date would be after the end of the consultation and give time to consider theconsultation responses. Which? does not understand how a consultation can consult legitimately on a proposeddate (12 December) which is before the end of the consultation (23 December) (see Theme (d) below).

28. Either of these changes would of course result in a higher level of FIT payments. Yet DECC’s ImpactAssessment estimates there would be little difference in terms of impact on bills from bringing in the cuts inApril 2012 compared to December 2011. It would reduce the impact per bill by £0.40—£1.20 in 2012 and by£0.10—£1.60 in 2020.

The proposed energy efficiency requirements go too far

29. Our advice to consumers looking to reduce their energy bills is energy efficiency first, thenmicrogeneration. We support too the principle of linking of receipt of microgeneration subsidy withrequirements for energy efficiency standards. However, we disagree with key aspects of DECC’s proposals.

30. It is proposed that from April 2012 people who install solar panels would have to demonstrate that theirhome meets a certain level of energy efficiency. If they are not able to demonstrate this, they will get a muchlower tariff of 9p per Kwh (ie rather than 21 p per Kwh). There are two routes:

— To show that their home’s energy rating is at least an Energy Performance Certificate (EPC) ratingof band C. Only 9% of houses (excluding flats) in England are C or above22 and DECC estimatesthat a typical house could require an investment of up to £5,600 in energy efficiency measures tomeet this rating; or

— Or to undertake all the measures that are identified on an EPC as potentially eligible for Green Dealfinance. DECC’s view is that the Green Deal will deal with the barrier of upfront costs.

31. Which? is considering the detail of these proposals and will respond to DECC with our consideredviews. It might be reasonable to require installation of cavity wall insulation if you live in a home withuninsulated cavity walls, or to install loft insulation (or top up loft insulation) if you do not have it already.But we think that going much beyond this, as the proposals do, is disproportionate.

32. We assume that part of DECC’s reason for proposing such high requirements is to dampen down FITactivity deliberately. But we think it is better to define the standards according to what is reasonable andproportionate to meet the objectives of FIT, including as regards the burden on consumers. There is much lessneed for stringent energy efficiency measures to ensure the FIT (electricity-generating measures) delivers valuefor money than there is for the Renewable Heat Incentive (heat-generating technologies). With the RHI, heatgenerated using public subsidy (taxation) will literally be disappearing out of the roof or walls if they are notinsulated properly. This is not generally the case with the FIT. Insulation is essential to ensure the value ofheat, it is not for electricity unless the householder is using electrical heating.

33. The EPC Level C proposal is unnecessarily and disproportionately stringent. A £5,600 cost for a typicalhouse is clearly excessive. In many cases, it would be more. The Energy Saving Trust has estimated thatexpensive to treat homes in the EPC F and G bracket would cost £5,000 to £9,500 to bring up just to LevelE.23 Many solid walled homes would need solid wall insulation to bring them up to Level C which could cost£5,500 to £13,000.24 DECC’s proposals penalise those in older properties.22 English Housing Survey 2009 as referred to in para 47 of DECC’s Impact Assessment. http://www.decc.gov.uk/assets/decc/11/

consultation/fits-comp-review-p1/3416-fits-IA-solar-pv-draft.pdf23 F and G banded homes in Great Britain—Research into costs of treatment, EST, June 2010.24 See Energy Saving Trust estimates at http://www.energysavingtrust.org.uk/In-your-home/Roofs-floors-walls-and-windows/Solid-

wall-insulation



34. Nor do we consider it appropriate that people should be required to take out the Green Deal. This is acomplex, long-term finance product which may not be appropriate or attractive to many people. Forcing peopleto take this out to be able to benefit from the FIT is, again, disproportionate. It is market-based and consumerswill need to pay a market rate of interest. The Green Deal is still in development and many questions remainunanswered over what it will look like, what measures it will cover and how much it will appeal to consumers.The voluminous Green Deal consultation has been issued today.

Theme (d): Affordability of Solar Photovoltaic energy versus other renewable energy (given the overall levy-funded cap for energy bills) and the impact of Feed-in Tariffs on energy bills

Which? agrees the impact on electricity bills must be reduced

35. This is the critical issue for Which? Our research has found that energy prices are consumers’ numberone financial concern25 and that was before the recent round of hefty price rises by all the big energy suppliers.

36. The current impact on electricity bills of the FIT is currently believed by DECC to be small (althoughthere is no mechanism to measure costs passed through to consumers, see below). However, this impact isescalating quickly and is projected to reach around £12 in 2015 and £26 in 2020 for the average domesticelectricity bill. This would reduce to £2.50 to £2.90 in 2015 and £2.60 to £3.20 in 2020 under DECC’sproposals.

Impact on

average

domestic bill

(£/year), 2010£

undiscounted

Do

nothing

Option 2

without

Efficiency

requirement

Option 2 with

efficiency

requirement

Option 3

without

energy

efficiency

requirement

Option 3 with

energy

efficiency

requirement

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

1.40

3.90

6.70

9.30

11.90

14.70

17.50

20.30

23.20

25.80

1.40

2.30

2.70

2.80

2.90

3.00

3.00

3.10

3.20

3.20

1.40

2.30

2.60 to 2.70

2.60 to 2.80

2.50 to 2.90

2.50 to 3.00

2.50 to 3.00

2.60 to 3.10

2.60 to 3.20

2.60 to 3.20

1.40

2.90

3.50

3.70

3.70

3.80

3.90

4.00

4.10

4.20

1.40

2.90

3.30 to 3.50

3.30 to 3.70

3.30 to 3.70

3.30 to 3.80

3.30 to 3.90

3.30 to 4.00

3.30 to 4.10

3.30 to 4.20

Table 17: Estimated Impact on Domestic Bills

Source: DECC’s Impact Assessment, page 25.26

37. Although the current impact is small, the cumulative cost per household to 2020 is £135. The total,committed liability households will have to bear is much greater because the FIT payments are guaranteed(and index-linked) for 25 years. Therefore there are significant benefits to consumers in taking action now toreduce the tariff:

— The total cost to consumers in 2014/15 would be £790 million in the “do nothing” scenario, reducingto £200 to £230 million in the proposals (at discounted prices, £320 to £350 m at nominal,undiscounted prices);

— The lifetime cost to consumers of the “do nothing” scenario would be £42 billion, reducing to £4.4to £5.5 billion under the proposals.27

38. £42 billion is a considerable sum and an excessive amount to support a technology that will have minimalimpact on UK security of supply and which is a comparatively expensive way to generate energy, save carbonand reduce energy bills. Therefore we support cost reductions and for there to continue to be a tight cap onFIT spending.

39. Which? considers there are additional reasons for taking a more cautious and responsible approach tothis consumer subsidy:25 Which? survey of 1,298 adults, weighted to be representative, in June 2011. 89% of consumers were worried about energy

prices, more even than for food prices, future tax levels or the value of my pension.26 http://www.decc.gov.uk/assets/decc/11/consultation/fits-comp-review-p1/3416-fits-IA-solar-pv-draft.pdf Note this table only

covers solar PV, not the other FIT technologies. The upper end of range for options with energy efficiency requirement is forGreen-Deal linked measure. Lower end is for EPC Level C requirement.

27 2011 prices, discounted to 2011. See Tables 7, 10 and 11 and para 78 of DECC Impact Assessment. http://www.decc.gov.uk/assets/decc/11/consultation/fits-comp-review-p1/3416-fits-IA-solar-pv-draft.pdf



— In the current economic climate even a small impact on energy bills needs to be scrutinised carefully.

— It is not known what costs suppliers pass through nor how eg whether some categories of consumerpay more than others. Suppliers are currently free to choose how they do this. Which? continues tocall for a mechanism to measure rather than estimate cost pass through.

— Any projections of take-up and costs are uncertain.

— It is not known how much domestic consumers are paying for the FIT as compared with businesscustomers. This must be rectified.

Consider reducing the tariff lifetime

40. As well as reducing tariff rates, we also recommend that DECC consider reducing the tariff lifetime forsolar PV from 25 years to say 15 to 20 years for solar PV. That would tie in more or less with the expectedpayback period (around 17–18 years, more or less depending on location and other factors). After the paybackperiod generators would be getting the advantage of lower electricity bills but not the extra profit from theadditional years.

41. This would mean that lifetime costs for all consumers subsidising the scheme would be much lower.This could considerably reduce the overall costs of the FIT and should make the FIT fairer in terms of reducingcross-subsidy from those who cannot afford solar panels. Given that few people remain in a property foranything like 25 years, and you cannot take the FIT with you, this should not have too much impact onconsumer investment decisions. We recommend that DECC consider this in the wider Phase 2 consultation.

Cost-effectiveness of solar PV vs other renewable technologies

42. We consider that proportionately more support should be allocated to technologies that give most “bangfor their buck” but it is impossible to assess this without seeing costs and benefits of technologies compared.We hope these issues will be covered in Phase 2 of DECC’s consultation but having two separate consultationsmakes it much more difficult to address the FIT holistically.

Theme (e): Experience of similar incentive mechanisms for renewables in other countries

43. We have no comment on this theme, other than to state that other European countries have also cut theirfeed in tariff subsidy rates.

23 November 2011

Written evidence submitted by the Micropower Council

Summary:

— The Micropower Council welcomes the opportunity to contribute to this Inquiry.

— The Micropower Council (MPC) is a cross-industry body whose membership comprises of electricityand gas companies, manufacturers, trade associations, professional bodies, non-governmentalorganisations and charities in the microgeneration sector. We provide the microgeneration industry’smain focal point for Government, regulators, Parliament, opinion formers and the general public onregulation and public policy issues affecting the production by consumers of their own sustainableheat and power.

— It is important to ensure that the Feed in Tariff (FIT) scheme is affordable and that tariffs are set atthe right level to incentivise take-up, but not so high that excessive returns are achieved. At the sametime, it is crucial that growth is maintained and that industry is able to build on the progress madeso far. A 5% rate of return for private household installations and a 7–8% rate of return for aggregatedand non-domestic installations would be sufficient.

— The sequence and timing of the consultation process has triggered real concern, particularly relatingto the 12th December “reference date”. A fair and reasonable consultation process where theproposals themselves do not prejudice the outcome of the consultation or affect decisions that aremade during the consultation period is crucial in terms of rebuilding investor confidence in thissector in the UK.

Response on Areas of Specific Interest to the Committee:

Impact to date of Solar PV FITs

1. The FIT has brought about a dramatic change in the market for small scale solar PV. During the firsteighteen months of the FIT scheme, over 3,000 companies have been registered to deliver FIT eligibletechnologies and 25,000 much needed jobs have also been created. These include high-tech manufacturing jobsbut also significant numbers of installation jobs across the country. This supply chain development andaccumulation of knowledge, skills and experience in installing low carbon technologies into homes will bevital to successful future delivery of sustainable energy policy objectives at the domestic level.



2. The FIT has also stimulated roll out of solar PV in a variety of settings. Social housing providers andlocal authorities have been able to develop innovative delivery models installing solar PV on homes to helpdeliver energy bill savings to lower income households. Private householders have had the option of investingdirectly in solar PV, which has become an economically viable investment thanks to the FIT, whilst thosewithout access to upfront capital have been able to access the technology via “Free Solar” models.

3. The Ofgem FITs Register shows that total quarterly solar PV installations have steadily risen since thestart of the scheme, from 2,699 in the first quarter up to 14,536 in the fifth quarter.28

Fulfilling the Objectives of the FIT Scheme

4. The original stated objectives of the FIT scheme were to encourage deployment of additional small-scale,low-carbon electricity generation, particularly by organisations, businesses, communities and individuals thathave not traditionally engaged in the electricity market. Up until now, the small scale solar PV FIT has madea considerable contribution to achieving this objective by stimulating development of new business models andbringing the benefits of the technology to a wide variety of householders, from privately owned homes tosocial housing tenants.

5. The basis for recalibrating tariffs is to deliver a 4.5% rate of return for <4kW installations and a 5% rateof return for other scales, according to DECC models. DECC also considers that a multi-installation rate at80% of the proposed standard tariffs for individual installations is justified in view of the “economies of scaleassociated with aggregated projects”—although the proposal is not to implement these until April 2012.

Private householder tariffs

6. It is important to ensure that the FIT scheme is affordable and that tariffs are set at the right level toincentivise take-up, but not so high that excessive returns are achieved. It is recognised that rates of return forprivate householders could withstand some fine tuning although a 4.5% rate of return is generally consideredto be too severe. A 5% rate of return is deemed adequate to represent a reasonably attractive investmentopportunity for householders and continue to stimulate uptake.

Tariffs for aggregated installations

7. The research by DECC consultants into “Aggregators’’ estimates that the costs of aggregated models aremuch lower than those for private individual installations. DECC is therefore proposing an ‘‘Aggregator Tariff’’set at 80% of the tariff for individual installations from 1 April 2012.

8. The rise of aggregated models, commonly referred to as “free solar”, has been a significant driving forcein the transformation of the market for small scale solar PV. A lack of upfront capital has always been one ofthe most significant barriers to adoption of microgeneration technologies, including solar PV, and aggregatedmodels have made it possible for these households to benefit from solar PV and reduce their energy billswithout needing to commit significant sums of money at the outset.

9. Micropower Council members do not agree that the cost-base for domestic “Free Solar” is substantiallylower than that of the individual householder. Companies operating “free solar” models must locate, identifyand work with potential customers for each installation. This work inevitably includes multiple contacts withthe customer, site specific assessment, geographic diversity and legal checks such as ensuring the customeractually has rights over the property. Furthermore, capital must be accessed at commercial rates addingadditional cost into the equation.

10. A 7–8% rate of return will be essential in order for households to continue to benefit from “free solar”offerings or for solar PV installation to continue to be viable in the social housing sector. This would enable areduction in the target rate of return without extinguishing growth and depriving numerous households of theopportunity to benefit from solar PV.

Management of the FIT scheme

Timing and sequence of the consultation process

11. The timing and sequence of the consultation process on Phase One of the Comprehensive Review hasprovoked real concern within the industry. The solar industry expected a cut in tariff levels from 1 April oreven before if, as was often stated by DECC Ministers, “the review of feed in tariffs called for greater urgency”.They did not expect one of the options upon which the Government was consulting to pre-empt the outcomeof the consultation. Government asks for the views of stakeholders on the 12 December “reference date” whilstobliging many stakeholders to take important business decisions before the end of the consultation period onthe basis that this proposal will indeed be implemented.

12. A fair and reasonable consultation process follows a clearly defined linear sequence with proposals beingmade, a set period of time allowed for stakeholders to respond and a reasonable delay factored in for the28 http://www.ofgem.gov.uk/Sustainability/Environment/FITs/Newsletter/Documents1/Feed-

in%20Tariff%20%28FIT%29%20Update%20Newsletter%20Issue%205.pdf



responses to be fully considered before a final decision is announced. In this instance, the consultation processhas effectively predetermined the outcome.

13. Members have also indicated that the 12 December “reference date” is unreasonable as it allowsinadequate time for industry to adjust to the changes. A longer implementation period—even if changes wereto take effect in advance of 1 April—would allow companies the time to honour existing contracts and factorrevised tariff levels into their business planning and processes.

14. Despite frequent references in Parliament to the need to protect consumer energy bills, one analysis (seebelow) from a member company indicates that by cutting tariffs now, rather than on April 1, DECC estimatesa saving that would equate to £0.60 on the average annual electricity bill. Longer term, the impact of even a“Do Nothing” approach would have been only around £22 on the average bill in 2020. In view of this, theaction proposed in the consultation document would appear to be disproportionate to the scale of the threat,especially in terms of the wider repercussions of these proposals that are already affecting many in the sector.

OPTION 1—DO NOTHING

2011–12 2012–13 2013–14 2014–15 2020–21

Solar PV Uptake GWh29 290 970 1650 2480 12300Costs to consumers £m30 110 360 570 790 2140Cost on average household bill 1.10 3.61 5.72 7.93 21.48(£)31

OPTION 2—LOWER TARIFFS EARLY WITH ENERGY EFFICIENCY (LEAD SCENARIO)

2011–12 2012–13 2013–14 2014–15 2020–21

Solar PV Uptake GWh 270 560–620 570–740 590–890 800–2100Costs to consumers £m 110 205 210 215 235Cost on average household bill 1.10 2.06 2.11 2.16 2.36(£)

OPTION 3—LOWER TARIFFS FROM 1 APRIL WITH ENERGY EFFICIENCY

2011–12 2012–13 2013–14 2014–15 2020–21

Solar PV Uptake GWh 290 710 790 885 1750

Costs to consumers £m 110 265 270 275 305Cost on average household bill 1.10 2.66 2.71 2.76 3.06(£)

23 November 2011

Written evidence submitted by Llangattock Green Valleys

1. Introduction—Llangattock Green Valleys

Llangattock Green Valleys CIC is a community interest company based in the rural Welsh village ofLlangattock in the heart of the Brecon Beacons National Park. Llangattock is a relatively small communitynumbers wise—around 420 homes and some 1,300 residents.

With our journey starting back in September 2008 as a loose collection of residents who shared a broadvision of creating a cleaner, greener, more sustainable future for our community. Today that vision is becominga reality with our principal objective being to establish Llangattock as a Carbon Negative Community by 2015.

By sharing knowledge, forging innovative partnerships and encouraging the whole village to get involved ina range of ambitious projects that are already making a real difference. 2011 has brought about us wining theBritish Gas Green Streets competition as well as reaching out of the village boundaries to a far wider audiencewith our Renewables Buying Club that includes solar PV.

Central to our ethos is our belief that while grants and funding are a great way to get things going, weshouldn’t rely on them. To become truly sustainable we need to apply sound business principles and find waysto generate income. Right now, we’re on track to generate significant revenue and be non grant dependentby 2013.

Basically, we believe we have a choice: we can wait for “someone” to come up with a solution to dwindlingoil stocks, economic stagnation, climate change, sustainability, restoring back pride and well being into29 Sourced from DECC Impact Assessment30 Sourced from DECC Impact Assessment31 HomeSun Calculation—Assumes UK electricity consumption of 328 TWh, average household annual consumption of 3,300

kWh



communities. Or we can start doing something ourselves. We think that developing long-term strategies locallymakes the most sense, because it means we’ll get the solutions that will work for our community.

We are of the firm belief that our destiny is not being written for us but by us. Together we can makeLlangattock and the surrounding area an area that can and is already inspiring many more communities tobring about the much needed change and begin to believe that the impossible is possible.

2. Proposed Tariff Level

(a) Residential (<4kWp)

The proposed tariff level for residential solar PV is pitched correctly in our view presents residential adoptersof solar PV installations with an attractive return compared to money on deposits with the downward trend ininstallations costs continuing. Whilst we are seeing that return on investment is a primary decision driver foradopters of solar PV. Adopters are wanting to reduce their electricity bills, as well as reducing their carbonfootprint and contributing towards their community’s carbon reduction goal.

It must be noted that adopters of solar PV whose intentions due to lack of capital availability and are directedtowards interest free loans as a method of funding their proposed solar PV will now find that they will needto make a far greater contribution towards the repayments of the interest free loan due to the reduced FiTpayments. We are already seeing evidence of reluctance to take up the interest free loans as affordability willnot allow the potential adopter of solar PV installations to make up the increased shortfall from their monthlyhousehold income to cover the interest free loan repayments.

(b) Commercial (>4kWp to <50kWp)

Aside from the interest free loan comment made in 2(a), our view on the proposed tariff level for commercialsolar PV schemes is as the residential view expressed above.

(c) Community Energy Projects (>4kWp to 50kWp)

The proposed solar PV FiT tariff level of 16.8p for 4–10kWp and 15.2p for 10–50kWp installations preventsus from deploying our funded model. As an example, the funded model allows us to mature solar PV schemeson school and community hall roof spaces with those organisations having little if no prospect in maturingsolar PV schemes on their roof spaces due to lack of capital. This is now on hold due to the proposedtariff levels.

Given the proposed rates, we strongly recommend the Government look at providing genuine CommunityEnergy schemes with a Community Energy FiT premium of:

— 4–10kWp providing a 8.2p Community Energy tariff premium to take overall FiT to 25p.

— 10–50kWp proving a 5.8p Community Energy tariff premium to take overall FiT to 21p.

As it stands, as an example based on the proposed tariff levels by the Government we would need to beinstalling solar PV schemes (10–50kWp) for £1,300 per installed kWp. Whilst in time the solar PV industrywill achieve this installation price of £1,300 per installed kWp. We are currently not there and are in need ofan enhanced FiT tariff for Community Energy schemes in order to mature the schemes. Allowing recipientorganisations to benefit from lower electricity bills and energy efficiency measures but also the widercommunity over the medium to long term having financial support for further renewable schemes along withenvironmental and suitability projects from the profits from the solar PV schemes.

Whilst the list below should not be viewed as definitive, it is very much a starting point in Governmentunderstanding what types of organisation should be eligible for a Community Energy FiT tariff premium:

— Community Interest Company (CIC).

— Registered Charities.

— Cooperative Societies.

— Wholly owned trading subsidiaries of Community Interest Company (CIC) and Registered Charities.

— Companies limited by guarantee.

Housing Associations and Community Trust are not mentioned above because are not legal forms as suchbut could in practice could use one of the legal structures above.

The Comprehensive Review considers that “the coalition Government is committed to ensuring that as manypeople as possible are encouraged to consider local low-carbon solutions and are able to benefit from thefunding available”. We urge the government to look at this in another way than has previously been the case.Whilst we have seen positive steps made through the fast track FiT review into solar PV schemes of >50kWpin the summer 2011 and reduced the demand for solar PV parks. The intentions to limit the rent-a-roof industrythrough the multi Installation tariff rates for aggregated solar PV is one we support but needs furtherconsideration as Community Energy including housing associations and social housing schemes will beadversely affected when Governments intentions are to prevent FiTs going to the few when they should bedistributed to a far wider adopter base.



3. Eligibility Date for Current Tariff Level

We believe that given the uptake of solar PV over 2011 coupled with the unprecedented growing demand inrecent months. The likelihood if the Government hadn’t stepped in when they did would be that of not onlywould the spending cap being exceed for this current financial year but future years of solar FiT paymentswould have been severely jeopardised. The industry highlighted to Government only six months ago thatintervention was needed with a reduction in the FiT tariff level needed to prevent a bubble from appearing inthe solar PV market which we currently have.

What must be brought into question is how the Government has gone about giving the solar PV industryjust six weeks (31 October 2011—11 December 2011) for installations to be installed if they are to receive thecurrent FiT tariff level for the next 25 years.

Any extension to the 12 December 2011 deadline we believe will only protract what are at the very leastdifficult market conditions for installers/community organisation to install solar PV schemes due to severeshortages of panels, inverters and mounting systems which has had a knock on effect to the prices withinstallers having to pay premiums to secure what little stock is available with a number of installers/communityorganisation just throwing the towel in as they cannot secure stock to fulfil their planned installations.

4. Multi Installation Tariff Rates for Aggregated Solar PV

This we believe has been brought about to quell the rent-a-roof industry but with the same brush hastarnished the community energy sector with the rent-a-roof schemes. It must be noted that we are not againstrent-a-roof schemes in principle where they benefit customers who are in fuel poverty and have come as awelcome boost for example with social housing organisations and local authorities especially in areas ofdeprivation.

But as no doubt the Government is fully aware there have been organisations that include the big six energycompanies that have marketed their rent-a-roof schemes on the basis of the electricity savings but have not beforthcoming and demonstrating what they will get out of it financially throughout the life of the FiT (25 Years).

Sadly this has allowed a number of organisations to profiteer from such schemes lining the pockets of thefew when the FiT is and should be there to allow as many adopters of solar PV as possible with the FiT beingdistributed as wide as possible maximising the benefits. What we have seen is a run on the FiT pot in the firstinstance with the Solar Parks (which the fast track review into >50kWp market quelled but came too late asthe pot had already been milked) and the rent-a -roof organisations.

Having a multi installation tariff rate for aggregated solar PV schemes is just plainly kicking the communityenergy sector when they are already on the floor following the proposals through the Comprehensive Review(Phase 1) having already had the knife stuck in our backs by Government and twisted by a cut in feed in tarifffor 4–10kWp and 10–50kWp schemes that is disproportionate to the actual reduction in the costs of solarPV installations.

Community Energy schemes must be given an exemption to the multi installation tariff rates for aggregatedsolar PV if we are too get our funded models to deploy to the organisations that are in most need for solar PVand the associated benefits that go hand in hand.

5. EPC Certificates

We would prefer an EPC target but this assumes that the EPC model is able to cope with multiple sourcesof heat, voltage optimisation etc. Which it currently cannot do. We are also concerned that there needs to besome modification of the model to enable rural buildings and older buildings in conservation area, nationalParks and/or with listing to partake in the scheme as these buildings frequently struggle to raise their EPCscore and are prevented from installing many of the measures by planning regulations but also have owners infuel poverty. In particular we note there is a fetish in the scheme for solid wall insulation which in our case isnot economic or aesthetically possible on stone buildings in a National park.

We believe there is adequate scope within most buildings to improve their thermal scores which togetherwith PV will make a major contribution but this needs more modelling.

6. Cost Control Mechanisms

We fully support the Governments consideration on contingent degression and more frequent/rolling reviews(which we would add would have prevented the current situation we are faced with with the 12 December2011 deadline).

We cannot support the Government’s third consideration of rationing/quotas are we believe this is arestriction of trade and organisations that are showing entrepreneurism in maturing multiply Community Energyschemes will be effectively penalised for showing entrepreneurism. This would not only restrict theorganisations promoting and delivering Community Energy schemes but the recipient organisations that arehaving solar PV installations.



7. Conclusion

In conclusion it must be seen that the current debate that is going around the UK regarding the subject foradditional support for Community Energy schemes is one that can only boost the profile of this vibrant drivenand motivated sector and will allow government to take seriously the proposition that the sector not only offerstheir own communities, regions and countries but also in being a seriously contributor to the government inmeeting its targets going forward with Community Energy projects being the catalyst for greater things tocome within communities.

24 November 2011

Written evidence submitted by EDF Energy

Summary Points

1. EDF Energy supports Government’s review of FIT and the need to reduce tariffs in line with falling costsof PV panels and to keep within the agreed budget cap set out by the comprehensive spending review. Therate of return should be adjusted so that it is commensurate with the originally intended 5% return to achievethe level of sustainable growth outlined in the FIT consultation of 2009.

2. In the interests of all consumers, we believe that subsidies should be applied to direct investment to themost cost-effective deployment of renewable technologies to bring them to market and to enable sustainablegrowth. Subsidies should be phased out over time as technologies mature and innovations bring costs down tocreate a level playing field for all low carbon technologies.

3. EDF Energy believes that while micro-electricity generation technologies can play a role as part of adiverse energy mix, in general they are an expensive way of reducing carbon emissions relative to large-scalerenewables and other low carbon generation. There are cost effective deployment opportunities for renewableheat, for example, through heat pumps.

4. However, we have concerns over the way that the review has been instigated and, in particular, thatchanges are due to be brought in before the consultation period has ended. This sets an unwelcome precedentfor policy and regulation, and brings uncertainty which is harmful for investment in all low carbon projects.However, the negative impacts of the current announcement are unlikely to be reversed and so, to provideclarity for all parties, we do not believe there is any merit in adjusting the date to bring in the proposedchanges. Any future announcements should consider these wider impacts.

5. While we appreciate the urgent nature of the review, it is important that any changes to the scheme aremanaged effectively to provide a stable and transparent process for all scheme participants, particularly theconsumer. As mandatory FIT licensees, we require clear visibility of changes, including dates forimplementation and sufficient lead times to prepare resources to successfully manage customer enquiries andapplications on what is already a complex scheme.

6. In the future, DECC should work with industry to develop a more stable method of cost control, forexample, by using volume-based triggers for degression of tariff rates. To help this, there needs to be greaterclarity on the rules of the scheme for registering installations and the correct documentation required to receivethe FIT payments, and on the responsibilities of all parties involved to prevent bottlenecks. A more transparentand effective registration process would provide DECC with greater visibility of actual uptake to help preventthe need for emergency reviews when the budget is placed under pressure or is already oversubscribed.

Introduction

7. EDF Energy is one of the UK’s largest energy companies with activities throughout the energy chain. Ourinterests include nuclear, renewable, coal and gas-fired electricity generation, combined heat and power,electricity networks and energy supply to end users. We have over five million electricity and gas customeraccounts in the UK, including both residential and business users.

8. EDF Energy has been offering solar PV products to residential customers as part of its EcoRenew rangesince 2008. Since the launch of EcoRenew EDF Energy has experienced a huge increase in the demand forsolar PV, initially fuelled by the government’s Low Carbon Buildings Programme (LCBP), and more recently,due to the introduction of the FIT scheme.

9. EDF Energy is also a mandatory FIT licensee, managing applications and enquiries for registeringinstallations up to 50kW and making FIT payments. We are also required to undertake site visits to validateclaims, facilitate switching and to detect, report and prevent fraudulent activities.



Response to Specific Questions

(a) Impact to date of Solar PV Feed-in Tariffs and the state of the solar energy market

10. Since the scheme began in April 2010, the Feed-in Tariff has achieved a much greater than expecteduptake of Solar PV, with over 250MW of PV installations registered for FIT as at September 2011.32 Thisgrowth has been coupled with a reduction in the costs of PV panels, both in the UK and globally. We agreewith DECC’s33 estimate that there has been a reduction in costs of at least 30% since 2008 and that tariffsshould be adjusted to achieve a rate of return of around 5% as originally set out in the Feed-In Tariffconsultation in 2009.

11. Since August, as mandatory FIT licensees, we have experienced a high volume of applications for FIT(c 400–500 applications per week). The volume of applications and customer enquiries have risen considerablysince the consultation on the review of solar PV tariffs was announced on 31 October. There have already beensignificant challenges in terms of managing applications, with delays caused due to incomplete informationbeing provided on forms as a result of poor advice being given to customers at the point of installation, whichis outside of our control as a mandatory FIT licensee.

12. As licensees, we are obliged to follow a prescribed process to deal with applications, and are not ableto speed up or simplify procedures at the request of our customers. The process will be put under additionalpressure due to the rush of applications from customers before the cut off date of 12 December and uncertaintyover the final future scheme arrangements, which are subject to the outcomes of the consultation. This tighttimescale also creates considerable constraints on our resources, with insufficient time to train and put in placeextra staff with the relevant expertise to manage the additional enquiries.

(b) The balance between affordability and delivering the objectives of the Solar PV Feed-in-Tariffs, includingfactors to consider when setting the rate of small-scale Feed-In Tariffs including jobs created, emissionsreductions and energy saving behavioural change

13. In terms of the costs of carbon abatement, micro-electricity generation technologies are in general a veryexpensive way of reducing carbon emissions relative to large-scale renewables and other low carbon generation.Nevertheless, we recognise a role for microgeneration and decentralised energy, particularly for renewable heatthrough heat pumps, to achieve the UK’s long term carbon reduction objectives.

14. Tariff levels should encourage growth in eligible technologies, to allow supply chains and industries todevelop in a sustainable way. When setting tariffs levels and reviewing these, the Government must considerthe overall costs of the scheme and impacts on bills. Therefore, in the wider interest of achieving a balancebetween affordability and climate change objectives, we support Government’s aims to reduce costs to keepwithin the budget envelope allocated for FITs and to adjust tariffs to provide a rate of return that is in line withthe original expectations for the scheme of a return of 5%.

15. However, Government should also set out a more predictable approach to future changes in the scheme,that incorporates cost control and a clear approach to tariff degression reflecting falls in the requirements forsubsidies as technologies develop and mature. In this way, industry would be provided with a clearer frameworkto build a sustainable industry, jobs and growth for the longer term, and avoid short term cycles of boomand bust.

16. In terms of energy efficiency, when we responded to the original FIT consultation in 2009, we agreedwith Government that the structure of FIT should be designed to encourage the efficient use of electricity andthat additional compliance on energy efficiency is not required. Nevertheless, we recognise the need to reducecosts and stabilise the roll out of FIT and believe that encouraging energy efficiency measures may be helpfulin this regard.

17. However, it is important that this is applied in a simple way and should not add further complexity forcustomers or other parties involved in the scheme, especially licensees who face additional administrationcosts. There should be clarity on the dates for when energy efficiency measures are required to apply for FITs,ideally with one date, rather than phasing in requirements as it is currently proposed.

18. We believe the current proposals to require an Energy Performance Certificate (EPC) rating of C or thatthe householder installs all identified Green Deal measures before applying for a FIT is unlikely to work inpractice. If a rating of C were to be applied, this would exclude c 80% of current homes from accessing thetariff. We therefore believe that it is more reasonable to propose a rating of D or E and a requirement thatbasic measures such as loft and cavity wall insulation have been installed, as is the case for the RenewableHeat Incentive Premium Payment (RHPP).

19. The Green Deal measures and the assessment procedures are subject to the outcomes of consultation,and so making this part of the FIT application process at this stage could be misleading for consumers. Wetherefore believe that the EPC rating would be a more workable solution, but this is dependent on whether FITlicensees will have access to centralised information on EPCs to perform this test or whether a customer32 Ofgem, Feed-in Tariff installation report 30 September 2011.33 DECC: Feed-In Tariffs scheme: consultation on Comprehensive Review Phase 1—tariffs for solar PV, 31 October 2011.



declaration can be used to satisfy this requirement as is the case for the RHPP. It will not be possible orreasonable for suppliers to carry out onsite checks on EPCs at the householder level.

20. We agree with DECC that there should be a reduction in the rate received by those with multipleinstallations. However, we believe that in practice, this will be difficult to administer and it should not createadditional compliance or administrative burdens on FIT licensees. Suppliers do not have information on FITcustomers to accurately track those with multiple installations. In order to be workable, the MicrogenerationCertification Scheme (MCS) and Ofgem should develop the means to record registration numbers for multipleinstallations in the central FIT database so that this data can simply be accessed by FIT licensees to processpayments.


21. EDF Energy supports the need to review the FIT and to reduce costs to keep within the budget envelopeas set out in the comprehensive spending review. It is in the interest of fairness for all consumers that FITtariffs remain in line with the original rates of return of 5%.

22. However, we have concerns over the way that the review has been instigated and that changes are dueto be bought into effect before the consultation period has ended. This sets an unwelcome precedent for policyand regulation, and brings uncertainty which is harmful for investment in all low carbon projects. However,the negative impacts of the current announcement are unlikely to be reversed and so, to provide clarity for allparties, we do not believe there is any merit in adjusting the date to bring in the proposed changes. Any futureannouncements should consider these wider impacts.

23. While we appreciate the urgent nature of the review, it is important that any changes to the scheme aremanaged effectively to provide a stable and transparent process for all scheme participants, particularly theconsumer. As mandatory FIT licensees, we require clear visibility of changes, and it is imperative that licenseesunderstand timescales and have sufficient time to successfully prepare and test the necessary systems andprocesses, train staff and produce clear and accurate customer literature and advice.

24. FIT is a complex scheme to communicate to customers. Customers consider suppliers as FIT licenseesas a point of contact on all aspects of the scheme, even the parts which are not within our control, such aschecks and information provided on the point of installation and fraud prevention and detection. In terms ofthe proposals in the current consultation, we require clarity on the final scheme arrangements and the dateswhen final decisions will be announced in order to clearly communicate the facts to FIT customers.

25. In the future, DECC should work with industry to develop a more predictable method of cost control,for example, by using volume-based triggers for degression of tariff rates. To help this, there needs to begreater clarity on the rules of the scheme for registering installations and the correct documentation requiredto receive the FIT payments, and on the responsibilities of all parties involved. A more transparent and effectiveregistration process would provide DECC with greater visibility of actual uptake to help prevent the need foremergency reviews when the budget is placed under pressure or is already oversubscribed.

(d) Affordability of Solar Photovoltaic energy versus other renewable energy (given the overall levy-fundedcap for energy bills) and the impact of Feed-in Tariffs on energy bills

26. It is important that the review of FITs is part of a wider consideration of the proposals for supporting otherrenewable technologies, including large-scale technologies in the Renewables Obligation Banding Review. Thiswill be key to ensuring the UK moves forward in achieving its climate change and renewables targets in a waythat achieves the right balance between affordability and environmental objectives, while providing sustainablegrowth for UK jobs and industries involved.

27. EDF Energy supports the use of subsidies for emerging renewable technologies to meet climate changemitigation objectives. However, these subsidies should reduce as technologies develop and mature and thereshould be a clear date for phasing out subsidies. Subsidies for renewables should be structured in a way thatdoes not disincentivise investment in other forms of lower cost low carbon generation. In the longer term, alllow carbon technologies should compete on a level playing field without subsidy, underpinned by a firm-longterm carbon price.

28. In the context of DECC’s recognition of the need to revisit costs of renewable subsidies in the ROBanding Review 2013–17, EDF Energy supports the proposals to keep the level of ROC support for Solar PVat 2ROC/MWh. We support DECC in its view that setting a band at anything above the level of RO supportfor the marginal technology (offshore wind) for meeting the UK’s 2020 target would not provide value formoney for the consumer.

29. In terms of the emergency review of large-scale solar PV (250kW–5MW) conducted earlier in the year,the 8.5p/kWh generation tariff is broadly consistent with the RO banding proposals.

30. EDF Energy believes that subsidies should direct investment to the most cost effective renewable energytechnologies and that costs should be compared across electricity, heat and transport. We believe that there aresignificant opportunities for the cost effective opportunities to deploy renewable heat through heat pumps.



31. In its response to the Renewable Heat Incentive (RHI) consultation in 201034, Ofgem stated theimportance of cost effective subsidies and compared the relative lifetime carbon abatement costs of the FIT(£460/t CO2), RHI (£57 /t CO2 traded and £75 /t CO2 non-traded sector) and RO (£101/t CO2) schemes. Thesefigures illustrate the favourability of supporting the development of renewable heat for carbon abatement interms of comparative cost-effectiveness. We would welcome an updated assessment and analysis of thesefigures as renewable schemes are developed and reviewed to ensure value for money for consumers.

(e) Experience of similar incentive mechanisms for renewables in other countries

32. FIT schemes have been implemented in many European countries and have achieved considerablesuccess in increasing the installed capacity of renewable technologies such as solar PV. In turn, we havealso seen a significant step reduction in the costs of PV in recent years, with the expectation that costs willfall further.

33. However, while not arguing with the success of FIT as an instrument to drive the deployment ofrenewable technology capacity, particularly at the small scale, there have been questions over the costeffectiveness of this approach relative to adopting larger scale renewable and low carbon technologies andactual production of energy.35

34. It is essential therefore that the UK develops a sustainable approach and learns from the experience ofother FIT schemes. Countries such as Spain and the Czech Republic have experienced stop-starts and runawaycosts, where the speed to adjust subsidies has not matched falls in installation costs. This is particularlynoticeable where rates had initially been set at an unsustainably high level which has then led to subsequentneed for dramatic cuts and retrospective changes to tariff levels, which can have a significant impact onconsumer confidence. The German model where tariff degression is triggered by capacity levels appears tohave some benefits of predictability, while being able to react rapidly to the falling costs and could beinvestigated further.

35. Government and industry should work together to create a more stable and transparent system of costcontrol to reflect falls in costs, for example by using volume based degression, and by providing greatervisibility for all parties on the rules for applying for FIT to get a better grasp on accurate levels of uptake sothat the budget available for these schemes can be managed more effectively.

24 November 2011

Written evidence submitted by Regen SW

Thank you for your opportunity to input to this inquiry. Please find below our response and attached ourreport on the benefits of microgeneration on which it is based.

1. Regen SW is a leading centre of sustainable energy expertise and pioneering project delivery. We enablebusiness, local authorities, community groups and other organisations to deliver renewable energy and energyefficiency and build a prosperous low-carbon economy. Regen SW has over 180 members, from installers tomanufacturers, consultancies and local authorities.

2. This evidence is based on the attached report36 which uses Regen SW’s knowledge base and links to theindustry and stakeholders in the south west to look at the evidence of the benefits that microgeneration,supported by the Feed-in Tariff has brought to date.

3. The Feed-in Tariff was brought in with a remarkable degree of political consensus behind the premise ofa shift towards decentralised energy. For example David Cameron wrote in the foreword to the Conservative’s2007 paper “Power to the People”: “I want Britain to adopt microgeneration: small providers, includinghomes and businesses, producing energy for their own use, using a variety of methods from CHP to wind tophotovoltaic power”.

4. The early evidence is that it is already clear that the opportunity to generate local energy has deliveredjust the flowering of community groups, local business investing in new skills and new jobs and energy savingsthat “Power to the People” predicted.

5. The levels of renewable energy being installed under the Feed-in Tariff are significant in the south westof England. The tariff has been successful in its initial aims of engaging a much broader community ofentrepreneurs, businesses, landowners, local authorities and housing providers and public in generating power.

6. There is evidence that engagement in generating power has also created greater awareness of the value ofenergy and that those installing microgeneration are also taking energy efficiency measures.34 Ofgem, 23 April 201035 Economic impacts from the promotion of renewable energies: The German experience, Final Report 2009, Rheinisch-

Westfalisches Insitut fur Wirtschaftsforschung.36 Report published by Regen SW and not reproduced here.



7. The interest in microgeneration has created a large investment in new businesses, jobs, skills and trainingwith over 2,000 people employed in the solar sector in the south west and significant investment from collegesin new courses and facilities.

8. There has been an extraordinary increase in the interest of communities in taking control of their ownenergy use with community energy groups springing up—many with sophisticated models and plans to retainthe expenditure going into energy within the community supporting its long term economic well-being. Theseprojects have been painstakingly developed to bring along the community and have suffered particularly fromthe cuts in tariff.

9. The rapid drop of costs in solar has shown how an effective policy framework can cut costs and movethese technologies towards being competitive with traditional forms of energy. In light of these falling costs itis clear that the Feed-in Tariff for solar needs to be reduced significantly to reduce rates of return to thoseplanned and achieve more installations.

10. The imposition of a fixed budget on the Feed-in Tariff by the Treasury in the Comprehensive SpendingReview has undermined the scheme. Rather than a clear digression policy to control the cost of the scheme inresponse to falling prices as used, for example, by Germany—a fixed budget leads almost inevitably to a boomand bust situation.

11. The speed of the change proposed resulting from managing the Feed-in Tariff budget is causing hugeproblems for the solar industry and its clients. Businesses have invested in good faith and people have retrainedon the basis of government policy. They must be given reasonable timetables to adapt to changes.

12. We have the following recommendations to put the microgeneration revolution back on track.

— The government needs to restate clear political backing and put in place a transparent long-termapproach to support for microgeneration, across all technologies

— The cut to the solar PV tariff from 12 December 2011 should not be implemented until 1 April 2012and the cap on expenditure under the Feed-in Tariff regime removed and replaced by a cleardigression policy to limit cost to bill payers.

— The introduction of energy efficiency requirements to the Feed-in Tariff scheme should be keptsimple and flexible.

— A premium Feed-in Tariff for community energy projects should be introduced.

24 November 2011

Written evidence submitted by Alan Simpson and Gerard Read

Alan Simpson was MP for Nottingham South until 2010. He was the architect of feed in tariff amendments inthe Energy Act 2010 and advisor to Labour Ministers on its implementation. He continues to advise MPsof all parties on renewable energy policies and works independently with NGOs and others on energy andclimate issues.

Gerard Read is the European Head of clean-tech investment analysis for Jeffries Bank. Based in Berlin andLondon. He has worked extensively with German policy makers on the development of their Feed in Tariffframework for renewable energy and is one of the leading authorities on energy transformation strategies.

1. Evidence Summary

(a) The central issue in the debate about Feed-in-Tariffs (FITs) is not their affordability. It is the potentialof FITs to change the whole energy debate. This is what makes the issue so charged. Both theopponents and proponents of FITs know this.

(b) FITs are potentially the most exciting tool governments have for bringing about both market changeand culture change in energy policy.

(c) As in Germany, FITs offer governments the ability to break the hold energy cartels have traditionallyhad over national energy policies by opening up and decentralising the market.

(d) The current “crisis” within the UK FITs programme is largely self-made; stemming from defectivedesign in the original DECC scheme and defective thinking in the Treasury (by turning it into afixed budget programme). Both defects are absent from the German approach and are easily remediedin the UK.

(e) The German experience is that, structured properly, FITs:

— generate more money than they cost;

— change public perceptions about energy production and consumption;

— reduce, rather than increase, energy bills; and

— transform government thinking about intervention mechanisms (from permanent energysubsidies to transitional ones).



(f) Current UK policy confusion deeply damages confidence that Britain is a safe place in which toinvest.

2. Background to the UK FITs Programme (AS)

2.1 It is important to recognise that the FITs amendments to the Energy Act 2008 were delivered on an all-Party basis. For several years prior to this I (AS) had tried to press the idea upon government Ministers, butwith little success. By then the UK was seen as having the most expensive mechanisms in Europe for delivering(very little) renewable energy. Britain was third to bottom of the EU renewable energy league (only better thanMalta and Luxemburg). On several occasions I had brought Herman Scheer into parliament to discuss themerits of FITs with Ministers and civil servants. Herr Scheer was the German MP behind Germany’s FITsprogramme and the guiding light in the wider Euro Solar movement.

2.2 At both a political and an administrative level, these meetings were disappointing; Herr Scheer’s easy,urbane manner and deep understanding contrasting strongly with the lack of knowledge and interest amongstUK officials and Ministers. It was clear that UK energy policy had settled into the comfort zone of being acatering service to the interests of the Big 6 energy companies. All proposals for a UK FITs programmewere resisted.

2.3 The Energy Bill (2007) became the vehicle for changing all this. By that time—despite opposition fromcivil servants, government ministers and the energy companies—a parliamentary majority had emerged thatwould press FITs into the Bill. All the Opposition parties supported the amendments we were bringing forward.On the eve of local government elections, 38 Labour MPs also voted for the (unsuccessful) amendment beforeit passed to the Lords.

2.4 By the time the Bill returned to the Commons there was a new Department responsible for it (DECC)and a new Secretary of State. Just as important, there were now 60 Labour MPs committed to the cross-partyintention to force the FITs amendment into the Bill.

2.5 Energy companies and civil servants were still determined that Britain would not take the samecomprehensive approach to FITs that the Germans had done. They argued that FITs should be limited to “microgeneration” schemes of less than 50kW (which is what the scheme has been reduced to now).

2.6 Proponents of the FITs amendment wanted it to be more ambitious and open ended. Both theConservative and Lib Dem parties wanted a de minimus threshold of up to 10MW. The compromise of a 5MWceiling allowed the Secretary of State to offer this as an initial stage, whilst Opposition parties could regret thelack of ambition and pledge to double it. Cynicism and incompetence have helped reverse these undertakings.

3. The Framework of the UK Scheme

3.1 A huge amount of background work, outside parliament, had gone into preparing the framework for aUK FITs programme. Unfortunately, most of this was disregarded by the Treasury and DECC. The RenewableEnergy Association (REA), Friends of the Earth and Pyory analysts had done detailed modeling for aframework that would not have walked into the muddle FITs is now in.

3.2 The most obvious shortcomings in DECC’s original approach included:

(i) Treasury and DECC economists were instructed to model a scheme that would only deliver up to2% of UK energy needs,

(ii) No consideration was given to the early take up of FITs by community-owned energy initiatives orsocial housing providers,

(iii) No independent framework for triggering the review of tariff rates was established, and

The UKdeclined to put in place any of the mechanisms Germany had used to share the benefits and savings from FITswith bill payers, as well as the costs.

3.3 Following the General Election, two further defects were added:

(i) The unnecessary (and untruthful) claim that FITs had to be included in the Comprehensive SpendingReview, and

(ii) The conversion of FITs from a freestanding, self-financing element within energy sector accounting,into a fixed budget scheme.

These last two steps account, in large measure, for the confusion the UK FITs scheme is now caught up in.

4. Beginning from somewhere else; the Lessons from Germany

4.1 German citizens have had a legal right to supply electricity to the grid since 1990, but this was paid forat the same price as the electricity they bought. In 2000, the German government began work on legislationthat would offer preferential tariff rates for renewable energy supplied to their grid. The Germans had alsochosen to give renewables priority access to the grid (under the provisions of the EU’s Renewable Energy



Directive, 1995). It was not until the middle of the decade that the programme really took off. Currentcomparisons with the UK are somewhat stark:

(i) Britain has installed roughly 500MW of solar energy in the last decade. Germany has installed over50GW of renewable energy (35GW solar) in half this time.

(ii) The UK “crisis” in FITs comes when perhaps 350MW has been installed under the programme.Germany is now installing many times this amount (8GW last year alone).

(iii) The German FITs programme is a freestanding element within the energy sector accounts. It doesnot count against public expenditure.

(iv) Employment in the German solar sector has just passed the 150,000 figure.

(v) Solar has become the major technology that has engaged citizen involvement in Germany’s “energyfutures” debate.

(vi) The programme has generated over €10 billion of new investment per year and given Germany 15%of the world market in renewables.

(vii) The ambition levels for renewable energy, coupled with the progressive “degression” rates appliedto FITs (for different renewable energy systems) have driven huge efficiency gains, particularly inthe cost of solar panels. German panel prices have fallen by 50% in the last year.

(viii) By the middle of this decade, Germany expects the cost of generating solar electricity to have fallento grid parity levels.

(ix) As in the UK, government tax and insurance receipts from the solar sector exceed the cost oftariff payments.

(x) The FITs programme has helped drive down German energy bills rather than inflate them, withenergy prices below pre-Fukushima levels. The following diagrams illustrate this:

110

100

90

80

70

60

50

40

30

20

10/09/2007 10/09/2008 10/09/2009 10/09/2010

Chart 5: German Power Prices

Source: Bloomberg

4.2 The most critical point for the Committee to grasp is in this second diagram37. German electricityproduction no longer “peaks” in dramatic undulations. Solar and wind energy generation take up to 25% frompeak production needs from power stations. This also reduces peak prices; meaning that the major energycompanies are no longer the major determinants of German energy prices. These price savings are passed on(currently) to German industry. The next step is to extend this to all energy customers.

5. An Energy Democracy?

5.1 The UK has one of the most closed energy markets in Europe. When the Coalition government cameinto office, Ministers pledged to open up this market to make it more transparent and competitive. Currentmarket reform proposals will do the opposite. FITs are central to the task of creating a genuine energydemocracy in the UK. To understand this it is worth considering one further diagram. It relates to the newpatterns of ownership emerging in the German energy sector by mid 2010.

37 Not printed



Regional Producers (2%)

Commercial/Industrial (7%)

Fund/Bank (11%)

Utility (13%)

Individuals (42%)

Farmers (9%)

Project Planner (15%)

Other (1%)

In the Hands of Ordinary People

Share of Germany’s 43,000 MW Renewable Energy Market

5.2 Earlier this month, we were involved in a group visit to Germany, to meet with politicians, bank officialsand senior policy makers. The purpose was to understand how Germany had been able to construct a schemethat was ambitious, transparent and consistent, in ways that Britain has struggled with. The key points toemerge from the meetings with German officials included the following:

(i) The actual market size of the renewable energy sector now stands at over 50GW rather than 43GW.Such is its rate of growth.

(ii) Over half of this renewable energy market is owned by households, farmers and communities.

(iii) Utilitiy companies own no more than 13% of the new energy market.

(iv) Germany has no problems of grid capacity in managing this level of renewables. Berlin, for example,already gets over 40% of its electricity from renewables.

(v) There is a clear framework for tariff degression rates that delivers investment security to the wholeprogramme of decentralised and renewable energy generation.

5.3 Germany is using FITs to construct a much more decentralised and democratised energy system. Incontrast, 99% of the UK energy market is owned by the Big 6 and energy market subsidies have been structuredto support this.

6. The way to cut UK Tariff Rates

6.1 No one opposing the proposed cut in tariff rates is arguing against reductions per se. Six months ago,the industry proposed a 25% reduction in solar tariffs; arguing that the falling cost of solar panels had to bereflected in both the prices charged to customers and the tariff rates paid to them. They wanted DECC to usethis to open up a more structured review process for tariff adjustments. This never happened.

6.2 The Committee may wish to examine, in detail, the role played by permanent officials in DECC inpushing (or not) the pace of the Comprehensive Review of FITs. The delayed report effectively bouncedMinisters into the current tariff-cut fiasco.

6.3 An earlier “leaked” draft of the review proposed a solar tariff of 9p/kW. This was consistent with storiescirculating that senior officials were pushing for solar tariffs of no more than 2 ROCs. This is where DECCpolicy is heading. What is unclear is whether the move is being driven by politicians or officials. It does,however, make a mockery of DECC claims that UK tariffs should be set at German levels.

6.4 The DECC review has nothing to do with growing the industry. It has more to do with killing off apolicy it didn’t want to begin with. Specifically:

(i) DECC has taken an arbitrary and knee-jerk approach to tariff cuts, undermining long term investmentin the process, and

(ii) The cuts have more to do with not embarrassing the Treasury than an overheating renewableenergy sector.



Both of these defects are easily remedied.

6.5 In Germany, the Approach to Tariffs and Targets is a Clear and Structured One(i) Several universities contribute (independently) to the analysis of technology costs and market

conditions. These are reviewed on a six monthly basis and there is complete transparency to theprocess.

(ii) The government then sets out its framework for targets and tariff adjustments. Currently theframework specifies that:

(a) Solar tariff rates will fall at a minimum rate of 15% each year, for the first 3.5GW of installedcapacity, and

(b) For every 1GW of additional PV installations there will be a further 3% cut in tariffs, up to amaximum of 15% in any one year.

6.6 It would not be difficult to set up a similar structure for planned growth of the sector in the UK. Theobstacles are that to do so would disrupt the cosy relationship between DECC and the Big 6 energy companies.It would require DECC to set up an arms length and transparent review process for tariff adjustments. And itwould require the Treasury to let go of the unnecessary straight jacket it has imposed on the UK FITsprogramme.

6.7 The most absurd part of the current controversy over FITs tariff rates is that it completely lacksperspective. Ofgem’s assessment of total scheme costs is that FITs might add £1 per year to household energybills this year. This compares with the £175 increase of bills arising from price increases announced by energycompanies (about which there appears to be little debate).

6.8 Ofgem’s assessment of FITs costs is a conditional one, because Treasury receipts (in tax and NI fromthe 39,000 jobs created so far) are likely to result in the programme raising more revenue than it costs.Moreover, in Germany the cost/benefit calculation also includes the “avoided cost” of fossil fuel consumption(that has been replaced by renewable energy production). Deutsche Bank calculated that, in 2008, this amountedto a revenue “gain” of some €800 million in energy cost savings.

7. Conclusions

7.1 The UK could not easily match the scale of German solar installations. However, an annual UK targetof 1GW of installed solar PV is easily within reach. The problem is neither cost nor capability. It is the absenceof leadership and vision, at both a political and administrative level.

7.2 Since the inception of FITs, most of DECC’s energies have gone into delivering its organisedunderperformance. At every opportunity, the debate has been turned to restricting FITs impact rather thanwidening its application. No attempt has been made to use FITs as a vehicle for opening up the UK energymarket, or for transforming energy subsidies (from permanent into transitional ones), or as a means ofdelivering the radical decentralisation that both Coalition partners are committed to.

7.3 There was no need for a second tariff review within a single year, or for cuts programmed to take effectbefore the public consultation process concluded. DECC has unused funds in other renewable energyprogrammes that could have been used to cover a more open and reflective review process. The Treasury hasnot been asked to approve such a move. The effect has been to take an important policy initiative and turn itfrom the transformational to the trivial. It is the precursor to neutering the scheme altogether.

7.4 DECC’s external reputation, for growing the UK renewable energy sector, is a largely discredited one.The Committee may wish to look more widely at the FITs programme as an example of the Department’sinconsistent approach to the use of its various subsidy schemes, its obsession with managed under-performance,and its reluctance to pool accrued surpluses in some parts of its renewables portfolio in order to accommodateunanticipated growth in other sectors. This is particularly important in relation to the construction (ordestruction) of investor confidence in the UK.

7.5 In line with advice given to us by German policy makers, the single most important step the UK couldtake to “up” its renewable energy game is to expand its solar roofs programme. The reasoning behind theadvice is that PV is the most non-disruptive technology that can be quickly deployed in any part of the country,and the one most guaranteed to promote a social change in energy thinking. Within the UK model, PV alsohas the greatest ability to link public discussions about demand reduction measures into those on new energygeneration.

7.6 DECC lacks any coherent view about a tariff that promotes genuinely community-owned renewableenergy generation and risks destroying many embryonic coops by arbitrary cuts. Existing tariff rates shouldapply to community owned schemes until an effective alternative formula is devised. Reducing the “pooled”tariff rates, without having a replacement mechanism in place will break some of the existing communityschemes.

7.7 Current government constraints make it inevitable that DECC will have to find ways of excluding thepoor so as not to break the (artificial) Treasury cap. This is the most serious criticism of what DECC is doing.



It could be avoided by taking FITs out of public expenditure accounting, in the way the Germans have done.However, within the Coalition there does not appear to be the political or administrative will to do so.

In other countries, FITs are used to drive energy market transformation rather than to promote individualtechnologies. They force a shift from permanent to transitional subsidies. It is understandable that energy cartelinterests should resist such changes. The Committee may wish to ask why the government would wish to becomplicit in such a process in the UK?

Should the Committee wish, we would be happy to give oral evidence in support of this statement, eitherabout the background to the UK scheme or the comparisons with Germany.

24 November 2011

Written evidence submitted by Consumer Focus

Introduction

Consumer Focus is the statutory consumer champion for England, Wales, Scotland and (for postalconsumers) Northern Ireland.

We operate across the whole of the economy, persuading businesses, public services and policy makers to putconsumers at the heart of what they do. We have specific responsibilities for the energy and postal sectors.38

We are yet to respond formally to DECC’s consultation on its proposals and are still considering theirpossible impacts. In areas this submission represents policy in development rather than finalised views. We arehappy to copy our formal response to DECC to the Committee when it is ready.

Following the executive summary, we provide high level feedback on four of the five key themes listedin the Committees’ Call for Evidence. We do not have new evidence on experience of feed-in tariffs inother countries.

Executive Summary— Consumer Focus supports the review of the feed in tariff for solar PV at this time. The aim of the

feed in tariff is to overcome barriers to investment by providing a guaranteed return. It should notovercompensate investors, particularly as it is paid for through a levy on everyone’s electricity bills.

— We understand that the new tariffs will provide a return on investment sufficient to incentiviseinvestment in areas with higher irradiance. As with any policy we are concerned about regional andnational differences, but just as energy efficiency measures, and potentially the renewable heatincentive, will have greater benefit for homes in colder areas so an investment in solar PV will havehigher returns for homes in southern parts of the country.

— However, we are concerned that the tariff for aggregated systems will prevent the installation ofsolar PV systems on social housing properties and the homes of vulnerable consumers. We thereforebelieve that the Government’s proposed community tariff (or tariffs) should cater for these schemes,to bring the benefits of decentralised energy to a wider group of consumers than is possible underthe proposed tariffs.

— Consumer Focus disagrees with the combination of short notice and the use of an eligibility dateover which the consumers has no control. Renewable technologies are a long-term investment, andconsumers cannot change their plans in as little as six weeks; and the industry and its investorscannot continue to function effectively with this cliff-edge approach. Changes must give investors(in industry and in installations) confidence that whilst market costs may change, Government policywill deliver stable returns.

Impact to Date of Solar PV Feed-in Tariffs and the State of the Solar Energy Market

1. The Feed-in tariff was working: it has engaged consumers, created thousands of jobs, and deliveredefficiencies in the supply chain. Here we focus on the customer attitudes and experience based on researchundertaken by Energy Saving Trust on consumer attitudes and our work on customer satisfaction which willbe published by mid December.

Attitudes

2. Consumers who have installed renewable technologies to date are likely to be older or retired professionalsliving in large detached homes, often in rural areas, who demonstrate a high level of environmental concern.

3. They have often introduced energy efficiency measures into their home, and of the consumers who havetaken up the feed-in tariff, just over two-thirds are “very” or “quite interested” in the Renewable Heat Incentive.

4. Overall the main barriers to uptake are financial: the up-front costs, inability to afford the installationcosts, a lack of finance and a payback period of over five years.38 For further information on our role and duties, see http://consumerfocus.org.uk/g/4p4



5. Consumers lack confidence in the feed-in tariff:

— Lack awareness and knowledge of the feed-in tariff scheme, only gaining an understanding afterundertaking specific research;

— Find the scheme complex and confusing;

— Are concerned about the reliability of feed-in tariff income; and

— Struggle with the key barrier of up-front installation costs, particularly if that cost is greater than£5,000 and the payback is greater than five years.

6. Consumers are also concerned about the experience or skills of installers and tend to undertake a rangeof online research but recommendations from family, friends and neighbours are used most consistently as botha source for general information and a source for finding potential installers.

7. Additional triggers are needed to widen interest in the market:

— Communications to promote technologies as a desirable long-term investment, raising awareness oftechnologies and benefits.

— Industry working with television and other general media to promote renewable technologies as anaspiration for a 21st century home.

— Detailed case studies and advice on technologies for specific property types.

— Exemplar homes open to the public.

— Tailored advice through EPCs, and access to free, trusted advice.

— Reliable financial incentives.

— Trustworthy advice and project management from installers.

— Technical assurance and guarantees.

— Remove or significantly reduce upfront cost barrier, or shorten payback period to five years.

8. Industry and Government need to learn from those who have installed renewable technologies: rather thantalking about costs and payback, they tend to talk of an investment in their home and their belief that thesystems will add long-term value. The value of such systems therefore needs to be set out clearly in the EnergyPerformance Certificate, for example through the inclusion of the annual value of the feed-in tariff, andincentives are needed to prompt interest in the energy performance of homes during their sale or rental.

Experience

9. Our survey of 2,600 microgeneration consumers in October 2011 found high levels of satisfaction.However there are areas where consumers are dissatisfied, and the results show that the three key stakeholdersin the market all have a role in making it work more effectively.

10. Consumers need more than cost estimates to give them confidence. They are influenced by personalrecommendations, which may be the reason for the acceleration of uptake in the second year of the Feed-inTariff scheme.

11. They are most influenced by information provided by installers, which is why we are concerned thatinstallers are failing to help consumers understand the value of their system or how to get the best out oftheir investment:

— 10% of installers do not discuss energy performance.

— 29% do not discuss planning and building control.

— 40% do not discuss current energy use.

— 64% do not discuss energy efficiency.

— two-fifths of consumers are not provided with a guide to maintaining the system.

— two-thirds are not given a guide to getting the best out of their system.

12. Lack of information was the largest cause of dissatisfaction with the sales process, but more significantproblems arose that contravene the REAL Assurance Code, as some consumers said they were dissatisfied bythe sales process because they were:

— Pressurised by an offer of a discount.

— Given misleading information.

— Subject to changing conditions, price or the scope of the project after contracting.

— Sales visits too long.

— Pressurised by the future reduction in the FIT or by a claim of limited availability.

13. During the summer Consumer Focus worked to raise awareness of mis-selling in the solar PV marketdue to reports of such activities and concerns about a likely increase in the run-up to the planned reduction inthe tariff in April 2012. Mis-selling is likely to appear in any rapidly growing market, particularly one whereaspects of the advice and sales process occur in the home, and any deadline is going to be used as a trigger



for pressure selling. We are particularly concerned about mis-selling as it is clear from REAL Assurance andConsumer Direct complaints that vulnerable consumers have become victims of misleading claims.

14. Our research found that consumers could take relatively simple actions to protect themselves, such asseeking 3 quotes, verifying companies’ claims of Microgeneration Certification Scheme (MCS) registration viathe MCS website; never paying more than 25% of the contract price upfront; checking the right to cancel thecontract within 7 days with no penalty; and refusing to sign a waiver of this period.

The Balance between Affordability and Delivering the Objectives of the Solar PV Feed-inTariffs

15. Consumer Focus was part of the stakeholder coalition that campaigned for the introduction of Feed-intariffs. In doing so we recognised the need to balance affordability and the desirability of policy goals thatranged from consumer empowerment to an industrial policy mechanism.

16. We recognised, and continue to recognise, the need to invest in new systems and technologies that enableconsumers to take action on their energy supply and demand. We understand that to meet the nation’s carbontargets, solar thermal and photovoltaic arrays are needed on 75% of homes39 by 2050. However, any financialincentive must match that needed to overcome barriers and not overcompensate investment.

17. We agree with Government policy that the barrier to uptake of solar PV is lower than other technologies,and therefore were satisfied with the original intention that PV tariff levels provide an average 5% return oninvestment (point 36, FIT impact assessment, DECC, 1 February 2010).

18. The biggest barrier to balancing the costs and benefits is that the short term direct benefits of the schemeare not received by 99.5% of those funding it. The scheme is funded by energy consumers but the economicbenefits are felt elsewhere in Government:

— DWP: tens of thousands of jobs created.

— Treasury: VAT receipts and income tax.

19. It is unfortunate that these economic benefits are not recognised in the Treasury’s control framework forDECC levy-funded spending through a mechanism to feed in additional funding from the public purse, as thismeans the framework effectively caps the scheme rather than allowing success to breed success.

Government Management of the Solar PV Feed-in Tariffs, including the Consultation

Business as usual.

20. Renewable energy generation is perceived to be beyond the reach of most people, particularly in thecurrent economic climate. That will remain the case unless the barrier of upfront cost is tackled. HoweverEnergy Saving Trust research for our upcoming report on consumer attitudes and experience shows that financeis not the only lever, nor is payback always the primary motivation.

21. We found that people who have invested renewable technologies see them as a long-term investment intheir home. However, it is questionable as to whether they will recoup that investment if they move out beforethe end of the “payback” period. The calculation engine behind the Energy Performance Certificate is not ableto set out the value of future FIT payments. The development of the Green Deal and the related reformattingof the Energy Performance Certificate must tie renewable technologies into other activities promoting lowcarbon homes:

— Government-backed calculation methods for EPCs and Green Deal advice should include thecalculation of the value of Feed-in Tariffs:

— to promote the value to potential investors in renewable technologies; and

— to promote the value of systems to prospective buyers and tenants where already installed.

— Consumers should be able to use Green Deal finance to cover upfront costs of renewabletechnologies, subject to meeting energy efficiency eligibility requirements.

22. Consumers are uncertain about installers’ skills, and misselling has been a growing problem, particularlyto elderly and more vulnerable consumers. We and others, including REAL Assurance, have sought to raiseawareness of the risks and how consumers can protect themselves but the assurance framework is difficult tocommunicate. It is difficult to communicate the combination of MCS and REAL Assurance schemes toconsumers.

23. Government could simplify consumer-friendly assurance branding as part of the development of GreenDeal accreditation branding, but it seems that this could duplicate rather than simplify consumer protectionschemes. More resource needs to be made available to support independent monitoring and enforcement ofsuch schemes, for example through Trading Standards, as the experience of early adopters is so key to gettingthese low carbon schemes off the ground.39 EST, 2010, Housing Energy Model Briefing Note 3, http://bit.ly/cpm82j (PDF 5.2MB)



24. The largest cause of dissatisfaction amongst consumers is the process for obtaining the Feed-in Tariff(FIT), with just over one-quarter dissatisfied. The most common complaint is the FIT is paid from the date ofregistration rather than the date of commissioning the system (ie the date it starts generating electricity). Delaysin receipt of paperwork are also a significant cause of complaint and Consumer Focus has heard that someinstallers hold back the registration process for their own ends, such as to hold power over the consumer duringa dispute over payment or damages.

25. The Government should revise the rules of the scheme so that consumers are paid from the date ofcommissioning as this is the date that they start generating electricity and because they lack control over theregistration process and are carrying the cost of others’ inefficient processes (or worse, deliberate delays).

26. The Government should enforce current rules on energy suppliers to ensure generators are paying forimported energy where net meters are installed. Over one-fifth of consumers, at the time of installation, had anet meter, ie one which runs backwards when energy is exported. Of those consumers with a net meter, justunder half have been asked by their supplier to change their meter, and in almost all cases the consumer wasnot charged for this change. However, 10% of all consumers surveyed have not been asked to change their netmeter. These consumers have the additional benefit of their meter running backwards, increasing the value ofexported electricity from 3.1p to around 16p depending on their electricity tariff.

27. The cumulative value of this could be around £1.2 million, and it is not clear who currently carries thecosts, although it is likely, again, that energy consumers pick up the tab. We do not want microgenerationconsumers to have to pay for a new meter, as smart meters are on the near-horizon, but nor do we want themforced on to smart meters that are being rolled out prior to the setting up of consumer protections. At the veryleast, these consumers must receive smart meters in the first year of accredited installation, with a requirementthat smart meters are installed with renewable technologies from that point.

28. Finally, the Government and its agents could enable monitoring of consumers experience by seekingpermission from Feed-in tariff applicants to be contacted for research purposes. It must also ensure that thecurrent review of the consumer landscape delivers good quality complaints data to relevant stakeholders (suchas Consumer Focus’s successor).

Consultation

29. We understand the time pressure behind the review, and support a change prior to April 2012, butConsumer Focus disagrees with the combination of short notice and the use of an eligibility date over whichthe consumer has no control.

30. From a policy perspective, we believe that maintaining the current tariff and dropping to 21p in Aprilwould see an even greater acceleration in uptake, with the potential for more misselling and putting morepressure on the FIT budget.

31. However, the Government’s proposal does not recognise the risk to consumers who had signed contractsprior to the launch of the consultation but who had not yet had systems installed. This is our principle concern,and was raised immediately with DECC at our first sight of these proposals. It is of concern for the consumerswho are directly affected, but will also undermine future consumer confidence as it has a significantretrospective impact on consumers’ contracts.

Contracts—Cancellation

32. Consumer Focus has used the model contract provided by REAL Assurance to its members in order tounderstand the impact of Government’s decisions on consumers in general terms. We recognise that there willbe variations of the contract in use, and consumers may have to seek their own legal advice in order tounderstand how Government decisions have retrospectively impacted their contract.

33. We believe that at the time of the launch of the consultation there were consumers who had entered intoa contract for the installation of a solar PV (of which they become the owner and thereby FIT Generator)where the contract:

— had an installation date of prior to 12 December 2011,

— had an installation date on or after 12 December 2011, or

— had no specific installation date.

34. None of these groups is protected against the installers’ inability to complete the registration ofinstallation by 12 December 2011, despite the benefit of the system’s generation-related income falling by 50%.

35. If they have paid a deposit they will be unable to cancel their contract without financial penalty. InSeptember we surveyed 2,600 consumers who have installed microgeneration. The majority (86%) ofconsumers purchasing a system were asked to pay a deposit before installation.

36. However, the amount requested as a deposit varies. Almost three-quarters (70%) of installers ask forbetween one and 25% of the contract price to be paid as a deposit upfront. One in ten consumers are not askedto pay any percentage of their contract price as a deposit upfront, but a slightly larger minority (15%) are askedto pay between 26 and 50% of their contract price as a deposit upfront. Under the REAL Assurance Consumer



Code consumers should pay no more than 25% as a deposit so this is a concern in terms of Business as Usual,but the risk is heightened for consumers who are affected by the 12 December deadline.

37. The REAL Assurance model contract does not allow for a cancellation of contract due to major delayto installation (Clause 8.2.1), and whilst the customer is entitled to cancel the contract if there are major delaysto delivery, it appears they can only get their deposit refunded if the delays are within the installer’s control.It may be down to the small claims courts to determine the extent to which delays are within the installer’scontrol, particularly if the contract included a timetable for registration of an installation by 12 December.

Contracts—Compensation

38. Where the Model Contract has an installation date which is before 12 December 2011 and that installationdate is not met, the position appears to be that the customer can:

— cancel the contract—where the reason is because the delivery of the goods is delayed, or

— ask for compensation—if the delay in the installation date is significant or unreasonable and is causedby factors within the installer’s control.

39. It is not stated in this model contract how compensation would be calculated. It may therefore be possiblein these circumstances for a customer to claim that any compensation payable should be calculated by referenceto the [potential] loss arising as a result of a lower feed-in tariff being applicable.

40. However to make such a claim, the consumer would have to prove all of the following:

— that the delay in the installation date was significant or unreasonable,

— that the loss being claimed is not too remote, in other words that it is a loss which flows naturallyfrom the breach or which was in the contemplation of the parties at the time the contract was madeas a probable result of the breach, and

— that the loss was caused by the breach of contract—the customer must prove that it was the breachof the contract caused the loss rather than any other event occurring.

41. Each case would, and will have to be considered on its merits, but we fear that it will be difficult forconsumers to prove their loss on the basis of the above tests, particularly (b) as the change in the tariffswas unexpected.

42. If consumers have been sold PV on the basis of a “beat the deadline” claim after the launch of thisconsultation then they are likely to be in a better position to meet these tests as the installer will haveunderstood, or could have predicted, the pressure facing the supply chain.

43. They may also be able to prove that the installer misled them on the deadline (see Figure 2 below)40.

44. Compensation is mentioned in the REAL Assurance model contract, but it is unclear as to what thecustomer may need to do to claim such compensation or how any such compensation may be calculated .

45. Consumers with an installation date set for after 12 December appear unlikely to be able to cancel orclaim compensation unless the installer delays that installation date. Again, consumers would have to provetheir claim for loss against the three tests above.

46. It appears there is no remedy available for consumers whose contract does not include an installation date.

47. Consumers are highly unlikely to be protected by their contracts, as the model contract from theindustry’s Consumer Code did not foresee these circumstances. Therefore the Government’s approach toconsumer protection is reliant on clear communication, a responsive supply chain and installers’ processing ofpaperwork to deliver contracted systems in time.

Communication

48. The success of the Feed-in tariff is the engagement of thousands of individual households and hundredsof small businesses. But this also means the notice of the Review had to get out quickly across a network oforganisations, some of which will be better equipped than others to update websites and other marketingmaterial. There will still be old marketing material circulating. Whilst a range of consumer-facing organisationsand industry itself has sought to advise consumers on the impact of the changes, the message is confusing:

— The eligibility date is one that the consumer has no control over.

— The date is prior to the end of the consultation—causing uncertainty (perhaps the cause of themisleading information in Figure 2 above).

— Consumers have been told that the FIT is reliable and no changes will be made retrospectively—butif consumers have already signed a contract they will see this as a retrospective move.

49. We think this is unacceptable as it is the consumer who will carry the cost if the eligibility date, eventhough the delivery of goods, their installation and the processing of paperwork is not in their control.40 Not published here.



Paperwork Processing

50. The processing of paperwork is of particular concern:

— DECC notes the backlog in MCS registrations in paragraph 32 of the consultation.

— Our recent survey of 2,600 microgeneration consumers found the biggest cause of dissatisfaction tobe the registration for the Feed-in Tariff, and delays relating to the paperwork were two of the topthree biggest issues.

— REAL Assurance has told us there have been instances of accredited installers holding back theMCS certificate in order to give them power over consumers in disputes over payment. This goesagainst the Consumer Code.

51. The eligibility date must be within consumers’ control and therefore we want it to be based on the dateof contract, not the completion of paperwork.

52. If not, we expect to see thousands, perhaps tens of thousands, of claims for compensation whereinstallations are not completed in time to meet the eligibility date proposed by DECC.

Affordability of Solar Photovoltaic Energy versus other Renewable Energy (given theOverall Levy-funded Cap for Energy Bills) and the Impact of Feed-in Tariffs on Energy Bills

53. The relevant comparisons with other technologies are the cost of subsidy per unit of energy generated;and the change in cost of technology.

54. The buy-out price for ROCs in 2010–11 was £36.99 per ROC, equating to about 8.6p per KWh insupport for solar photovoltaic. This should be compared with the current price of 43p/kWh for the Feed-intariff for domestic-scale solar PV, and the proposed price of 21p/kWh.

55. Clearly larger renewable energy projects are more cost-effective but we still consider that the FiTwas working:

— 30% cut in costs in the supply chain, and price reductions for consumers.

— Directly engaged over 70,000 households in the low carbon transition.

— Generated positive word-of-mouth, which has in turn given more consumers confidence to invest.

— Economic benefits of jobs.

56. We then expected tariff degression to bring the cost to the consumer down until such time grid paritywas achieved or more cost-effective options to deliver low carbon homes (such as Green Deal finance) wereproven. Degression is a key feature of feed-in tariffs as:

— A rise in demand will deliver savings, and has done so with the FiT.

— There is a risk that suppliers will price to the tariff, and not pass those savings on to consumers.

— The more people taking up the FiT, the fewer left to pay for it.

57. The change in the cost of solar PV technology has been substantial, but this has in part been due to thereliability of the market. Due to the speed and scale of the cut, and the way in which it is being implemented,there is now a risk that whilst consumers will pay less per unit generated by new systems, cost reductionswill be more difficult to achieve and this could cause problems in the future as Britain tries to reach morechallenging targets.

58. Whilst we think that the FIT should continue to enable investment in small-scale systems, the cap onspending requires Government to look at ways to achieve consumer engagement more cost-effectively. Wethink this is best achieved through more support for community-scale projects.

Community Renewable Energy

59. We support the Feed-in tariff on the basis that it incentivises and encourages consumer engagement inenergy services. Our consumer research shows that many people who install renewable technology are likelyto have taken action on energy efficiency and are also likely to be interested in the renewable heat incentive.

60. But it is clear that the barriers to solar PV are relatively low for wealthier property owners, whilst thebarriers of upfront cost and property ownership remain for most consumers. We therefore want to see greaterattention and encouragement for more cost-effective community scale systems. These face greater barriers buthave more potential to generate social as well as environmental benefits, and those benefits can be felt both byinvestors and other members of the community.

61. We also know that investors in community schemes are not primarily motivated by financial return41,so the ROI can be kept within the 5–8% range that has worked to date. But a mechanism is needed to helpcommunities with the upfront costs, and risks.41 Wessex Community Assets (2010) Community Investor Research, http://www.brightonenergy.org.uk/wp-content/uploads/2011/

01/Investor-Profile.pdf



62. Participants at a recent workshop at Hockerton Housing Project told us that the key barriers to communityscale systems are:

— Leadership—successful projects often have a leader who gives significant time, and has both goodsocial and technical skills.

— Negotiating a site.

— Upfront cost of planning applications, a particularly high risk cost for community-owned windturbines.

— Range of skills necessary either in-house, or that must be funded from external sources.

— Engineering.

— Community engagement.

— Financial.

— Legal.

63. They identified two types of community that may or may not overlap, and the benefits of communityscale systems for them:

— The community of investors—there is a low entry barrier to investors, dependent only on the costof a single share. It should be remembered that not every physical community has a source ofrenewable energy that it can access cost-effectively.

— The host community—Company Rules can require profits from an Industrial Providential Society orCommunity Interest Company to be returned to the community for the purposes of sustainabledevelopment.

64. Our principle recommendation to DECC regarding a community tariff is therefore to maintain currentreturns on investment but to offer additional support with the upfront cost barrier—particularly the cost ofplanning applications. National and local Government could also require commercial schemes engagement ofconsumers, for example by requiring them to open up a share of the scheme to community investment.

24 November 2011

Written evidence submitted by the Office for National Statistics

“The Feed-in Tariff Scheme is one of eight regulatory schemes that the National Accounts ClassificationCommittee have been asked to give a formal decision on. In order to maintain consistent treatment acrossmember states in the National Accounts individual schemes have been discussed in Eurostat, the Feed-in Tariffscheme has not been discussed. ONS has requested that a more general decision on treatment of levy-fundedsubsidy schemes is agreed by member states, which will allow ONS to classify all such schemes. The viewsof member states are being discussed at the next meeting of the Financial Accounts Working Group on6 December 2011. The National Accounts Classification Committee has not provided any formal advice on thetreatment of Feed-in Tariffs and will meet to decide on the treatment of such schemes after they have receivedthe outcome from the December meeting.”

25 November 2011

Written evidence submitted by Friends of the Earth England, Wales and Northern Ireland

Summary

— The feed-in tariff has been a great success since it was introduced in April 2010 in delivering exactlyas planned—uptake of small scale renewable technologies among non-traditional target groupsincluding communities, non-energy generation businesses, individuals, farmers, councils, schools andhospitals; driving enthusiasm for renewable energy and a greater understanding of energy use andsaving; contributing to renewable energy and carbon saving targets; and driving down costs as anindustry is developed.

— Towards the end of 2010/ beginning of 2011 it became clear that due to a number of factors,including significantly the fall in the cost of Solar PV globally, up-take was higher than the originalintended ambition of the scheme, but cost savings were available to reflect falling technology costs.300% more electricity can now be generated for only 75% more budget.

— The crisis to which this success story has led to is almost unfathomable. The application of a rigorousbut little understood and un-transparently applied spending cap to the FIT scheme has been a driverin this, as has a failure to understand the potential and costs of either Solar PV or DecentralisedEnergy as a whole—both of which are excluded from major Government Energy policies. However,an arbitrary and confused approach to reviewing the scheme where some Solar PV rates were cutdrastically over the summer and others left uncut, with no evidence base or consistent rationale, hasincreased the problem.



— The Government is now faced with a choice of forcing a major contraction (of 50–95%) of a growinggreen industry, with job losses of between 18,000 to 29,000, or taking a flexible approach tosupporting the scheme. The 12th of December date should be immediately abandoned—there is nojustification for it, even if one accepts the framing of the spending gap, and it is causing seriousdamage to the industry and wider.

— The Government should take the opportunity to set support for the scheme to deliver significantlyon the its original objectives—rather than attempt to change the objectives to further marginalise therole of Solar and DE—and set support for solar at a level in order that:

— It plays a significant part in contributing to decarbonising the electricity system by 2030.

— It opens up the energy market to new types of generator and investor

— Those on low incomes, without access to capital or property are able to participate

— Solar is supported to develop into a mature industry in the UK, capable of driving down coststo grid parity by the end of the decade.

Enquiry Theme 1: Impact to Date of Solar PV Feed-in Tariffs and the State of the SolarEnergy Market

1. The feed-in tariff scheme has been a huge success since the short time since its introduction in April 2010in scaling up Solar PV deployment and the requisite development of a Solar PV industry, primarily ininstallation and maintenance, but also according to the Renewable Energy Association (REA) with some 60plus companies involved in supply chain manufacturing. More than 100,000 solar panels projects have beeninstalled; the number of direct jobs in solar has risen from 3,000 in 2010 to 30,000 today; and the number ofcompanies operating in solar has risen from 350 to 4,000. The cost of Solar PV has fallen by 30% in just overa year.

2. This has been driven by falling global prices but also a reduction in installation costs driven by the scaleup of the installation industry in the UK. The REA also estimates that installation costs, which attribute forroughly half of the cost of a solar project, have fallen by 50% since the scheme’s introduction: solar PV is theonly energy technology with such a cost reduction profile. Earlier this year Friends of the Earth, the SolarTrade Association and a host of other organisations wrote to the Government calling for planned moderatereductions in the tariffs of 25%. It was expected that 500MW of solar would have been installed in the year toApril 2012 without the recent Government announcement (Element Energy analysis1). While this would havebeen a remarkable success compared to the previous level of deployment, it should be kept in context—in2010 Germany deployed 8GW of Solar—deploying in one year more than the UK scheme plans to deliver intotal to 2020.2

3. The feed-in tariff also plays a wider role in the energy market—opening up energy generation frombeyond the traditional energy companies to diverse groups from farmers and businesses to hospitals andschools; reducing people’s energy bills; and leading to more energy efficient consumer behaviour and take upof home insulation through engagement of the public with energy. Some of these impacts are explored below.

4. The feed-in tariff has led to a take-off of both community energy and social housing retrofit projects.Scores of community-led energy groups and co-operatives have been established across the country involvinglocal communities in clean energy projects. It is important to note that community scale projects take longerto deliver that domestic installations. Many such schemes were in the pipeline on the cusp of coming throughat the time of the announcement. In some cases this has already taken longer than would have otherwise beenthe case due to community projects having to down-scale projects to under 50kW following the fast-trackreview over the summer and the Government’s requirement that they “adjust their aspirations”.3 The timing istherefore critical, and potentially devastating to the community energy sector—with at least six share offersopen at the moment known to Friends of the Earth, encouraging local people to invest in their local energyfutures. There are dozens of community energy projects across the country threatened by the review which arejust getting off the ground. Overall £16 million has been invested in co-operatives alone according to Co-opsUK, and huge amounts of social and volunteer capital has been invested. Regaining this once it has been lostwill be very difficult, including the confidence that taking this sort of activity and project forward will proveworthwhile in the long run. Impacts on these schemes is detailed in answers to theme three below.

5. Social housing and local authority projects are in a similar position. While not a great deal have yet beendelivered—and where they have it is in small pilot phases such as those by South Yorkshire HousingAssociation and Birmingham City Council, there many were in the pipeline to be delivered by 31 March 2012:Element Energy’s recent report “Implications of the Comprehensive Review of the Feed-in Tariff for the UKPV Industry” commissioned by Friends of the Earth and Kingspan found that existing “individual socialhousing contracts cover more than 10,000 roofs and there is very strong interest from Local Authorities [and]Housing Authorities”4 This is part of the wider impact of the scheme, fulfilling an original objective of bringingin non-tradition players into energy generation and ownership, and encouraging new investment in energy,which has been successful with businesses such as Marks & Spencer installing PV on their shop roofs, localauthorities, housing associations, farmers, schools (such as 10:10 solar school and Keep Britain Tidy ecoschools), hospitals, football clubs and others participating. It has also had the effect of bringing in new sourcesof finance—for example South Yorkshire Housing Association secured financing from a pension fund as part



of their project, which has now been withdrawn and many projects had secured matched investment fromthe ERDF.5

6. All political parties are concerned about the dominance of the Big 6 Energy companies, who own twothirds of generation in the UK (as appose to the “Big 4” in Germany who own 7%6. From the perspective ofwanting more independent generation from diverse sources to increase energy resilience; stamping down ondecentrailsed energy seems counter-productive 7

7. As the scheme is still in its infancy much work still needs to be done to understand the role that localrenewable energy technologies, especially those with high visibility such as solar panels, have on publicengagement and uptake. The anecdotal evidence is strong, and we would urge the Government to collect astronger evidence base about the role of micro-generation and community-scale technologies in increasingparticipation in and uptake of local climate mitigation measures. This is crucial as the Department for Energyand Climate Change, the Local Government Group and the Committee on Climate Change have all stressedthe pivotal importance of local action in helping to meet national carbon budgets. There is already some initialevidence about community energy schemes and domestic installations driving energy saving behaviour—seeboth the IPPR “Green Streets” report8 and the Good Energy Feed-in Tariff Report9 which noted their surveysof micro-generators found that two-thirds had changed their energy use behaviour.

Enquiry Theme 2: The Balance between Affordability and Delivering the Objectives of theSolar PV Feed-in Tariffs, including Factors to Consider when Setting the Rate of Small-scaleFeed-in Tariffs including Jobs Created, Emissions Reductions and Energy-saving BehaviouralChange.

Definition of affordability

8. It is right to look at affordability in the context of delivering objectives of the Solar PV tariff. However,this has so far been missing from the Government analysis of the scheme in Parliament and the media, where“affordability” has been entirely dominated by the Comprehensive Spending review “cap” placed on the feed-in tariff of £867 million over the CSR period, not on whether the objectives of the scheme are being met, orbeing met cost-effectively or affordably.

9. It is not clear why the spending cap is the chosen limit of “affordability” of the scheme, being basedsolely on a projected uptake model rather than any analysis of costs and benefits. While affordability toconsumers in terms of energy bills has been much talked about by Ministers, it is clear that the driving forceof the review is to remain within this spending envelope, as set out at the beginning of every review documentthis year. According to the review Impact Assessment, t he cost to consumers so far of the scheme has been£1.40 a year and the cost of delaying the cutting of the feed-in tariff rates to April 2012 is only 90p perhousehold. However, as we explore below, it is not even the case that the feed-in tariff must be all or partfunded by energy bills. For example, the Renewable Heat Incentive—its sister scheme for heat, enacted alsoin the Energy Act 2008 is now to be funded from general taxation.

10. It is Friends of the Earth’s views that polices should be set in order to deliver their stated objectives—not on the basis of arbitrary resource constraints. The current framing excludes from the debate perhaps themost important question—what is the scheme supposed to be delivering, and what is the level of ambition?The issues then becomes how to deliver this in an affordable way.

Level of ambition of the feed-in tariff scheme

11. The original scheme was designed to deliver just under 2 % of electricity by 2020.10 Friends of the Earthhas always believed the 2% figure to be too low, and campaigned alongside 50 other organisations for the levelof ambition to be at least tripled to delivering 6% of electricity by 2020.11

12. Due to a number of factors, including the fall in cost of PV, the attractiveness of the FIT in a time oflow national interest rates, cuts to funding (especially council funding) for energy efficiency measures, and theease of use and popularity of the feed-in tariff scheme, this scheme has begun to deliver over expectations.This has led to the opportunity to deploy a much larger amount of PV at a proportionately lower cost thanoriginally expected, as tariff rates can be brought down significantly. This is explored below.

13. However, it is not possible to sustain a growing solar industry within the current budget cap. ElementEnergy (November 2011) found that even a “zero growth” scenario where the industry remains at the samesize would require an additional £667 million over the rest of the CSR period.

14. So the Government faces a choice—allow the original ambition (and therefore budget) of the feed-intariff to be increased, or force the solar industry and rate of solar deployment to contract. Choosing to staywithin the cap is the reason why the reason that the Government’s impact assessment has scenarios that rangefrom a 50–95% reduction in the uptake of solar. However, it should be noted that some of these scenariosappear to lead to a significant underspend of the cap, which is discussed in detail below. Yet in the consultationthere is no mention of delivering a set level of ambition—though analysis of the figures shows an apparentlowing of ambition, with Element Energy analysis showing the scenarios delivering annual electricitygeneration from PV reaches to between 0.21% and 0.65% of total electricity supplied in 2020.



15. Forcing the industry to contract to such a level would be a waste of the resources already spent buildingit, as well as contributing to increasing the cost of upgrading our energy system and decarbonizing supply byincreasing policy risk and therefore the cost of capital. There is a question of whether we can “afford” tocontract renewable energy production, economic activity, jobs and business opportunities, and confidence inthe renewable energy sector at a time when growth and £200 billion of investment in energy is needed. TheElement Energy research indicates that the impact would be a loss of between 18,000 and 29,000 jobs andbetween £150 million and £230 million in revenue to the Treasury from direct taxes alone. This is representedfrom the Element Energy graph from their report below:

Source: Element Energy Analysis, DECC Impact Assessment Data

Changes to objectives of the feed-in tariff scheme

16. Friends of the Earth believes setting the level of ambition of the scheme should correlate to the scheme’sobjectives and affordability should be examined in this context. However, the objectives of the scheme havebeen modified in the consultation document and so it is worth examining what the objectives of the schemewere, what they are proposed to be, and what the case is for the change. appears the Government is re-consulting on the aims and objectives of the FITs scheme whilst proposing very specific changes to the schemethat could take effect during the consultation. Paragraph 17 of the consultation sets out the aims of FITs as thecurrent administration sees them and paragraph 18 states that they are “broadly similar” to the aims when theFITs scheme began. Rather confusingly paragraph 22 states “we will be interested in hearing views on theseaims and objectives through both the current consultation and the phase 2 consultation.” This is becomes evenmore confused when one reads paragraph 23 which states “Ensuring that the FITs scheme meets the aims andobjectives set out above is the principle objective of the comprehensive review”.

17. The original objectives of the feed-in tariff scheme, designed to drive uptake of small-small renewableenergy (under 5MW), have been variously listed in the original impact assessment (February 2010) as to:

(a) Contribute to meeting the UK’s renewable energy target and carbon savings target.

(b) Provide incentives for an area of renewable energy deployment (small-scale) not successfullysupported by existing incentives (the Renewables Obligation).

(c) Engage the general public in “a better understanding of energy use and acceptance of renewableenergy technologies.”

(d) “Achieve a level of public engagement that will engender widespread behavioural change.”

(e) Drive uptake of a range of small-scale low carbon electricity technologies by a range of targetgroups in order to deliver a higher rate of deployment.” These target groups are later referenced ascommunities, individuals, businesses, farmers and councils.

18. Additionally, not listed as an objective but clear from the design of the scheme listed in the ImpactAssessment is to drive costs down by increasing deployment. The 2010 Impact Assessment describes“degression rates which reduce tariff levels by a fixed percentage each year for new installations to reflect fallsin technology costs over time and to drive innovation and cost reduction”. Both the degression and the inbuiltplanned review system highlight this. The Conservative Green Paper that first advocated a Party position ofsupporting the introduction of feed-in tariffs noted:



“Moreover, as recent studies carried out for the Energy Saving Trust indicate, the need for costlyfeed-in tariffs to support nascent micro-generation technologies is likely to decrease sharply as timegoes on and the costs of these technologies continue to decrease. It is precisely because of the factthat the costs of these technologies will continue to decrease as they mature that it is justifiable tosubsidise them initially through feed-in tariffs, to the point where they become mass-markettechnologies which can compete on equal terms with centralised generating plant based on existing,mature technologies.”12

19. The current consultation makes two significant changes. Firstly, it suggests it is no longer an aim of thesolar feed-in tariff to contribute to renewable energy targets. Secondly, it removes the aim of driving smallscale deployment among the aforementioned non-traditional “target groups”.

20. The consultation does note that “The FITs scheme is designed to promote take up of small-scale low-carbon electricity technologies by the public and communities. This is part of a portfolio approach to meetingthe UK’s renewable energy target “. It goes on to say:

“The analysis underpinning the Renewables Roadmap is based on a benchmark that the marginalcost (in terms of subsidy) that is currently considered necessary to deliver the UK’s renewable targetis 9p/kWh. In other words, our analysis shows that if we offer this level of support (or lower) to arange of technologies, the UK target will be met, without the need for subsidy at higher levels. This9p/kWh level is broadly equivalent to two Renewables Obligation Certificates (based on 2012–13costs). Any additional support for renewable energy technologies above this benchmark thereforeneeds to be justified on other grounds. In the case of FITs, we consider that this justification isprovided by the fact that the scheme’s aims include contribution to wider low carbon goals, as wellas the renewable energy target. These wider aims include:

— empowering people and giving them a direct stake in the transition to a low-carbon economy;

— helping develop a supply chain that offers households a wide range of cost effective measuresto lower their energy use and carbon emissions;

— Assisting in public take-up of carbon reduction measures, particularly measures to improve theenergy efficiency of buildings.

These are broadly similar to the aims set when the FITs scheme began.”

Friends of the Earth disagrees that these aims are broadly similar. To take the first, it is a fundamentalchange implying that the solar feed-in tariff is no longer required to contribute to renewable energygeneration targets—a fundamental aim of the scheme. No mention is made as to whether carbonsaving is proposed to still be a relevant goal under the review.

21. There are a number of reasons why we believe solar should contribute to renewable and carbon savingtargets. Firstly, to take costs now rather than cost trajectories is to fundamentally misunderstand the value ofthe feed-in tariff scheme, the point of which is to drive down policy cost. Indeed, the feed-in tariff has beenshown to be the most effective policy in driving down the cost of renewable energy worldwide, according tothe IPCC’s fourth assessment report.13 While solar is currently more expensive than offshore wind, the mostmarginal cost technology, the cost is coming down faster than any other technology (30% this year) and it isexpected to not require subsidy, if properly supported, by the end of the decade, according to Ernst and Younganalysis.14 There are reports that at the largest scales (5MW) in the south west projects are already starting tocome through at the 8.5kw/h level—although smaller schemes are a few years away from this. The speed ofindustry savings makes the recent Committee on Climate Change assessment that solar would not becompetitive with offshore wind by 2040 out of date.15 This means that solar has a different support profile—more support is required now, but less overall.

22. Despite the focus on marginal cost in the FIT consultation in reference to renewable energy roadmap,the Renewable Energy Roadmap itself states that it “focuses in particular on the 8 technologies that have eitherthe greatest potential to help the UK meet the 2020 target in a cost effective and sustainable way, or offer greatpotential for the decades that follow”17 [our emphasis] and rightly so. Cost curves are static snapshots of acertain year; they don’t tell you where a technology might be on the curve five or ten years later with support.Wave generation is currently expensive yet everyone rightly considers it worth supporting to encourageinvestment in innovation and to get it to commercial scale deployment—as set out in the Renewables Roadmap.Simply letting technologies fight it out based on their current cost is not a sensible strategy for ensuring wedevelop a diverse renewable energy mix and support emerging technologies. The below graph from the recentElement Energy Work highlights historic falls in the cost of Solar PV, and below that the price decline thisyear in installations in the UK.



23. The impact assessment suggests that the total “cost” in policy terms—as distinct to from the costs onbills—of delaying the cuts until April is £10 million a year. This is the net cost after the costed carbon savingsof extra solar PV are subtracted from what is assumed to be higher “resource costs”—the macro financial coststo society of deploying more solar rather than other means of electricity (more solar is assumed to be more“expensive” to society than the alternative). The impact assessment provides no explanation of how theseresource costs are calculated and the assumptions underneath them. Respondees to the consultation areapparently asked to take these figures on trust. Friends of the Earth has emailed officials at DECC asking formore explanation about how these figures have been arrived at but at the time of writing had not received aresponse; it is in our view unacceptable that a key document underpinning the consultation is not supportedwith the necessary facts and figures to allow full engagement from stakeholders.

24. The second is that it is likely that this estimate of resource costs places little or more likely no emphasison the non-financial benefits that decentralised energy brings. Indeed £10 million per year—which amounts to



less than 40p a year for every man, woman and child in the country—seems to us a small price to pay for thebenefits brought.

25. The speed of deployment of solar is a significant benefit when many technologies will take years todeliver. The IEA warns we have five years to switch to low carbon energy or be locked into irreversibleclimate change.18

26. Additionally, the feed-in tariff, and within that the solar feed-in tariff, is critical for bringing forwardsmall-scale renewable electricity generation at the local and regional level—it is the only mechanism that doesso. This is essential for a number of reasons. Firstly, there is huge technical potential at this level. Research byPoyry and Element Energy for the Government identifies a technical potential of 131TWh available from sub5MW renewable sources in the UK.19 A study by Dr Brenda Boardman of Oxford University’s EnvironmentalChange Institute for Friends of the Earth and The Co-operative Bank on how to cut carbon emissions from thedomestic sector by 80% while ending fuel poverty found that in addition to energy efficiency, every home willneed renewable technologies installed to generate clean heat or electricity. That is approximately 25 millioninstallations required in the next 42 years at a rate of 600,000 a year. Just over 100,000 solar projects havebeen installed since the start of the scheme. According to DCLG achieving even a 60% cut in carbon emissionsfrom the UK’s housing stock by 2050 will require a significant take-up of micro-generation technologies.20

27. The second aim is also important—to drive take up by target non-traditional groups. The changing ofthis is consistent with recent ministerial claims that the scheme was designed primarily for householders, whichis manifestly not the case from both the original impact assessment, and statements of Ministers and ShadowMinisters from both sides of the House at the time of the introduction of the scheme. For example, CharlesHendry said:

“The idea behind it is to allow the inclusion of non-commercial scale projects, such as those thatwill be installed by homeowners, small businesses, local authorities, community groups, farmers andothers. That would help out hospitals and schools that want to facilitate greater use of renewablesand ensure low emissions as part of our 2020 targets. It would also help households to reduce theirreliance on the grid, ameliorating levels of fuel poverty.”21

This wider role has been understood by the Coalition parties, who both supported the introduction of thescheme, called for an increase in its ambition in April 2010, and committed in the Coalition Agreement to“encourage community owned energy where local people benefit from the energy produced.”22

28. Friends of the Earth believes that local people must be involved in and benefit from the transition to alow carbon future in order for the scale of transformation needed to take place, (by promoting engagement andtake up, as noted in the “impacts” section above, and additionally so that this can take place in a moreequitable way.

29. Solar PV is particularly important among the small-scale renewables in providing access to renewableenergy to wide sections of society and engaging them with renewable energy. This is because solar is moreeasily deployed in a wider range of locations than other, both in terms of geographical locations and differenttypes of build environments—such as urban and rural settings. This is recognised by Government who in theoriginal impact assessment for the scheme (February 2010) recognised that “PV is easier to deploy than othertechnologies and carries less risk to the investor since it is a tried and tested technology.” This allows manygroups—from businesses such as Marks and Spencer who have invested in solar roofs for some stores, to locallandmarks with high visibility like football clubs, schools, hospitals, and churches.23 Typically it also enjoysmore support from communities and fewer barriers in planning than other renewable technologies and thereforecan be deployed at a much faster rate.

Setting the level of ambition in line with scheme objectives

30. The level of ambition the solar FIT should be seeking to reach, and tariff rates, should therefore bedetermined by what is needed to meet the scheme’s initial goals of contributing to carbon and renewabletargets, involving target groups, and engaging the public. Additionally the scheme should continue to bedesigned to build up an industry and drive down prices, so that the FIT, as a transitional subsidy, can beremoved promptly.

Objective 1: Meeting renewable and carbon targets

31. In addition to meeting the 2020 renewable energy target, we believe the scheme, and energy policy ingeneral should also be set with a view to meeting the Committee on Climate Change’s recommendation ofalmost entirely decarbonising the electricity supply by 2030 in order to stay with carbon budgets set by theCommittee under the Climate Change Act. Friends of the Earth believes should be done primarily throughreducing energy demand and renewable energy. Delivering around 52TWh of solar PV by 2030 would requirea similar build-up of the solar industry and rate of deployment to that delivered by the feed-in tariff in Germany,but following 10 years behind (see below graph). This level of solar deployment, alongside effective policieson demand reduction and on other renewables deployment, would give a balanced mix of energy technologiescompatible with meeting the CCC’s decarbonisation target primarily through renewable energy and demandreduction.



32. In the feed-in tariff debate in parliament on the 23 November, both Greg Barker and Chris Huhne setmuch stock by delivering a feed-in tariff “like Germany”. Germany went from 0.08 GW installed solar in2000, to 10 GW in 2009 (with 4 GW installed in 2009 alone),25 and then 17 GW in 2010 (7 GW installed in2010).26 Their 2050 report implies 110 TWh and 110 GW is possible by 2050.27 Following German deploymentrates (but 10 years behind them) would give the below deployment scenario, and is consistent with griddecarbonisation by 2030.

Source: Friends of the Earth graphic, DECC Impact assessment and German Installation data (referencedabove) Red, green, purple lines are from DECC’s 2010 and March 2011 FIT Impact Assessment. Blue line isGerman solar installation 2000–10, ie from the start of their FIT].

33. What is surprising about this level of ambition is its affordability. Element Energy have modelled analternative “moderate growth” scenario where the sector grows by 25% for the next two years towards 1GW/yr. Such a scenario would allow the sector to continue to create new jobs as the installation rate rises, and wouldlead to significantly higher electricity generation than the level in DECC’s Impact Assessment. According tothe report, this delivers three times the amount of electricity than the Government’s proposals by 2014. Itrequires just an additional £867 million—or an average of £214 million over the remaining years of the CSRperiod (equivalent to a total of 60p a month on household bills by 2014, if it were to be bill-payer funded)—or 75% extra budget for 300% extra electricity.

34. This level of deployment is also consistent with that needed to build a mature industry capable ofbringing costs down. The Solar Trade Association’s costed Solar Revolution Strategy concluded a mature 1GWpa market would reach competitiveness with retail electricity prices around 2017–19 and would cost householdsapproximately £6.50–£9.00 per annum (consistent with the Element Energy model). This investment is toincubate a technology that can then go on, subsidy free, to deliver up to a significant proportion of electricitysupply.

35. Support should also be set at a level that brings in the non-traditional target groups, firstly by settingtariffs to deliver appropriate hurdle rates for different investor types, taking into account the cost of financing.

36. Secondly it is critical to set tariff at such at levels to make split benefit schemes viable. The setting ofthe PV tariff at its current level has been important in allowing social landlords to take advantage of the schemefor the benefit of their communities: this is where, for example in housing association schemes, one partyreceives the FIT income and another the free electricity. Ensuring sufficient tariff rates for community-scaleschemes to generate sufficient return on investment to enable them to borrow capital is crucial. Element Energyfound that financing rates for schemes vary from 5.5% for the lower end of bond market financing to over10% for venture capital financing. European Investment Bank financing can be available for 4.5% but only fora maximum of 50% of the project.



37. Additionally, local authorities need the ability to finance local renewables schemes and should besupported to develop and then replicate best practice models: soft loans should be made available forhouseholds (and businesses) without money in the bank. Ensuring local government, social housing and otherpublic sector bodies are able to use to the scheme to the benefit of the communities they serve and removingbarriers and creating incentives for them to do so is key. This is critical to meeting the scheme’s objectives ofreaching out to target groups and public engagement, as well as a fundamental feature in delivering sociallyjust outcomes and access to renewables. In Germany 51% of renewable energy is community owned.28

Enquiry Theme 3: How Scheme has been Managed so far, and the Impact of the Management ofthe Scheme

38. The scheme has not been well managed since the 2010 General Election. Firstly, the capping of thescheme and decision by Treasury (not the ONS) to classify the FIT as imputed tax and spend was not atransparent or understandable process—nor was it consulted on. The “fast-track review” for large-scale solarearlier this year was poorly conducted. Firstly, the primary objective of the consultation was to remain withinthe CSR spending envelope, and in doing so it merrily tore up the design of the scheme: in the original designtariff rates were set to deliver a specific rate of return designed to achieve a particular level of deployment.Arup found that at the time of setting the tariffs “For systems in the 250kW and above band, the Internal Rateof Return [IRR] would reduce to 0.5%, which is much too low to attract investment. For 200kW the IRRwould reduce from 9% to around 3.5%. This would take it below the commercial hurdle rate and make itdifficult to justify such a project on a commercial basis. This would imply that all interest in large scale PVwould be ended with the new levels”.29

39. The current consultation is a step forward if only in the respect that tariff levels are now being set againto deliver a particular return on investment, however still not in order to meet any particular level of ambitionas per the original “rate of return model”. Additionally the ministerial justification for the review was spurious.It rested on responding to the “solar farm threat”—yet cut projects right the way down to 50kW schemes—roughly the size of 15 domestic roofs, and including projects on schools, hospitals and football clubs. This wascontradicted by the consultation’s own (very conservative) definition of a solar farm as being at the 250kWlevel. The consultation received over 500 responses, and over 81% disagreed with the proposals, yet nothingwas changed from consultation to implementation.

40. The comprehensive review of the scheme was announced at the same time as the fast-track review, on7 February 2011. The consultation was due to be released, according to DECC officials, in June, and then,“over the summer” and then in September. There was no update other than “soon” until the rumours of asudden and drastic cut began to emerge in October, preceding the October 31 announcement.

41. The announcement that rates were proposed to be cut just six weeks after the consultation began, andbefore the consultation period closes, has had a profound impact which is explored below. However, continuingto insist the spending cap is stayed within for the spending review period, and contracting the industry frombetween 50–95% as proposed in the current reviews impact assessment, will have an even greater impact. Theproblem here is the arbitrary, Treasury-imposed, cap itself. It is likely that if the spending cap is not addressed,a further shambolic review will be needed to keep within it again as costs continue to fall. Such a frameworkwould be threatened by constant review. The Government’s Control Framework for Levy-Funded Spendingmakes it clear that policies will be subject to repeated modification when the priority is keeping within afinancial cap, rather than ensuring policy success and industry stability. In response to whether reviewed policeswill be re-reviewed the document says that “regular review is a feature of all control framework polices.”30

This fundamentally undermines confidence of both the industry and investors that feed-in tariff rates, or indeed,that or other policies, will be un-tampered with for any given period of time—pushing up policy risk andtherefore the cost of capital, and ultimately the cost to the consumer per tonne of carbon saved. Greg Barkerin November of last year promised “TLC” for energy policy—transparency, longevity, and certainty.31 Constantre-reviews are the antithesis of this.

42. This repeated reviews this year has already led to repeated distribution to projects, such as CommunityEnergy Warwickshire who had planned two 70kW schemes on local hospitals in advance of the fast-trackreview, which were then downscaled to 50kW and now risk not going ahead following the latestannouncement.32 David Parsons, Chair of the Local Government Association Environment Board has said“Rushing through these cuts before the consultation has even finished is going to leave local authorities stuckbetween a rock and a hard place. Solar panel schemes that were commissioned based on the promise of theprevious rate of subsidy will be jeopardised with many councils unable to meet the shortfall. ‘‘To expectcouncils and the solar industry to deliver projects and have them registered by OFGEM within six weeks isunrealistic and unacceptable. “Local authorities now face the difficult task of telling hard-up tenants that theywill no longer be able to deliver on the promise of reducing their energy bills. “According to the LGA, TorbayCouncil’s plans for PV installations across 45 public buildings including schools are being put on hold, whileWrexham County Borough Council’s work on a 3,000 solar panel council housing scheme, expected for March2012, could be derailed.33

43. The Church of England is also concerned about the impact and like many investors is taking the 12thDecember date proposed in the consultation as a foregone conclusion. Their e-petition reads: “The Governmenthas announced proposed changes to the Feed in Tariffs scheme for small scale low-carbon electricity generation.



The proposed cut-off date for the current rate of Fits has been set as the 12 December 2011, instead ofpreviously announced 31 March 2012. Church and synagogue led schemes working to utilise Fits for Solar PVhave been developed to generate further funds for sustainability, social action, and community projects.Significantly reducing the Fit ahead of schedule removes an opportunity for communities to reduce their carbonfootprint and harms funding for further community work.”34

44. Additionally, as well as impacting community projects the 12 December date is having an effect on thesolar industry as a whole. A survey conducted by the Renewable Energy Association and the Solar TradeAssociation reveals that:35

— Initial impact may result in employment levels falling by 42%.

— 95% of social housing tenants may not get the PV panels they were expecting.

— 33% of companies fear they may be forced to close.

— 90% of companies say the proposed cuts are too deep and too fast.

— 98% of companies alarmed by Government’s treatment of the UK solar industry.

45. The CBI’s Executive Director John Cridland has noted the wider impact that this will have onGovernment’s green projects due to the destroying of investor confidence in the Government. He said: “Movingthe goal posts doesn’t just destroy projects and jobs, it creates a mood of uncertainty that puts off investorsand they wonder what’s coming next. Some companies have invested heavily in solar photovoltaic systemsand in the supply chains needed to install them. That commitment has been undermined by the feed-in tariffdecision—and so industry trust and confidence in the Government has evaporated. This bodes poorly forinvestment in future initiatives. A new industrial policy needs to recognise the real-time costs of these decisions,and should set out a clear path that investors understand and can believe in.”36

46. The below information on impacts on community schemes has been provided to Friends of the Earth.

(a) Brighton Energy Co-operative

Brighton Energy has cancelled its share offer as a result of the announcement of the 12 December eligibilitydate for solar PV schemes. It was impossible for the group to raise funds, install and commission solar arrayssooner than March 2012, and the proposed new tariffs make the scheme financially unviable. Brighton EnergyCo-op had planned to install PV panels on two churches and at Shoreham Port. The surplus generated fromthe feed-in tariff would have allowed the group to create a low carbon fund to help people living in fuelpoverty to insulate their homes.

(b) South Yorkshire Housing Association

South Yorkshire Housing Association is a Registered Social Landlord, and raised finance to launch its PowerRoofs scheme, fitting solar panels to social housing in South Yorkshire. As a result of the feed-in tariff cuts,£1 million of planned PV installations have now been cancelled by the housing association. Craig Jackson:“The criticism of the feed-in tariff when it launched 18 months ago was that it was a scheme that was just forthe rich. Now, it really is just a rich person’s plaything. At least with more generous rates we could dosomething that would help the fuel poor. We ploughed the surplus back into other services, such as providingdedicated energy efficiency advice to our tenants. Now, tenants will be paying for the feed-in tariff throughtheir energy bills but will have no way of gaining any benefit from it.”

(c) Morecambe Bay Community Renewables (MORE Renewables)

MORE Renewables intended to invest £380,000 in community solar PV projects before 31 March 2012,with £20,000 already committed in start-up costs. However, the drastic cuts in the feed-in tariff have scupperedthe project. The share offer which would have raised the money is on hold, and the project manager has hadhis contract terminated. As a result, seventeen community organisations have been denied the chance togenerate their own renewable electricity and reduce their energy bills and carbon emissions.

(d) Gloucestershire Community Energy

Gloucestershire Community Energy was preparing to launch a community share offer to raise £400,000 toinstall solar PV on the roofs of schools, village halls and church and a community centre across the countywhen the feed-in tariff review was announced. As a result, the group has had to significantly scale down itsambitions, with the community centre likely to be the only recipient of solar panels now, meaning that manyothers will lose the opportunity to benefit from reduced electricity bills.

A huge number of other projects have either already been cancelled or are at risk including:

Brixton Solar—Bath and West Community Energy—OVESCO—Community Energy Warwickshire—ONCORE—Leominster Community Solar—Bristol Energy Co-operative—The Solar Coop—Wey ValleySolar Schools—Whittington and Fisherwick Environment Group—Low Carbon Chilterns Co-op—LutonBorough Council—Leeds City Council—Mid Wales Housing Association—City of York Council—WrexhamCouncil—Reading Borough Council—Waltham Forest Council—Torbay Council—Cambridge CityCouncil—Westminster Council—Barnsley Council—Bournemouth Council—Bristol City Council—



Crawley Borough Council—Eastbourne Council—Hampshire County Council—Peterborough CityCouncil—Redditch Borough Council—Surrey County Council—Uckfield Council—Waverley BoroughCouncil

Impact on business confidence

47. In response to the fast-track review Jerry Stokes, President of Suntech Europe, a leading supplier ofphotovoltaic modules in Europe said: “This very disturbing sudden and massive reduction from previoustariffs damages attractiveness for investment and sustainable job creation in the UK and jeopardizes significantinvestments and planned investments already undertaken. Fit reduction is healthy for the longevity of themarket and when well-planned encourages both market growth and investment but also reduction in cost andrapid convergence to distributed energy costs—so called grid parity. Unfortunately, the proposals made in theconsultation document have ignored European and global best practice which has been established in countrieswhose long term commitments to supporting renewable energy is well ahead of the UK. We should learn fromthe mistakes made elsewhere rather than creating another mistake from which others will benefit.”37 AmiramRoth-Deblon, Head of Business Development New Markets, juwi Solar said: “It certainly puts all ourdevelopments on hold until we know what the FiT is. Further our trust in the Government is knocked. We willnot invest further into the UK market unless the FiT changes for the better.”38

48. There has been a wider impact on investor confidence in the Government’s commitment to renewableenergy as a whole. Ernst and Young said in response to the fast-track review that “the whole investor marketwas totally disengaged as a result of the Fit being ripped up,”39 while Daniel Guttman, a Director, at PwCRenewables and Clean Tech, reports that “At a high level, a review of FiTs so soon after their introductiondoes not help the UK’s reputation as a location for cleantech investment…The other possible impact is thatinvestors and businesses lose their trust in the UK’s intentions towards other renewables and clean technology.40

Inquiry Section 4: Affordability of Solar Photovoltaic Energy versus Other Renewable Energy(given the overall Levy-Funded Cap for Energy Bills) and the Impact of Feed-in Tariffs onEnergy Bills

49. In this section the impact of different proposed scenarios on the spending cap, the flexibility of thespending cap, and the rationale of the spending cap is examined. The costs of Solar PV specifically have beendealt with above.

Costs to consumers

50. The impact assessment suggests that the “costs to consumers” of sticking to the original date of April2012 for the cuts to FIT tariffs, rather than the new December 2011 proposed date, would increase these costsby £60 million a year—which translates as less than £1 on the average domestic energy bill (<0.1% of atotal bill).

51. On paper, the April scenario appears to break the “budget” set for the cap over the whole CSR period,but this is flawed for a number of reasons. Firstly, DECC is allowed to overshoot the budget by 20% withoutrecourse to drastic action, and Government projections suggest that the April date scenarios could beaccommodated under this overshoot headroom. Secondly, the cap itself is a flawed concept, the operation ofwhich is shrouded in mystery, as described above. And thirdly, were Government genuinely committed to theobjectives of the FITs programme and the creation of stable employment and industry in the solar sector, itcould easily find alternative ways to fund the scheme, either in full (as with the RHI) or in part, to cope withany overshoot; the last year has shown examples of when the Government is perfectly able to find extra fundingwhen it chooses—such as to freeze fuel duty, or encourage councils to return to weekly bin collections.

52. One of the two reasons given for the need to introduce the December date is that the fear of higher thanpredicted take-up will mean spending “very rapidly result in the spending envelope for the FITs scheme beingbreached” (consultation document). Yet despite the significant impact that the proposal to move to Decembertariffs would have—and is already having—the Impact Assessment does not paint a clear case for why thespending envelope will indeed be breached. Its “central” estimate for take-up under its chosen scenario comesin 17.2 per cent under budget—and that is to ignore the 20% headroom that DECC is permitted by Treasuryto overshoot the budget by before the sort of urgent corrective action it is taking is actually required to happen.Even allowing for other FIT technologies it seems that the proposal to move to a December reference date,rather than new tariffs simply beginning in April, is an unnecessarily extreme response.

53. As the consultation document goes on to explain, the Government has put in place a “Levy ControlFramework” which sets out this spending envelope: it is in effect a cap on the total amount of FITs paymentsfor the four years of the current Spending Review period:



£m 2011–12 2012–13 2013–14 2014–15 TOTAL

Budget 80 161 269 357 867

54. The Impact Assessment presents estimated costs for its three main scenarios. Its central estimates aresummarized below.

2011–12 2012–13 2013–14 2014–15 TOTAL Over / Over /under under

budget budget(£m) (%)

Budget £m 80 161 269 357 867Scenario 1: no changes to 110 360 570 790 1,830 +963 +111%tariffs2: with Without 110 210 220 230 770 -97 -11.1%December energyreference efficiencydate requirement

With energy 110 205 210 215 740 -127 -17.2%efficiencyrequirement[lead option]*

3: without Without 110 270 280 290 950 +83 +9.6%December energyreference efficiencydate requirement

With energy 110 265 270 275 920 +53 +6.11%efficiencyrequirement*

55. Source: Impact Assessment. * DECC provides possible ranges for take-up—we use the central figurefor a given range.

Source: Friends of the Earth graphic based on data in DECC Impact Assessment

56. These projections imply the following:

(a) Under DECC’s lead scenario (2b), in which new tariffs are introduced from April, with aDecember reference date and an energy efficiency requirement from April, the total “cost” ofthe FIT is significantly under the £867 million four-year Spending Envelope, by 17.2%. TheSpending Envelope is not just being respected: it is being very comfortably undershot.

(b) Under the equivalent scenario (3b) without the December reference date, the total “cost” of theFIT is slightly over the four-year Spending Envelope: 6.11%. The Spending Envelope is beingexceeded, but only slightly.

57. In any case, it is highly relevant—but not mentioned at any point in the consultation—that the conditionsattached by Treasury to the Levy Control Framework is that DECC is permitted to exceed the SpendingEnvelope by up to 20% before it “has to develop urgently plans to bring policies in line with the cap”: “DECCand the Treasury will agree at the outset a range of acceptable headroom above the cap, which will representthe level of permissible variation before DECC has to develop urgently plans to bring policies in line with the



cap… The acceptable headroom will initially be 20% of the total cap but will be reviewed during theRenewables Obligation Banding Review and the Feed-in Tariffs Comprehensive Review”.41 No mention ismade in the current consultation of any review to this 20% headroom, it is reasonable to assume that itstill stands.

58. Making allowance for the existence of a 20% overshoot before urgent action is needed, all of theproposed scenario budgets now appear to comfortably fit within the permissible headroom—appearing to leaveample room even under the most “expensive” scenario for other technologies. DECC has provided no data inthe current Impact Assessment on the expected trajectories for the other technologies supported by the FIT,such as hydro, wind or anaerobic digestion, so it is impossible to judge how much “headroom” should beprovided in the budget to allow for these other technologies. The Government’s proposed scenario would leave£300 million available for other technologies under the 20% headroom.

£m TOTAL Over / under budget Over / under budgetwith 20% headroom with 20% headroom

(£m) (%)

Budget 867Budget with 20% headroom 1,0402: with December Without energy 770 -270 -26%reference date efficiency requirement

With energy efficiency 740 -300 -28.9%requirement [leadoption]

3: without Without energy 950 -90 -8.7%December efficiency requirementreference date With energy efficiency 920 -120 -11.6%

requirement

59. The point is not necessarily to state that straying into the 20% headroom territory is something overwhich the Government should have no qualms. However given the tremendous impacts that rushing for aDecember date will have on schemes and the implications for investor confidence in the Government’s greencredentials, it seems clear that the imperative to make the cuts proposed as the lead option appears to beoverstated.

60. In practice, the “budget” is itself something of an arbitrary construct, and the very concept of using it asjustification for the earlier tariff cuts is questionable. At the macro level the “cost” of the FIT is zero: FIT isfunded through levies on energy bills, with payments then recycled to FIT recipients from a central fundingpot. The “budget’s relevance in terms of impacts on bills is found not in the “cost” of the scheme but in itsbreakdown of what the scheme costs for those households who do not receive the FIT. It is a distributionalproblem, not one of absolute “cost”: who pays, and who benefits?

61. Levies on bills are inherently regressive, because bills themselves are regressive—the structure of billcharging is such so that lower energy users do not get charged proportionately less than higher bill users. Ifthe Government is concerned about the impact on poorer households of the FIT, it is proceeding in entirely thewrong direction: sweeping the rug from under schemes such as council-led or social housing providers willruin access to FIT for many households on lower incomes. It should be working to reform the FIT levy so that



it is charged more fairly—for example on the basis of units of consumption not levied as a flat rate—andensuring that those in the lower income deciles disproportionately benefit.

62. Friends of the Earth disagrees with the contention that nothing can be done to change the cap on thefeed-in tariff scheme. There are many options open to Government. First of all, simply to abandon the capitself; as stated above the cap is arbitrary and is a fundamental change to the scheme brought in withoutconsultation during the course of the Comprehensive Spending Review. Other European countries, such asGermany, do not operate with such a cap. Secondly, Friends of the Earth has been told that Treasury MinisterDanny Alexander was asked why caps of the different policies that fall under the control levy framework capcould not be flexible, to allow for underspend in one to help with overspend in another; he said that nobodyfrom the Department of Energy and Climate Change had asked him. This is confirmed by Chris Huhne’sstatement to MPs that he had not asked the Treasury whether this was possible. 42 Mystery shrouds the operationof the cap, what flexibility there is, and whether spending between different policies under the cap can betraded—and Ministers themselves do not seem to know.43 On 3 November Friends of the Earth wrote toTreasury asking for clarification on how the cap works in practice; on 14 November we received a holdingreply informing us that we would receive a response by 2 December; by this time over four weeks will havepassed from our original enquiry.

63. Fourthly, the Government has other options than to pay for the feed-in tariff from levies on bills. TheRenewable Heat Incentive is now to be funded from general taxation. There is no reason whatsoever why thesame principle could not be adopted for the feed-in tariff—either in full or in part, to cope with any “overspend”against the cap. There appear to be available income streams from green programmes that could be used inthis way, including the CRC, the carbon floor price, and the EU ETS—the latter of which the ConservativeParty has previously said should be used to fund a feed-in tariff through a “Decentralised Energy Fund”. Asspelled out above, the Treasury benefits from increased tax inflows generated by increased economic activitycaused by the feed-in tariff scheme that could contribute towards.

References1 Element Energy report for Friends of the Earth and Kingspan, “Implications of the Comprehensive Reviewof the Feed-in Tariff for the UK PV Industry”, November 2011

2 http://www.reuters.com/article/2010/12/06/us-germany-solar-idUSTRE6B53L220101206

3 Lord Marland in House of Lords responding in feed-in tariff debate, July 2011

4 Element Energy report for Friends of the Earth and Kingspan, “Implications of the Comprehensive Reviewof the Feed-in Tariff for the UK PV Industry”, November 2011

5 Presentation by Craig Jackson, South Yorkshire Housing Association at Friends of the Earth Councils,Communities and Climate Change Conference, 2 November 2011, London.

6 http://www.renewablesinternational.net/citizen-owned-green-power-in-germany/150/537/32311/

7 http://www.ofgem.gov.uk/Markets/RetMkts/rmr/Documents1/RMR_FINAL.pdf

8 IPPR, Green Streets, Strong Communities http://www.ippr.org/publications/55/7703/green-streets-strong-communities

9 Good Energy, Feed-in Tariff Report, 2011, http://www.goodenergy.co.uk/feedintariff/good-energy-feed-in-tariff-report

10 DECC, 1 February 2010 a. Impact Assessment of Feed-in Tariffs for Small-Scale, Low Carbon, ElectricityGeneration (URN10D/536 http://www.dekoepel.org/documenten/FITsImpactAssessmentaccompanyingGovernmentResponse[1].pdf

11 Friends of the Earth “Briefing: In defence of feed-in tariffs” March 2010 www.foe.co.uk/resource/briefings/monbiot_fits_response.pdf

12 Conservative Party Green Paper “Power to the People—the Decentralised energy revolution” 2007

13 IPCC’s fourth assessment report

14 STA, Solar Revolution Strategy, May 2011, http://www.solarpowerportal.co.uk/assets/attachments/Microsoft%20Word%20-%20Solar%20Revolution%20Strategy%20-%20REPORT%20-%20FINAL.pdf

15 CCC, Renewable Energy Review, May 2011, http://www.theccc.org.uk/reports/renewable-energy-review

16 DECC, Renewables Road Map, 2011 www.decc.gov.uk%2Fassets%2Fdecc%2F11%2Fmeeting-energy-demand%2Frenewable-energy%2F2167-uk-renewable-energy-roadmap.pdf&ei=cQbPTueEE8HL8QOGs_TADw&usg=AFQjCNECqDW5kwzAlOI4hoF7zv8xmSeGJw

17 CCC, Renewable Energy Review, May 2011, http://www.theccc.org.uk/reports/renewable-energy-review

18 http://www.guardian.co.uk/environment/2011/nov/09/fossil-fuel-infrastructure-climate-change



19 Qualitative issues in the design of the GB feed-in tariffs, Poyry and Element Energy, June 200920 Review of Sustainability of Existing Buildings: The Energy Efficiency of Dwellings—Initial Analysis,DCLG, 2006.21 Charles Hendry, 18 Nov 2008 http://www.publications.parliament.uk/pa/cm200708/cmhansrd/cm081118/debtext/81118–0006.htm22 Coalition Agreement for Government, May 201023 Friends of the Earth “Consultation Response: Fast track Review of Feed-in Tariffs” May 2011www.foe.co.uk/resource/briefings/fits_fast_track_response.pdf24 http://www.westminsterforumprojects.co.uk/forums/event.php?eid=37325 http://www.bmu.de/files/english/pdf/application/pdf/broschuere_ee_zahlen_en_bf.pdf , p1426 http://www.erneuerbare-energien.de/inhalt/47055/3860/27 http://www.umweltrat.de/SharedDocs/Downloads/DE/02_Sondergutachten/2011_Sondergutachten_100Prozent_Erneuerbare.pdf?__blob=publicationFile28 http://www.renewablesinternational.net/citizen-owned-green-power-in-germany/150/537/32311/29 Analysis by Arup Consulting for Friends of the Earth30 Control Framework for DECC levy-funded spending, Questions and Answers, DECC, 29 March 2011, p1531 Greg Barker, November 2010, www.decc.gov.uk/en/content/cms/news/micro_council/micro_council.aspx32 A list of known affected community projects is being updated here: https://docs.google.com/a/sharenergy.coop/spreadsheet/ccc?key=0Arm5tIWT6huTdDlUZUExVjlwcVYyOWxRaU5HZFRHcUE&hl=en_GB#gid=033 http://www.localgov.co.uk/index.cfm?method=news.detail&id=10402334 http://www.churchcare.co.uk/news.php35 http://www.solarpowerportal.co.uk/news/fit_cut_aftermath_11000_jobs_face_axe_33_companies_face_closure_says_rea_su/36 http://www.google.com/hostednews/ukpress/article/ALeqM5iI8QLqZYN-TZG_zF5eAaAf2eqTeQ?docId=N0578421320936398883A37 http://www.pv-tech.org/guest_blog/uk_fit_review_we_will_not_be_moved?utm_source=pvtechfeeds&utm_medium=rss&utm_campaign=guest-blog-rss-feed38 http://www.pv-tech.org/guest_blog/uk_fit_review_we_will_not_be_moved?utm_source=pvtechfeeds&utm_medium=rss&utm_campaign=guest-blog-rss-feed39 http://www.bbc.co.uk/news/business-1279061340 PriceWaterhouseCoopers, 18 March 2011,www.ukmediacentre.pwc.com/content/Detail.aspx?ReleaseID=4139&NewsAreaID=241 http://hm-treasury.gov.uk/d/control_framework_decc250311.pdf (March 2011)42 http://www.publications.parliament.uk/pa/cm201012/cmselect/cmenergy/uc1623-i/uc162301.htm43 http://www.publications.parliament.uk/pa/cm201012/cmselect/cmenergy/uc1623-i/uc162301.htm

25 November 2011

Written evidence submitted by G-CEL

Summary

G-CEL is a community based programme operator promoting free solar panel installations to low incomefamilies.

— We propose a definition of a community based programme operator.

— We would like to see a return to the original tariff reduction recommended in the governments 2010announcement of the FIT tariff with consideration being given to establishing a community basedproject FIT tariff.

— We consider the proposed changes to the FIT tariff to be detrimental to the solar PV industry ingeneral and will specifically exclude low income families from the energy saving benefits.

— The proposed reduction in the FIT tariff has had a major impact for funding community basedprojects. To the extent that private funders have withdrawn from the market place.



— We consider the affordability of the Solar PV programme to be acceptable when compared to theenvironmental benefits accrued from widespread installations of solar panels

Background

G-CEL was established as a community based organisation working within the socially deprived areas ofWales. Each member of the organisation is an established practitioner in the provision of services to supportthe local communities they represent.

G-CEL welcomes the opportunity to provide evidence to the Joint Audit Committee and Energy and ClimateChange Committee G-CEL is a newly established social enterprise working in some of the most socially andeconomically deprived areas in South Wales. The company has been formed to provide support for householdsin fuel poverty, economic inactivity and low incomes. Our definition of a Community project is as follows:

A Community based PV Programme

The definition of a Community based PV programme is one that is:

(i) Based in a clearly defined community area.

(ii) Is managed by a locally recognised social enterprise.

(iii) Is one that provides community support services and a track record in achieving social outcomesfor that community (usually more than five years).

(iv) Can be based on installs on community-owned assets or on private households.

(v) Offers the PV programme completely free to the recipient household.

(vi) Uses the PV programme surplus for the benefit of the community.

(vii) Employs local resources to manage and maintain the PV programme.

A Community PV Programme Operator

A community based PV programme operator and its partner organisations will be one that provides a valuableservice to the community it represents on a not-for-profit basis. Ideally the organisations will have charitablestatus and will have been operational in the community for at least five years before 31 March 2012.

Community Organisations Working in Partnership

The Community based PV programme operator may have formed partnerships with other such organisationswithin a close geographic area, to obtain maximum benefit from a regional approach to the programme.

Beneficiaries within the Community

A community based PV programme operator will have as its clients, households experiencing multipledeprivations, including high levels of unemployment, long-term limiting health problems, fuel poverty, childpoverty, and low levels of education and social mobility. Many of these households will have been encouragedto enrol for the PV programme in order to provide some relief from escalating energy prices. Within acommunity PV scheme the householder will be regarded and treated as an active citizen with a role insupporting and abetting the transformation of their community rather than simply as a passive client. Thecommunity scheme will seek to deepen and broaden the relationship to incorporate other elements such asenergy efficiency, renewable heat and community development so as to continue to bring benefits both toparticipants and the communities in which they live.

Furthermore, profits generated through the business will create a community fund that will be used to createtraining and employment opportunities, new social enterprises, new active citizen schemes and young people’snetworks. This opportunity will be lost without an extension for this particular community project.

Long Term Implications and Responsibilities for these Organisations

The management of community based PV programmes can be both productive in supporting the existingwork of these social enterprises and to provide long term employment opportunities based around maintenance,training and administration. The integration of energy efficiency into the “whole” community approach willadd value to economic and environmental savings attributed to that community.

Retaining locally generated money from the FIT within the local economy supports the “local multipliereffect”, in which money that continues to circulate locally accrues value as it is retained. Supporting such local,inward investment from the FIT can lead to the relative value of that investment being multiplied three orfourfold, with significant positive impact on the local economy.

The long term stability of the PV programme will be enhanced by having a “local” and “accountable”organisation that can administer such aspects of the programme as change in property ownership, issues relatingto maintenance, roof rental payments, monitoring progress towards higher energy efficiency targets andsupporting future renewable energy programmes.



Recommendations

We recommend that DECC consider this definition of a Community Project within the context of this andfuture consultations when referencing Community based Solar PV projects.

G-CEL welcomes the opportunity to provide evidence to the committees as following: Our evidence, whichfocuses on the areas of G-CEL’s activities in the domestic sector and related issues, these comments, shouldnot be taken as representing the views of the individual members of G-CEL.

G-CEL strongly supports the UK Government’s target to reduce CO2 emissions especially it’s longer-termambition of a 60% reduction by 2050. However, it is clear that these challenging targets will not be achievedwithout the introduction of additional and innovative policy measures

The proposed linkage between solar PV FIT payment and improvements in energy efficiency in domesticproperties is to be welcomed, however, We believe that many householder living in properties in the category“Hard to heat” will be severely disadvantaged due to lack of ability to pay for energy efficiency measures.(DECC estimated cost for energy efficiency measures in a solid walled property is £14,000)

G-CEL believes that the UK Government’s targets are achievable if the right policy framework is developedand implemented with regards to the FIT payment mechanism.

1. State of the solar energy market and impact of solar PV to date:

Evidence—The solar PV industry is in a state of uncertainty due to the recent DECC announcement regardingthe cut in Feed in Tariff and the rescheduling of the cut off date to the 12 December. Many feel this isunacceptable and stand to lose financially if these recommendations are implemented. G-CEL considers theproposed changes to be detrimental to progress in community based programmes such as our PV4FREE.

We suggest a staggered reduction in the FIT payment in line with the recommend structure originallyproposed in the 2010 announcement. Consideration should be given to providing a special community basedprojects FIT rate valid until 31 March 2013.

2. Balance between affordability and delivering the objectives of solar PV, including factors to consider whensetting the rate of small-scale FITs, i.e. jobs created, emissions reduced and behavioural change.

Evidence—G-CEL operates a community based FREE PV programme funded by private finance. Theproposed reduction in the FIT tariff will put our programme under threat of closure. This will have a detrimentaleffect on job security within the solar PV industry and locally curtail out efforts to create jobs linked withinstallations, maintenance and associated energy efficiency advice provision. G-CEL has aspirations to createa community based energy efficiency programme interdependent on the PV programme thereby providing lowincome families with greater access to energy efficiency advice.

We predict that the solar panel industry will suffer severe cut-backs in the number of solar PV installationsregistered after 12 December 2011 and a consequential “knock on” effect of lost employment opportunitiesand manufacturing job losses being ranked in the thousands.

Within the UK over a quarter of CO2 emissions come from households. Another quarter comes from carsand public transport. Over 70% of emissions come from buildings and transport of which the majority willcome from the household sector. The real climate change challenge and the biggest potential reductions inemissions are from our streets and homes. These changes must be driven by both the EU and nationalgovernments. Without the awareness, support and action of millions of EU citizen’s climate change goals willnot be delivered. A “low carbon economy” can only be built by a “low carbon society”.

3. Governments management of the Solar PV FITs, impact to date and their management of the consultation

Evidence—G-CEL does not wish to comment specifically on the government’s management of the Solar PVFITs in general. However we will say that until the release of the recent consultation the FITs rates were clearand precise. The long term forecast for the PV solar industry was on a sound footing with considerableincentives to provide growth for the foreseeable future. A 20% to 25% reduction in the FIT payment on 1April 2012 would have been an acceptable reduction for the industry. We would be appreciative of anyconsideration of a special FIT tariff for community based solar PV programmes—any return to the originalcommunity based energy generation concept would be welcomed.

Since the release of the consultation there has been uncertainty in all aspects of the Solar PV industry. Theconsultation indicated that the date 12 December was to be the cut-off date for the 43.3p/kW FIT, and further,even if installations were to proceed after that date the rate would only be payable until 31 March 2012. Thisprovided zero financial incentive for purchasers to consider proceeding with installations after this date. Wefeel the consultation was ill-timed and poorly thought though. Giving a firm date of the 12 December whilethe consultation has a deadline of the 23 December—not really a consultation is it?



4. Affordability of solar PV energy versus other renewable energy and the impact of FITs on energy bills

Evidence—G-CEL is unable to comment on the question of comparative renewable energy sources as it isoutside our remit. We would offer the following observation on the impact on energy bills. Assumption—thereare 25 million households in the UK for every 25,000 solar PV installations each earning an average £1,000per year the averaged cost per household would be £1 per year. These installations would generate 51 millionkW of electricity from carbon neutral sources and reduce green house gases by 25,000 tonnes of CO2emissions annually.

5. Experience of other incentive mechanisms in other countries.

Evidence—G-CEL is unable to comment on this question as it is outside our remit.

Information for the Committee

Why the committee should support community based energy programmes?

G-CEL and other national energy efficiency agencies can show people how to make a difference, but themaximum impact will come only with the whole hearted commitment of the EU and national governmentsthrough their leadership, regulation, taxation and spending policies.

In the opinion of G-CEL, politicians should be implementing major policies that result in real action in keygeneric areas to help individuals reduce their personal environmental impact:

Support Organisations that deliver change at a Local Level such as G-CEL

To deliver the required sea-change in understanding and behaviour on energy efficiency and a low carbonsociety, action must be rooted in local initiatives to change our behaviour in the home. Our day to day use ofenergy is significantly influenced by locally based organisations. Retailers, installers and dealers should beencouraged to advise us to use the greenest products; local authorities have a key role to play in planning andlocal leadership; whilst neighbourhood champions and community based organisations are the key influencersof behaviour.

G-CEL believes that the key priority is to encourage home owners to invest in greening their homes throughincentives in property/energy efficiency improvements and those that can afford to invest should be encouragedand those that are unable to invest should have open access to such free measures that would provide maximumbenefit both now and in the future.

G-CEL would like to raise the issue of funding mechanisms for community based projects as integral to thiswork of the committee. The ethos on the community-based project is to provide households experiencing fuelpoverty with free solar panels that are maintenance-free and insurance-free to the householder. This type ofprogramme requires a long-term commitment from local community based organisations to undertake themanagement of these installations for 25 years. These community based organisations will be ideally placed toco-ordinate a holistic community energy efficiency programme based on the foundation stones laid under theFIT programme. G-CEL recognises the importance of reducing energy use and improving domestic energyefficiency across communities, and as such would recommend an enhanced FIT payment for such communitybased programmes. Consideration should be given to financial incentives to funders of community basedprojects and government support for organisations promoting these community-based projects. We recommenda community FIT payment of 43p/kW until 31 March 2013.

30 November 2011

Written evidence submitted by The Electrical Contractors’ Association

About the ECA

The Electrical Contractors’ Association is the UK’s largest trade association representing electricalengineering and contracting companies. The industry has an aggregate turnover of over £5 billion and employsaround 350,000 operatives and 8,000 apprentices. Our 3,000 members range from local electricians to nationalcompanies with several branches employing thousands. ECA members carry out a range of work ranging fromdomestic heating, lighting and photovoltaic (PV) installation, and installing cutting edge, environmental controltechnology on buildings such as Heathrow Terminal 5.

1. The ECA is greatly concerned about current and future harm to the PV installation sector as a result ofthe hasty and dramatic reduction of Feed-in Tariffs announced in recent DECC consultation. The DECCconsultation has already caused considerable market confusion. The nature of the announcement and the speedof the proposed implementation have severely damaged the credibility of Government-supported greenenergy initiatives.

2. The Feed- in tariffs for PV panels introduced in 2010 provided a much needed boost to constructionindustry jobs and activity, while also providing a widely accessible means of helping to reduce UK carbon



emissions, and publicizing the carbon reduction agenda to consumers. Many thousands of jobs have beencreated and statistics provided by DECC in their consultation show the full extent of the industry.

3. At the initial announcement of FITs there was the proviso that they would be reduced as the industrymatured and the cost of PV installations dropped. As such, it was widely recognized that the current 43.3p/kwh level (for small installations on existing domestic premises) would be pared back in the medium to longterm. A review was announced in 2011, but it was not expected to apply to new FITs until after April 2012.

4. The current lead up to the DECC consultation was, to put it bluntly, a shambles. We note that the EnergySavings Trust (EST) actually published an announcement about the reduced tariffs and other plans, the daybefore the official consultation document was issued. DECC quickly issued a note to say that the EST documentwas “inaccurate” but in virtually every respect the EST information was highly accurate. EST’s document washastily withdrawn, due apparently to “technical problems”. Then, the DECC consultation document set aclosure date for comments which is after the implementation date of the planned lower rates—a key issuesubject to the consultation. This seems highly prejudicial and its practical effects on the sector, and possiblyits customer base, have been both immediate and negative. We understand that the consultation process iscurrently being challenged in the courts by various third parties.

5. The ECA believes that the rushed implementation and drastic reduction of tariff levels will severely harma sector of the construction industry which, for the main part, comprises SME and micro-businesses. The sectorresponded to FITs by creating jobs and wealth which have been of environmental, social and economic valueto the UK, including the Treasury.

6. For investment in green technology to occur, both in capital and labour, businesses need reasonablecertainty and continuity. We would like to see as an outcome from this committee a process for better providingthe various green technology sectors, and notably the PV sector, with conditions which will support businessplanning, a consultation regime based on adequate notice, and no implementation dates before consultation onthose dates finishes. Government consultation is a not new phenomenon, and there seems no justifiable reasonfor the situation we have been presented with.

7. The present DECC consultation has caused utter dismay in some parts of the PV installation sector, whichhas been in the vanguard of creating the very jobs that Government says it wants to see. The negative impactson investors, start-ups and other small businesses, and even potential customers, is likely to be longer term,and not restricted to PV installation. For example, it may damage confidence in the Renewable Heat Incentiveand other forthcoming green initiatives.

8. We are also greatly concerned about the proposal to link FITs to as yet untried energy efficiencyrequirements, including the forthcoming Green Deal. These added requirements, added to a greatly reducedFIT, could have a very serious effect on consumer demand in 2012.

Please be advised that our assessment is that a level of 29p kWh for sub-4kw existing installations, tothe end of 2012, would greatly reduce the FIT subsidies required, support the sector and crucially, ongoingcustomer demand.

9. We welcome the committee’s examination of this topic and we are ready to contribute further to thisissue, as required.

22 November 2011

Written evidence submitted by the National Housing Federation

Summary

Feed-in Tariff: Impact on bills and benefits

— The Department of Energy and Climate Change’s (DECC) own figures show, by 2020, lowest incomehouseholds will be spending up to 15% of income on energy, five times more than the highest incomehouseholds. Carbon reduction levies, including FIT, forecast to lead to increase in bills over 2% ofhousehold income for the poorest, if they receive no benefit in reduced bills, compared with just0.2% for the wealthiest.42

— So if FIT and other levies are not to be highly regressive, reductions in energy costs they financeneed to be biased very significantly towards low income households.

Solar PV in social housing

— Less than 50 respondents to a Federation survey in summer 2011 (about 4% of housing associations)had installed any PV and fewer than 40 others had plans or were in the process of installing, largelybecause of challenge and complexity created by procurement regulations to which social landlordsare subject, and lender negotiations over charging issues.

42 Estimated Impacts of Energy and Climate Change Policies on Energy Prices and Bills, DECC, July 2010, paragraphs 37–41



— In social housing, benefit of free electricity goes to tenant, not the landlord or private partner carryingout the installation.

— Yet great potential for cost-effective installation in social housing, for that installation to producesignificant carbon and fuel poverty benefits, and to support other climate change policies.

Impact of Phase 1 consultation announcement

— Announcement has created great concern in the sector, at the extent of the reductions and the shortnotice.

— Activity halted to nearly 18,000 housing association homes, and impact on confidence andcommitment to climate change policies beyond FITs.

Key recommendations

Government should:

1. Defer effective date of tariff reduction for social housing installations substantially in developmentwhen Phase I consultation published on 31 October 2011 to at least 31 March 2012, as schemestargeted for March are now on hold.

2. Set tariff for social landlord- or community-organised schemes to enable sufficient numbers of themto be financed, recognising that only such schemes can secure solar PV benefits for low incomehouseholds at any scale. Initial view based on member modelling is that rate needed around 30p,certainly proposed 16.8p multi-installation rate uneconomic in social housing.

3. Set tariff and eligibility to ensure low income households receive bill reduction benefits at leastequivalent to increase in their bills caused by the policy. Similar policy objectives should be adoptedfor other obligation mechanisms, notably ECO.

4. Improve approach to understanding and evaluating the impact of its policies as a whole on socialtenants and landlords, recognising that social housing can contribute significantly to carbon and fuelpoverty objectives but this requires co-ordinated policy design.

Full Submission

Introduction

1. The National Housing Federation is the voice of affordable housing in England. We believe that everyoneshould have the home they need at a price they can afford. That’s why we represent the work of housingassociations and campaign for better housing.

2. Our members provide two and a half million homes for more than five million people. Each year theyinvest in a diverse range of neighbourhood projects that help create strong, vibrant communities.

3. The social housing sector should be a major focus for Government policy on carbon reduction and homeenergy efficiency. This is for reasons of:

— Opportunity: there are over 4 million homes in the sector, 20% of England’s housing stock. Incontrast to the owner-occupied and private rented sector, ownership is highly concentrated, with 272housing associations owning 90% of housing association stock.43 and almost all council landlordsowning 3,000 or more homes. Housing associations are substantial, professionally managedorganisations, with a track record, above all through the Decent Homes programme, of managinglarge scale programmes of work to existing properties. They have a strong commitment to improvingresidents’ economic and social wellbeing. Their effective asset management and investment meansthat on average social homes are more energy efficient than other tenures, but there are still 1.2million homes with substantial further potential for carbon saving.44 The scale and concentration ofstock means there is opportunity for large scale. installations, producing substantial carbon and fuelpoverty benefits with economies of scale.

— Need: on the most recent (published 2011 but measuring 2009) figures, 762,000 social householdswere in fuel poverty, a higher proportion than in any other tenure.45 With October 2011 inflationfigures including 12 month rises in gas prices of 24.1% and in electricity prices of 14.9%,46 thismust be widening and deepening. At the same time, social tenants will be affected by other economicand policy developments, including falling real terms pay for those in employment, changes to thebenefit system, and increasing worklessness.

43 Statistical release—Regulatory & Statistical Return, Tenant Services Authority, August 201144 Analysis by Camco for National Housing Federation, 201145 Annual Report on Fuel Poverty Statistics, DECC, July 201146 Consumer Prices Indices October 2011, ONS, November 2011



Feed-in Tariffs and the Social Housing Sector

Impact on energy bills

4. All social tenants are affected by Feed-in Tariffs (FIT) because they contribute to them through a surchargeon their energy bills. Social tenants, as a group, are much more predominantly in the lowest income groupsthan residents in other tenures, with fewer than a quarter in employment, a third retired, and nearly two thirdsreceiving income-related benefits. On the Government’s own figures,47 energy is set to account for over 15%of the spending of the poorest households by 2020, over five times as much as the richest. So FIT and anyother levies on energy bills affect low income households disproportionately. The Government’s figures suggestthat by 2020, climate change levies will be adding to the energy bills of the poorest households, if they receiveno benefit from them in reduced bills, by an amount equivalent to 2.1% of their income, compared with just0.2% for the best off. If spending financed by FIT and other mechanisms is not biased heavily towards cuttingthe energy bills of the poorest households, the policy impact will therefore be highly regressive, and worsenfuel poverty, as Professor John Hills has recently pointed out in the interim report of the Fuel Poverty Reviewcommissioned by the Secretary of State.48

Installations

5. The Federation has encouraged members to think positively about installing solar PV and other renewableenergy technologies because large numbers of social housing tenants are on low incomes and at risk of fuelpoverty, and could benefit from having access to free or low cost electricity. The characteristics of much of thesocial housing stock, for example built as large blocks of flats, or large numbers of houses or smaller blocksof similar design, creates opportunities for larger scale installations with substantial potential carbon and fuelpoverty benefits. In addition to the benefits to tenants in properties where PV is installed, some landlords’plans include using the surplus generated for them to cross-subsidise energy efficiency work to reduce carbonand fuel bills in other property.

FITs opened up for Staffordshire Housing Association a strategy to make an investment of over £1.5million in PV for some 360 homes. The income generated from the FIT payment was intended to undertakeretrofit work to the homes that could not benefit from PVs or to build new homes. This reinvestmentwould help to tackle fuel poverty and reduce CO2 emissions within their stock as a whole, or to providenew energy efficient homes. They had procured this work from a local contractor with the aim of makingtheir investment create jobs for people in the area. This was an important part of their strategy as Stoke-on-Trent is one of the most deprived cities in the country and has been encouraged to look for growth injobs via the green technologies. The Government’s proposals are likely to bring their programme to anend in December, depriving many more homes of much needed support to tackle fuel poverty. In additionthe contactor has ceased his recruitment and training arrangements and is no longer considering takingon apprentices.

6. In summer 2011, the Federation surveyed all its members to get a clearer picture of what housingassociations in England have been able to achieve so far and the challenges they are facing in installing PVand benefitting from FIT. Less than 50 respondents to the survey had installed PV on either new or existinghomes and fewer than 40 more were either installing or about to install PV. Less than 3000 small-scaleinstallations (below 4KW) had been carried out by respondents on existing homes as of mid-September 2011.Fewer than 30 respondents had installed PV when new homes were being developed but only 11 have beenable to claim FIT following guidance issued by the Homes and Communities Agency about state aid rules (seeparagraphs 19—21).

Golden Gates Housing Trust and Warrington Council have been progressing their solar PV pilot project,with approval to install 600 properties in wards among the 10% most deprived in England. This haspotential to make a huge difference to the financial circumstances of the tenants involved, taking themout of fuel poverty. The project was integral to an investment programme for properties to have doubleglazing, efficient heating systems and loft insulation up to 300mm (they already have cavity wallinsulation). It also linked to funding an educational programme to deliver behavioural change so thattenants were much more energy efficient. They were trying to implement a tender for 300 properties butwith much uncertainty as to how many will be completed before the deadline of the 12 December. Withthe proposed changes they will not be able to proceed with phase 2 which consists of 300 propertiesbecause the business case no longer works. After the pilot the Council had been seeking to install solarPV to circa 3,000 properties over a number of years. Extensive work has been carried out on surveyingthe properties to identify those most suitable.

Timescales

7. The Federation’s survey found that schemes involving housing association stock have tended to takelonger to develop and procure than retail schemes involving owner-occupied stock for a number of reasons:47 Estimated Impacts of Energy and Climate Change Policies on Energy Prices and Bills, DECC, July 2010, paragraphs 37–4148 Fuel Poverty: the problem and its measurement Interim Report of the Fuel Poverty Review, CASE Report 69, October 2011



— Their scale is likely to lead to a high level of benefits, but by the same token, assessing potential,planning the works, negotiating with financing and delivery partners, is likely to take significantlylonger than a retail installation on a single property;

— Negotiations with lenders with an existing charge on the property affected;

— The need to go through European procurement, because of the scale of the projects;

— Negotiations with District Network Operators about connection.

8. Responses to the survey indicated that, for some larger schemes, these factors were adding as much as ayear to the process, and some schemes now face abortive costs in the region of £100,000, in addition tosubstantial staff time, for schemes that are no longer viable.

Housing Solutions, a landlord of more than 6,000 homes in the South East, were planning to start PVinstallations to 200 homes in December 2011 for completion by March 2012. Surveys had been completedand promises made to residents which may now be broken. A further 750 homes were proposed fromApril 2012 and these are very unlikely to proceed. Housing Solutions have invested about £80,000 ingetting their programme to this stage and these setup costs will now be wasted if they cannot proceed tothe installation phase. The income generated was to have been reinvested as part of their core purpose ofmeeting affordable housing need and improving services to residents, which had included plans to improvethe energy efficiency of the stock and to tackle fuel poverty.

Economic viability

9. There is an important difference in the economics of solar PV installations between social landlordschemes and large- and small-scale private sector schemes. In the latter case, the free electricity generated ispart of the benefit to the individual or company carrying out the installation. In social housing, the benefit ofthe free electricity goes to the tenant, reducing the return to the landlord or their commercial partner from FIT.It does not appear that DECC recognised this crucial difference in economic viability in the analysisunderpinning its proposed lower rates.

Affordability, Delivery and Factors to consider in setting FIT rates

10. Distributional fairness needs to play a very strong part in shaping FIT and other policies funded ultimatelyby levies on household fuel bills. We therefore suggest that the Government should adopt as a key objectivefor policy, that the net effect of FIT and other levies on the lowest income households, should, at worst, beneutral, with low income households receiving benefits from such policies at least in line with the contributionthey make to their cost through higher bills.

11. If this principle is accepted, it follows that FIT rates and other conditions should be shaped to support ahigh volume of installations by social landlords and others (like community groups) which benefitpredominantly low income residents and neighbourhoods. It is improbable that there could ever be a high levelof installations for low income households in other tenures. So social landlord and community schemes are theonly significant option if FIT is not to end up being distributionally unfair.

12. The Federation’s members do not believe that the rates proposed in the Stage 1 consultation, the 21prate, still more the 16.8p multi-installation rate, are enough to make installations in the sector viable. Figuresfrom a number of social landlords’ analyses suggest a rate in the region of 30p is the minimum required.We urge Government to engage with the sector on its analysis of viability before reaching final conclusionsabout rates.

13. One way the Government could modify its approach to increase installations in social housing and forlow income households is to develop the idea floated in the Phase 1 Consultation of a Community Tariff. Wewould suggest this could allocate a higher than standard tariff to schemes which plough most or all of theeconomic surplus created by the installation into social benefits, for example reduced bills for low incomeresidents, or cross subsidy for energy efficiency programmes which further reduce bills for residents in theproperties involved, or more widely.

14. The Government’s proposal to make eligibility for FIT conditional on the property on which solar PV isinstalled meeting minimum energy efficiency standards needs careful consideration, particularly in relation toany prescriptive standard, and the Federation will offer our view on the detailed options raised in our responseto the Phase 1 consultation. If such a policy is not to treat low income social tenants unfairly, a number ofimportant issues must be thought through properly, with DECC considering the interaction between policy onrenewables, energy efficiency and fuel poverty in a connected way. There is a clear logic for linking energyefficiency and the installation of renewable heating but no direct link with energy efficiency and the potentialfor PV to reduce carbon emissions and electricity bills for low income households.

Management of Government Policy, and impact of Phase 1 Review Proposals on Social Housing

15. The impact of the announcement has been dire. Information we have received since publication of theconsultation indicates that installations to nearly 18,000 homes have been stopped in their tracks. This means18,000 households, almost all of them on very low incomes and at risk of fuel poverty, will not now see



reductions in energy bills of up to £150 a year.49 Even if the Government, on reflection, accepts our argumentsthat a higher rate of tariff is needed to support social housing installations, there is no prospect of the currentlyplanned installations going ahead, since prudent Boards must make decisions on the basis that the 12 Decemberdate will stand. As previously stated, social landlords now face considerable abortive costs in projectdevelopment and procurement, costs which are, of course, met out of the rental revenue landlords receive fromtheir predominantly low income tenants.

16. We are therefore urging the Government to permit social landlord schemes which were substantially intrain at the date of the Phase 1 consultation announcement (31 October) to proceed with the current rates oftariff, against which they were developed, in good faith.

17. It has been well understood, following the announcement in February 2011, that the Government wasreviewing FIT, and there would have been widespread agreement that it was extremely likely that there wouldbe a reduction in rates. But, ahead of the announcement of the Phase 1 consultation on 31 October, theGovernment had given no indication that:

— the consultation would be substantially less than the normal 12 week period;

— the effective date for some of the measures would be just 6 weeks from the start of the consultation.

18. The character of the consultation and the timescales has led not just to concern in the sector, butto disillusionment. It does not appear to the Federation and its members that, in making its proposals, thedepartment has:

— recognised the impact on all the types of businesses involved in the solar PV market (of which sociallandlords, as social businesses, are just one) of very significant short notice changes to policy;

— sufficiently engaged with the social landlord sector during the preparation of the consultation, toinform the development of its proposals and, if such significant change was on the cards, to openminds to the range of options under consideration and enable landlords to take earlier action tomitigate the risk of a reduction in FIT;

— taken any account of distributional fairness as a factor to consider in decisions on FIT policy andrates. Despite the issue being clearly set out in other DECC analysis,50 there is nothing in the Phase1 Review consultation or supporting impact assessment to suggest this has been considered or thatit has had any impact on the policy proposals;

— considered the impact of its FIT proposals on the perception and confidence in the social housingsector about the range of DECC policies, above all Green Deal, on which important policydevelopment is proceeding in parallel (and, we would say, with a much higher quality of engagementwith the social landlord sector). The proposals on FITs will in some cases affect the ability oflandlords to fund Green Deal work, since the surplus generated by some solar PV schemes wasearmarked for investment to meet a likely shortfall in what can be financed under the Golden Rule.

Solar PV and Social Housing in other Countries

19. DECC chose to notify the FIT scheme to the European Commission in 2010, as a renewable energyinitiative. The Commission ruled that the scheme was state aid but compatible with the Treaty. It stated,however, that grants and feed in tariff revenues were unlawful, i.e. if an organisation received a grant to payfor the PV installation, they would not be able to claim FIT revenues.

20. This has caused problems for housing associations developing new homes with Social Housing Grant(SHG). One of the conditions of SHG is that the new home corresponds to a level of the Code for SustainableHomes, usually 3, but 4 in London. Unfortunately, for Code level 4 and above, it is sometimes difficult forhousing associations to reach these levels without incorporating PV panels on the schemes. Since the PV panelwould have received some form of SHG grant, this means that they cannot claim FIT revenues.

21. The approach in this country contrasts with other member states. France, for example, chose not to notifytheir feed in tariff scheme, using instead the existing state aid legislation, including the Commission decisionof 28 November 2005 on the application of article 86(2), and the European Regional Development Funds(ERDF) / European Social Fund (ESF) regulations for the period 2007–2013 to inform the way they weremanaging their feed in tariff initiative. The 2005 Decision and the ERDF /ESF legislation allow for a level ofgrants and revenues to coexist, when it comes to Services of General and Economic Interest providers, suchas social housing associations, and when it is aimed at promoting renewable energy. This has meant forinstance, that social housing providers in France have been able to use ERDF to invest in PV panels and claimFIT benefits.

22 November 2011

49 Estimate by Paradigm Housing Association50 Estimated Impacts of Energy and Climate Change Policies on Energy Prices and Bills, DECC, July 2010, paragraphs 37–41



Written evidence submitted by the Association for the Conservation of Energy

Introduction

The Association for the Conservation of Energy was formed in 1981 by major companies active within theenergy conservation industry, in order to encourage a positive national awareness of the needs for and benefitsof energy conservation, to help establish a sensible and consistent national policy and programme, and toincrease investment in all appropriate energy-saving measures. We welcome this opportunity to submit ourviews on Budget 2011 and green taxation.

Summary

1. ACE firmly agrees that the rate of the PV feed in tariff should be reduced in line with the reductions inthe upfront cost of installing the technology.

2. However, the speed with and degree to which the proposals cut the support is plainly irresponsible. Theproposed cuts of over 50% for most domestic size installations are too significant to be responsibly introducedin one stage. Combined with the idiotically short timelines and retrospective application the proposed reductionsare the embodiment of bad policy making process.

3. ACE cannot state strongly enough that the proposed application of the new tariffs to installations with aneligibility date of 12 December, before the consultation is over let alone allowing for consideration of theresponses, is completely unacceptable. ACE calls on Government to adopt the alternative proposal investigatedin the Impact Assessment for this consultation of introducing the new tariffs for installations from April 2012,as always anticipated. This date gives a short but not unreasonable amount of notice to the industry, investorsand households.

4. One of the main purposes of the FIT was to create a market for renewable electricity technologies orfurther develop embryonic markets (such as for PV). The extreme and retrospective changes currently proposedwill have the effect of immediately stalling investment, killing the burgeoning market developed over theprevious 18 months and most importantly destroying industry confidence in this and other government schemeson which basis it is expected to invest.

5. Government has been seeking to build investor confidence around the Green Deal proposals: itacknowledges that this is a complicated and difficult exercise. Irresponsible changes like those proposed forthe PV FIT provide no confidence to the sustainable energy market in the sincerity of Government’s aims forenergy efficiency and sustainable energy proliferation.

6. What the consultation does include are some excellent ideas which we would not like to lose. ACE firmlyagrees with the proposal that eligibility for the tariff should be contingent on a minimum energy efficiencyrequirement being met.

7. To further enhance the compatibility between the government renewable energy and energy efficiencyprogrammes and make the process of refurbishment more seamless for business owners, ACE have on anumber of occasions (eg Access for All, http://tinyurl.com/65yrzwj) called for renewable energy technologiesto be financeable through Green Deal Finance and for the tariff payments to be included in the “savings” sideof the equation.

Response

The evidence presented concerns the third evidence bullet point for the inquiry: the way in which theGovernment has managed the Solar PV Feed-in Tariff, the impact this has had to date, including themanagement of the Consultation.

1. ACE firmly agrees that the rate of the PV feed in tariff should be reduced in line with the reductions inthe upfront cost of installing the technology. This is essential to avoid providing unnecessarily high returns,achieving poor value for money and placing a greater than necessary burden on energy bills. However, thespeed with and degree to which the proposals cut the support is plainly irresponsible.

2. The proposed cuts of over 50% for most domestic size installations are too significant to be responsiblyintroduced in one stage. The consultation document confirms that the cost of installing PV has fallen by 30%,however no evidence has been provided to justify the reduction in the tariff beyond 30% to the proposed newlevels. Combined with the idiotically short timelines and retrospective application the proposed reductions arethe embodiment of bad policy making process. Furthermore, ACE is shocked that rate cuts have beenconsidered in isolation only, with no consideration of other options for limiting FIT expenditure, such ascapping the number of supported installed capacity for a given financial year, or doing so in combination withrate cuts.

3. One of the main purposes of the FIT was to create a market for renewable electricity technologies orfurther develop embryonic markets (such as for PV). The tariff levels were originally set to deliver an attractiveenough return to encourage investment, with pre-announced degression rates to allow long-term investmentcertainty. The extreme and retrospective changes currently proposed will have the effect of immediately stalling



investment, killing the burgeoning market developed over the previous 18 months and most importantlydestroying industry confidence in this and other government schemes on which basis it is expected to invest.

4. Government has been seeking to build investor confidence around the Green Deal proposals: itacknowledges that this is a complicated and difficult exercise. The success of the Green Deal will rely on anumber of supply chain players making considerable investments to raise finance, adjust business models andcreate additional capacity. Irresponsible changes like those proposed for the PV FIT provide no confidence tothe sustainable energy market in the sincerity of Government’s aims for energy efficiency and sustainableenergy proliferation. The proposals in the PV FIT consultation document have already been sufficient tosignificantly knock the confidence of the energy efficiency industry. If the changes are implemented, thisconfidence may be lost entirely impacting heavily on the success of Government’s flagship policy the GreenDeal.

5. ACE would also like to point out that tariff rates for new build are proposed to be cut by a lesser degreethan those for refurbishment. Lower tariff rates for new build were introduced at the start of the scheme toreflect the lower barriers to installing PV on new buildings. The cost of scaffolding is an obvious andquantifiable saving for new build and hassle to occupant householders is a less quantifiable but neverthelessreal barrier for installations in the existing stock. No justification is given as to why or how these considerablebarriers and costs, real enough 18 months ago to justify a tariff differential, have been discounted or removed.

6. The proposed reduction of the tariff for installations on new build by only 44% compared to the reductionof 52% for the same sized installation on an existing home amounts to yet another subsidy to the house buildingindustry at the cost of the taxpayer or energy consumer. Unless Government can provide convincing evidenceto prove that the many and various financial and non-financial barriers experienced in installing PV on existingbuildings in comparison to new buildings have been overcome, the tariff differential introduced to reflect thesemust be maintained.

7. ACE cannot state strongly enough that the proposed application of the new tariffs to installations with aneligibility date of 12 December, before the consultation is over let alone allowing for consideration of theresponses, is completely unacceptable. It reflects not only irresponsible policy making but makes a mockeryof the public consultation process.

8. The failure to present in the main consultation document the second, and more sensible, option exploredin the Impact Assessment of the new tariff introduction date of April 2012 misleads consultation respondentsby selectively presenting the available information and analysis.

9. Whatever the concerns about spending on the FIT scheme, the possible breach of the parameters set forit and the need to make the savings set out in the Comprehensive Spending Review, these concerns mustnever come as a priority above the legal and rational implementation of Government’s responsibilities in itspolicy making.

10. The impact of the proposed retrospective tariff introduction date of 12 December is already arrestingmuch investment. Large schemes planned by local authorities and social housing providers that have only beenhalf delivered are being stopped, breaking trust and destroying confidence, let alone wasting significantplanning and preparation investment. This is creating chaotic conditions in the industry, likely resulting in joblosses at a time of recession and when Government has announced key plans to deliver “Green Growth”.

11. ACE calls on Government to adopt the alternative proposal investigated in the Impact Assessment forthis consultation of introducing the new tariffs for installations from April 2012, as always anticipated. Thisdate gives a short but not unreasonable amount of notice to the industry, investors and households.

12. What the consultation does include are some excellent ideas which we would not like to lose. ACEfirmly agrees with the proposal that eligibility for the tariff should be contingent on a minimum energyefficiency requirement being met. ACE called for a minimum energy efficiency requirement to be introducedwhen the FIT was first consulted on in October 2009 (http://tinyurl.com/7zzot3t). The reasons we gave in thatconsultation response were many. The principle that households should not be rewarded for energy generationif they have not first made attempts to rationalise their energy use is central. The utilisation of the “triggerpoint” of property improvements, the introduction of the “whole house” or “whole building” perspective ratherthan single technology thinking, and the increased return on investment if energy saving measures are includedin the ROI calculation continue to be valid justifications.

13. The conditionality requirement should apply to both domestic and non-domestic buildings. This is inorder to avoid a distortion in the FIT market to over-favour non-domestic buildings if no requirement, or alower requirement, is placed on them. The FIT conditionality requirement also provides a key opportunity toreach the SME market with an incentive to take part in energy efficiency improvements and in the Green Deal.The SME market is one which has to date not been influenced by existing carbon saving programmes like theCCAs or the CRC.

14. ACE strongly supports the second conditionality option—all measures financeable under the Green Deal(with available ECO subsidy).



15. The clear benefit of this option is to bring more closely together the incentives for renewable energy andthe mechanism through which energy efficiency improvements can be financed into a package that makes moresense to building owners and occupants.

16. A key strength of the Green Deal is the finance provision that allows energy efficiency improvements tobe made at no upfront costs. Clearly, an energy efficiency conditionality requirement based on those measuresthat are financeable through the Green Deal removes the cost barrier to uptake. This non-standardised energyefficiency requirement does not introduce the same differences between burden levels that would be introducedby a fixed point standard (e.g. EPC band).

17. A significant benefit of this option would be to drive activity through the Green Deal in its early stages.Although the energy efficiency measures identified would not necessarily have to be financed through GreenDeal finance, the profile of the Green Deal would be raised with those households investigating and taking upa FIT installation.

18. To further enhance the compatibility between the government renewable energy and energy efficiencyprogrammes and make the process of refurbishment more seamless for business owners, ACE have on anumber of occasions (eg Access for All, http://tinyurl.com/65yrzwj) called for renewable energy technologiesto be financeable through Green Deal Finance and for the tariff payments to be included in the “savings” sideof the equation. Through this alignment, the increase in the savings produced by the tariff payment could allowmore ambitious packages (incorporating solid wall insulation in particular) to be installed under the GoldenRule which require less ECO subsidy. In addition, in allowing the up-front cost of the renewable technologyto be removed, the tariff level paid could be lowered to reflect the reduced barrier to investment. ACE believesthat this proposal is even more relevant in the light of the conditionality requirement proposed under ourfavoured option 2.

19. This option clearly relies on information on what Green Deal financeable measures are suitable for abuilding. This information is to be introduced on the new format EPC, available in April 2012. Investorswanting to take up the PV FIT will need to have information on the relevant energy efficiency measures beforethey can make an informed investment decision. Therefore, both the new tariff level and the conditionalityrequirements must be introduced at the same time, and at a time when the necessary investment information isavailable—with the introduction of the new format EPC in April 2012.

20. As non-domestic buildings are equally eligible for Green Deal Finance ACE would recommend the sameenergy efficiency conditionality option for this sector.

22 November 2011

Written evidence submitted by The British Retail Consortium

Introduction

1, The British Retail Consortium (BRC) is the trade association for the UK’s retail sector and is theauthoritative voice of the industry to policy makers and to the media. The BRC brings together the wholerange of retailers across the UK, from independents to large multiples and department stores, selling a wideselection of products through centre of town, out of town, rural and online stores.

2. Retailers have put the environment, sustainability and energy efficiency at the heart of their operationsand have invested considerable time and resources in this work, as well as engaging their staff\and customerson these issues. The BRC’s climate change initiative “A Better Retailing Climate” is testament to the workthat has, and continues to take place across the sector. For information on this initiative, please follow thelink below.

3. http://www.brc.org.uk/brc_policy_content.asp?iCat=43&iSubCat=673&spolicy=Environment&sSubPolicy=A+Better+Retailing+Climate

Summary

4. Investment in energy generation is, by definition, a long term issue, requiring significant resources upfront,with savings and benefits being realised in the future. To encourage businesses and the consumer to recognisethe long term benefits, policies need to be clear, simple and stable. Stability is arguably the most importanttheme in this debate and will affect the success, or otherwise, of all policy instruments across the environmentand climate change policy arena.

5. It is for this reason the BRC is particularly disappointed the Government has decided to make changes tothe Solar PV Feed-in Tariff in the way the consultation proposes. The BRC is understanding of the reasonsbehind making changes to Solar PV FITs. However the timeline change raises questions over the regulatoryworth of a consultation and creates an unstable policy environment that undermines investments already madeand confidence in making future investments for both retailers and their customers. From a better regulatoryperspective if nothing else, this should be re-examined and considered by the Committee as an important lineof questioning.



6. The Government has made a number of changes to its environmental policy over the past year which ishaving a significant impact on business confidence and ability to invest in environmental initiatives. Earlierthis year, the Government made stringent changes to the financial elements of the Carbon ReductionCommitment, which transformed that initiative into a tax rather than a reputational incentive. This furtherchange relating to energy efficiency continues to build on the damage done by the CRC decision and we wouldurge the Committee to consider the change to the Solar PV Feed-in Tariff within this context.

7. Specific Question Responses


8. Feed-in tariffs have played an important role in stimulating the market for solar PV. They have generateda sufficient financial incentive for businesses and individuals to invest in the technology. The price of solar PVhas reduced significantly and the solar energy market has grown despite the current economic situation.

9. (b) The balance between affordability and delivering the objectives of the Solar PV Feed-in Tariffs,including factors to consider when setting the rate of small-scale Feed-in-Tariffs including jobs created,emissions reductions and energy-saving behavioural change.

10. Feed-in-tariffs have aided the development of the solar PV market. The market has grown and jobs havebeen created. The Government should be proud of its successes in this area. Whilst we recognise that a balancemust be struck between affordability and delivering against carbon emissions reduction targets, the Governmentmust ensure that any action taken builds on current successes, rather than undermining progress to date. Policychanges with short timescales prevents businesses building in contingencies on investments already made andimpacts on confidence and trust within the system.

11. The consultation document considers how the tariff can be amended so it can adapt to market changes.To ensure that the administrative burden is minimal and that the process is simple and consistent we wouldadvise that one approach is applied to all technologies eligible for FITs.

12. (c) The way in which the Government has managed the Solar PV Feed-in-Tariff, the impact this has hadto date, including the management of the Consultation.

13. The BRC realises changes need to be made to the FIT tariff. We understand that in light of the fallingcost of solar PV the technology does not need the level of subsidy originally envisaged to be competitive.Therefore, we are not disputing this change at this stage.

14. The BRC’s concern with the consultation is the proposed changes to the timeline, which will havesignificant consequences for retailers. These are:

— The decision impacts on retailers’ investments that have already been made in good faith.

— It undermines the confidence to invest as businesses cannot guarantee government commitment willbe honoured.

— It directly affects customers and their trust in the renewable energy services they are being offered.

15. In addition, the new deadline, 12 December, is prior to the close of the consultation on 23 December.This irregularity gives the impression that the decision has already been made and undermines faith in anyfuture consultation processes.

16. Furthermore this consultation document is part 1 of 2. Part 1 speaks about changes to the overall FITpicture however, it is unclear whether these issues will be discussed in greater detail in Part 2. To make theprocess less complicated the consultation should have been carried out all at once. It seems that Part 1 hasbeen issued solely to change the deadline for installation of Solar PVs on the existing FIT and that will occurbefore the consultation closes.

17. The BRC and a range of other organisations have put these points to Government however, so far,responses have been disappointing. This seeming lack of recognition of the practical issues associated with theproposed changes is particularly concerning as it gives the impression that decisions have already been made,which does little to reassure potential investors that the policy framework will remain consistent.

18. Affordability of Solar Photovoltaic energy versus other renewable energy (given the overall levy-fundedcap for energy bills) and the impact of Feed-in-Tariffs on energy bills.

19. The consultation proposes introducing a measure that would require a building to have achieved an EPCof level C or above before it becomes eligible for feed-in-tariffs. We agree that all energy saving measuresshould be applied prior to introducing additional measures. However, not all buildings can realistically reachlevel C of an EPC on energy efficiency measures. The requirement should only be introduced under thecondition that a level C is achievable, or a list of relevant energy efficiency measures should be specified.

20. (e) Experience of similar incentive mechanisms for renewables in other countries



21. No comment

22 November 2011

Written evidence submitted by Peter Morgenroth, Morgan Lighting of Chorley

Executive Summary

The introduction of Feed-In-Tariffs (Fits) for solar PV in the UK has been a major success in changinghearts and mind of the UK consumer to embrace and install system on domestic properties to help reduce theirCO2 footprint, help control their future energy costs and receive a defined income for their significant longterm investment.

The Fits have achieved the desired catalytic to generate about 25,000 jobs in the UK for suppliers, designers,installers, training organisations, roofers and electricians.

A review of the proposed DECC changes shows them to be severely flawed and unworkable and will haveconsequences not envisaged in the draft impact assessment.

The impact of the proposed changes will:

— Destroy the Consumer confidence and uptake of PV systems by more than 95%.

— The UK will lose about 25,000 UK jobs.

— Will send the message DECC and the Coalition are abandoning their CO2 commitments and beseen to be taking away the mechanism for individuals and home to reduce their fuel bills andCO2 footprints.

The report makes recommendations to modify the DECC proposal.

1. Introduction

The responds to the Committees request for feedback.

The report considers the proposed FIT reduction from 43.3p to 21p for domestic systems up to 4kW againstthe actual cost reductions actually seen. The author has serious concerns that the proposed cost reductions willforce suppliers and customers to use lower cost parts that are likely to have a significantly negative impact onthe safety and longevity of the systems. The impact of the proposed requirement Energy PerformanceCertificates and building being upgraded to class C is discussed. Whilst the objectives make sense thepracticality of the proposals and impacts are discussed.

The report steps back to review the messages and the impact that the proposed changes will have and howthese need to be modified if the PV FIT success is not to be maintained.

The report makes recommendations to alter and modify the DECC proposals to enable Consumers and thePV Solar industry to continue to contribute to the CO2 reduction commitments and to protect UK jobs.

2. Impact to Date of the Solar PV Feed-in Tariff

2.1. To date the Feed in Tariffs have achieved the desired effect which was to act as a catalyst to encouragethe adoption of Solar PV systems, develop the UK supplier and installer network. Many SMEs have investedtime and money to develop their capabilities to offer PV systems to customers. It has created a new greenindustry creating many UK jobs.

2.2. Consumers have been encouraged to make the significant capital investment which locks up their moneybased on a reasonable return in the future. The scheme has allowed the Consumers to feel they can make adifference to their Carbon Footprint, enable them to reduce their bills when they are able to use the electricityand to help reduce the CO2 by exporting spare energy to the grid.

2.3. DECC and the Coalition has shown that the policy is working and able to contribute to the CO2 reductiontargets made by the previous Government and the Current Coalition.

3. The Balance between Affordability and Delivering Objectives of the Solar PV FITs,including Factors to Consider when Setting the Rate Small-Scale FITs including JobsCreated, Emission Reductions and Energy Saving Behaviour

3.1. The DECC proposal is supported by the Draft Impact Assessment. Key assumptions in this documentare as follows:

— Costs of systems have fallen by 30–35% ( Ref 1 Table 3).

— The proposed reduction of the <4kWpk FIT from 43.3p to 21p will reduce uptake by 70% (Reference 1 Policy Option 2 last paragraph).

— The addition of policy Option 3 to include EPC 3 will reduce the uptake by 92%.



3.2. Morgan Lighting has been installing solar PV systems for 18 months. The costs of materials of similarquality have fallen by about 20% not 30–35%. To achieve greater cost savings then the designers and installershave to use lower cost products and cut corners on the installation. DECC expect the products to last 25 to 35years. The author is an expert is the design of high reliability silicon, electronics and electromechanicalproducts. Sadly much of the electrical industry in the last few years has adopted the lowest cost options to thesignificant detriment of product reliability, performance and safety. The standards MCS 01 and MCS 005 needto be strengthened to ensure additional work is done to ensure product installed have the best chance ofachieving their lifetime goals. The proposed reduction in FIT of more than 50% is too large a step and willreduce the quality of many installed systems to the point where the industry could get a bad name for of quality.

3.3. The impact statement suggests the proposed reduction in Fit will reduce the uptake by 70%. Our analysissuggests this will be 80%. The step should be reduced substantially to protect the consumer confidence wherethey must have more than a 4–5% ROI for them to make a capital investment locking up money for 25 years.The 70% reduction in installations will immediately reduce UK jobs and the benefits have not been includedin the cost analysis.

3.4. If Option 2 is adopted and the solar PV systems can only be installed on homes that will achieve theEPR of C or better combined with the Fit cut will reduce the uptake by 92% according to the draft impactassessment. Our analysis should the impact will be higher. If only 9% of homes meet C or better today andprobably 20% of homes are suitable for a PV system then this will limit those who can fit without the additionalcost of upgrading to EPR C. The additional costs will reduce the uptake by more than 95%.

3.5. Whilst we understand the desirability and benefits to encourage consumers to enhance the EPR of theirproperty it is an outrage for DECC to link this to the PV installation because the Green Deal is NOT in placeand may not get agreed. The Green Deal funding is not assured and may not be available to many consumers.Many of the SMEs who have set up to install PV are not in a position to support the Green Deal and it willbecome a preserve of the larger organisations and Power Generating Companies. The proposal will put barriersin the way killing the current PV success and demotivating customers to make improvements to their homesand remove the ability for homes and businesses to reduce their fuel costs. The Green Deal should stand onits own.

3.6. All forms of alternative energy have higher costs compared to fossil fuels. The Wind Energy requires asubsidy and also requires the grid to be upgraded to get the energy to the right place. Solar PV is local andsmall scale so does not require upgrading the grid. It also generates more power during the day when the gridload is at its highest.

4. The Way in which the Government has Managed the Solar FIT, the Impact this has had toDate, including the Management of the Consultation

4.1. To date the FIT has achieved its objective as a catalyst to generate a new UK solar PV industry, creatingUK jobs, skills and most importantly generated and interest in the General Public so they can participate inreducing the CO2 emitted from power stations and to help keep their fuel bills under control.

4.2. The Consultation has not been handled at all well. Information was leaked early. It appears that DECChave been unduly influenced by the large Power Companies and come up with a proposed FIT reduction thatwill kill the industry and consumer interest. They have linked in an un-workable addition requiring it to befitted to homes with EPR C or better.

4.3. The 12 December cut-off date has caused chaos. We have had to return deposits for orders because wecannot get parts from our normal quality suppliers. The Consultation is due to finish after the cut-off date.

5. Recommendations

5.1. The reduction to 21p should be scrapped and replaced with an initial reduction of say 25% with afurther small step reduction in future years.

5.2. The requirement to require Energy Performance Certificates and requirements to upgrade to C shouldbe removed from this proposal in its entirety. If the DECC want the Green Deal to work it should stand on itsown. Leaving it linked will cause the current PV success to fail.

5.3. The costs should include the benefits of UK jobs and the full costs of wind power and nuclear powershould be used.

5.4. The MCS Standards urgently need to be reviewed to ensure the manufacturers and importers produceproducts that have a high chance of still being working in 25 to 35 years to ensure product safety andproduct reliability.

6. Conclusions

6.1. The DECC proposals as they stand will kill the industry with the loss of UK jobs and the loss ofConsumer confidence that DECC and the Coalition are serious about the commitments to CO2 reduction andEnergy Security.



6.2. Modifying the proposals as suggested with a balanced approach can deliver PV at reduced cost, CO2

reductions and the maintenance of UK jobs.

Reference

1. DECC Draft impact Assessment 2 November 2011.

22 November 2011

Written evidence submitted by Leeds Solar


The Feed In Tariff combined with measures such as the permitted development regulations, and allowingMCS accreditation through CPS schemes such as NAPIT has directly led to a step change in the solar PVindustry from it being an insignificant and expensive cottage industry to it being an industry capable ofinstalling GWp scales of electricity generation capacity at rapidly deceasing costs.

The economies of scale, and impact of competition introduced thanks to the feed in tariff have successfullyreduced the standard costs of a 4kWp PV domestic PV system from approximately £16,000 before the schemestarted to around £10–12,000 now. We anticipate this price dropping further to around £9,000 in Januaryfollowing the FIT rate cut.

(b) The balance between affordability and delivering the objectives of the Solar PV Feed-in Tariffs, includingfactors to consider when setting the rate of small-scale Feed-in Tariffs including jobs created, emissionsreductions and energy-saving behavioural change

The FIT degressions are far too widely spaced and not deep enough. There should be regular degressionsevery four to six months to both drive down costs and prevent excessive profits being made in the monthsbefore any annual degression period.

More regular degressions would also benefit the industry as customers would not be waiting until the periodbefore the drop to try to get the best balance of price and financial payback, which has been a major problemfor us.

If we had a 10–15% reduction in the FIT rate every six months solar PV would be capable of deliveringelectricity at a similar rate of return to onshore wind by 2014–15. We’re confident that we can live with andgrow with such cuts if they’re scheduled well in advance.


DECC’s management of the feed in tariff scheme has been appalling. It was obvious at the time of thecomprehensive spending review last year that costs and prices were dropping far more rapidly than DECC hadoriginally envisioned, and yet despite cutting £40 million from the planned budget, DECC decided to leave thetariffs unchanged.

Similarly in April 2011 despite a 20–25% reduction in installed costs, DECC carried on with the plannedrise in FIT rates of 4.8% in line with RPI inflation, thereby meaning that the rates of returns became far higherthan they should have been.

During the fast track review of the rates for over 50KWp installations, we along with many others in theindustry made representations to DECC requesting that they changed their plans to introduce an urgent acrossthe board cut of 20–30% in line with the reductions in installed prices we were seeing, and to prevent theentire FIT budget being used up. DECC ignored these representations entirely, and left the under 50KWp ratesunchanged while slashing the rates for the over 50kWp systems.

The result of this was that not only did the domestic market continue to grow exponentially as the returnsrose above 15%, but on top of this, most of the money that had been raised originally to finance largescalesystems was instead moved into the rent your roof sector, resulting in a huge upsurge in the rent your roofmarkets rate of installations.

To compound this, DECC seem to have been taken completely by surprise when the September installationfigures were announced, resulting in this current panicked slashing of the FIT rates. Anyone with half a cluein the industry knew that the September figures were going to be massively increased as they combined boththe surge in largescale PV installations to beat the cut, the continued exponential growth in the domestic marketthat DECC had left unchecked, and the additional rent your roof schemes.

The impact assessment for this FIT reduction proposal shows that the budget estimates upon which this isbased rely on a 70% cut in the rate of under 4kWp installations and a 95% cut in the rate of 4–50kWpinstallations. This is a ridiculous target for a policy designed to promote the growth of this industry, and we



can’t possibly be expected to deliver the reduced costs we’re supposed to deliver under this scheme withoutthe economies of scale the scheme is also meant to deliver from market growth.

We’d strongly recommend that DECC end their contract with their current consultants as their advice hasbeen consistently wrong and their predictions have been hugely wrong.

(d) Affordability of Solar Photovoltaic energy versus other renewable energy (given the overall levy-fundedcap for energy bills) and the impact of Feed-in Tariffs on energy bills

The aim of the feed in tariff was to stimulate growth in the PV market, and bring down solar PV costs overthe next few years to the point where it can become cost competitive with other renewables. The PV industryhas delivered this growth and cost reductions far faster then predicted by DECC to the point where we’realready cost competitive with small scale wind, and can become increasingly competitive with largescaleonshore wind in the next couple of years given properly structured support and degression periods.

Why restrict this question to renewable energy though?

The nuclear decommissioning authority received approximately 50 x the entire FIT budget in 2011–12, andan increase in budget this year of many times the entire FIT budget.

The estimated costs of a new generation of nuclear power have more than doubled in the last 10 years, basedon the experience elsewhere in Europe.

The actual costs of installed PV systems in this country has already dropped by around 40% in the 18months since the FIT scheme started, with further drops of around 10% every six months seeming likely forthe foreseeable future. We’ve also installed around 500MWp of solar generation capacity in the first 18 monthsof the scheme, whereas the first new nuclear station is still at least 10–15 years from generating anything atall, by which time we could easily have 20GWP of solar PV installed.

If properly supported, with proper degression rates to realistically match and drive down costs, I’d expectthat the average lifetime cost per KWh of electricity generated from this 20GWp of solar PV should becomparable with Gas/coal by some time between 2017–20, or even lower if fossil fuel prices keep rising asfast as they currently are and PV costs keep falling through economies of scale.

23 November 2011

Written evidence submitted by Good Energy

Good Energy: An Introduction

1. Good Energy is the UK’s only 100% renewable electricity supplier. We supply over 27,000 customerswith renewable electricity and act as FIT licensee for over 8,000 decentralised generators. We believe thatdecentralised generation is a key component to taking the UK to a decarbonised energy system and HomeGeneration is a key enabler in engaging customers in the energy debate.

Executive Summary

2. The introduction of the Feed-in Tariff has been an unparalleled success. Not only has it encouraged nearly100,000 householders/businesses to install micro-generation, it has also made energy more visible to a “Flickof the Switch” society, where energy availability is normally taken for granted. When people understand wheretheir energy comes from, they value it more and use it less.

3. The benefits of microgeneration extend beyond the owners to their neighbours and communities. Forexample, installing solar panels on schools helps to educate the next generation of energy users, and the useof solar panels by social housing bodies is helping to tackle fuel poverty.

4. Good Energy recognises that the falling cost of solar panels should lead to reductions in the level of FIT,and accepts the move to reduce the lowest tariff to 21p/kWh. However, we strongly object to the current DECCpolicy of “watch and panic” leading to boom and bust, which in turn damages consumer and investorconfidence. We require an independent and transparent method of setting rates to restore confidence.

(a) The impact to date of Solar PV Feed-in-Tariffs and the state of the solar energy market

5. Solar power is an integral part of UK’s renewable energy future. The solar Feed-in-Tariff has successfullykick-started an industry which, unlike most other renewable technologies, can be used by householders andbusinesses to break their dependency on the centralised energy market and the volatility of global fossil fuel-led energy prices. It is delivering security of supply to thousands of households, and was beginning to provideprotection against fuel poverty to people in social housing.

6. Contrary to some ill-informed commentary, Solar does have a significant role to play in providingrenewable energy in the UK. Solar is a natural hedge against the intermittency of wind, and the Department of



Energy and Climate Change is wrong to dismiss it. Most analysts believe that, with the right support, solarwill reach grid parity within 10 years, and will not require further support from Government.

(b) The Balance between affordability and delivering the objectives of the Solar PV Feed-in-Tariffs, includingfactors to consider when setting the rates of small scale Feed-in Tariffs including jobs created, emissionsreductions and energy-saving behavioural change

7. Solar PV is currently an immature industry in the UK, and like any industry in incubation, it requires alevel of support. Unlike some energy technologies, the trends to falling costs and rising energy bills suggestthat the need for support is time-limited and that small-scale solar could become cost effective in the UK.

8. We believe that the FIT rates should be set to deliver a reasonable rate of return of 6% to 8%. This ishigher than that received on cash deposits, but it should be borne in mind that cash deposits usually maintainthe capital invested. We believe this assessment should be done independently of DECC, who are focussed onnot breeching the Levy Control Framework rather than the actual aim of the scheme—which is to help smallscale renewables solve the UK energy “trilemma” of decarbonisation, security and affordability.

9. Our own research demonstrates that installing of micro-generation galvanises households into greaterenergy efficiency action. They treat home-produced energy as a much more precious resource not to be wasted.Our data shows they use less energy as a result and are more likely to install other energy efficiency measures.


10. The underlying issue is that the Levy Control Framework is based on incorrect forecasts for take upmade by the previous administration. To be fair to DECC, when the scheme was launched, this estimatewas recognised as a shot in the dark as it was difficult to predict the impact of a new scheme in uncertaineconomic times.

11. The Government’s ability to plan effectively is now constrained by the outdated Levy ControlFramework. The department is no longer running the scheme to deliver its original aims, but sees it as Pandora’sbox which it needs to close to avoid treasury penalties for breeching the spending cap. It would be better tocelebrate the scheme’s success in engaging individuals and communities in the energy solution.

12. The decision to bring forward the eligibility date for small-scale solar with just six weeks notice, andbefore the closure of the consultation period was in our view a clear example of the “manage by panic” attitudethat currently exists. One of the principle aims of the FIT was to move away from the boom and bust cyclethat had been seen in micro-generation support through the grant allocations before. Any growing industryneeds stability to encourage investment.

13. The solar PV industry recognised that rates needed to be reduced, and was working in a business-likemanner towards significant reductions in April in line with the proposed review date. The decision to shortenthis has had a disastrous impact on the industry’s ability to plan, leading to complete distrust in the scheme. Ithas disproportionately affected larger community and social housing schemes which do not have the flexibilityto respond as quickly as domestic schemes.

14. In particular we fail to understand why the Government felt that it had to controversially implement anew eligibility date before the consultation closure date which is just 12 days later.

15. We are particularly concerned at the proposed additional 20% cut to multi-site installations. The impacton social-housing providers who have seen the scheme as an opportunity to address fuel poverty is immense.The Impact Assessment does not back up the claims of 20% economies of scale, nor does it appear to takeinto account that such installations do not receive the benefit of avoided import, as this goes to the tenants.

(d) Affordability of Solar Photovolatic energy versus other renewable energy (given the overall levy fundedcap for energy bills) and the impact of Feed-in Tariffs on energy bills

16. Solar PV is accessible to anyone with a south-facing roof. This means it can be used in urban areas andat the point of demand much more easily than wind or hydro. At the start of the Feed-in tariff, solar PVwas significantly more expensive than other technologies, but following its success these costs have reducedsignificantly, and had been expected to fall further driven by a competitive industry.

17. We believe that the impact of FIT on energy bills is overstated and should be seen in comparison withother environmental and social obligations. If a proper system of assessing costs and FIT rates based on atransparent rate of return was implemented, we would envisage reaching a point at which solar PV no longerneeds support. But without a clear assessment process, no one knows when the next rate review will take place,how much notice will be given of new rates, and some even doubt whether the principle of grandfathering therates will be upheld. None of this is conducive to investment.

18. We should also be aware of the impact on bills of failing to address fuel poverty for social housingcustomers, increasing fossil fuel prices and the impact on society at large of curtailing a successful industry



which is delivering jobs and tax income to the economy. 20% of the cost of an installation is VAT, withadditional treasury income from income tax on installers and corporate tax from a successful industry.

23 November 2011

Written evidence submitted by Lark Energy

1. Lark Energy is part of the Larkfleet Group, a privately owned construction and development companybased in the East Midlands. The group builds private and social housing developments ranging from 30 unitsto over 1,000. It has a national reputation for being at the forefront of sustainability initiatives in the sector.

2. Lark Energy was established in March 2010 to help diversify the business at a time of difficult economicconditions in the housing and construction markets. The company builds on the Group’s expertise in energyefficiency and renewable energy technologies and focuses on delivering renewable energy projects for theGroup’s own development sites and for external clients and customers. It is involved in solar PV at all scalesfrom individual residential installations through commercial roofs to solar farms.

3. This year Lark Energy has installed 11 MWp of PV, including two of the UK’s largest solar farms (nearGrantham and Newark), and a large number of commercial roof top projects.

4. We are currently working day and night to install a further 1.5 MWp of roof top and ground-mountedprojects before 12 December.

5. As a result of the government’s announcement we have lost over £10 million of orders, predominantlyhousing association projects designed to address fuel poverty.

6. We are not opposed to reductions in FIT levels to reflect reductions in installation costs. Indeed, at thetime of the fast track review on large scale solar, we urged the government to make less drastic cuts in therates for large scale solar whilst at the same time reducing rates for other sizes of installation to a moresustainable level. We told the minister and DECC officials that the industry would face another cliff face beforethe end of the year if free domestic installations in particular were not brought under control.

7. Instead, the new FIT levels were announced after weeks of uncertainty in the market and were far moredraconian then anyone had forecast. No serious engagement has taken place with industry in the interveningmonths. Even worse, a completely impractical, and possibly unlawful, implementation date was announced totake affect two weeks before the end of the consultation.

8. One of the government’s justifications for the six week notice of changes was that this period allows mostinstallations already ordered to be completed. Whilst this may be the case for small, straightforward domesticinstallations, it is completely unrealistic for commercial or multi-roof installations which require planningpermission, permission from the District Network Operator (DNO) for connection to the grid, structural surveysand ordering of long lead time components. In essence, the government’s announcement amounts toretrospective action on such projects, given that three months is the usual time from order to delivery.

9. We are also extremely concerned about the health and safety impacts of the deadline with worseningweather and shortening days, there are almost certainly going to be accidents as companies race to completeinstallations.

10. Furthermore, the government claimed that the supply chain should be able to cope with demand broughtabout by such changes. Again, this is completely misleading—many components were reserved by the largestcompanies and supplies of top tier panels and inverters quickly dried up. Mounting rails for roof installationshave been even more difficult to obtain.

11. The regulatory impact assessment accompanying the consultation document is an extremely shoddy pieceof work. There is no real analysis of the different options and very limited justification for the preferred choice.

12. It is worth noting, however, some of the implications of the FIT changes as modelled in the assessment:

— DECC estimate that installations will reduce by 95% as a result of the proposal.

— The current cost of FiTs to energy bill payers is £1.40 per year. If the government does nothing andcontinues to adjust the FIT downwards by 9% each April, the addition to energy payer’s bills wouldreach £25.80/annum by 2020.

— Leaving the changes until April when they were widely expected would add less than £1 to theaverage annual energy bill.

— No attempt is made to model the impact of the proposal on jobs, although bizarrely it indicates jobsgrowth despite the 95% reduction in work.

— No account is taken of the loss to the exchequer of PAYE tax or consequential state support costs ifthe measure results in redundancies.

— No account is taken of the electricity savings made by the 100,000 PV installations, the impact onfuel poverty of installations on social housing stock or the impact on CO2 emissions.



— No account is taken of the substantial sums of money spent by housing associations, localgovernment and community groups which will be lost through aborted projects.

13. We were also hit hard by both the fast track review earlier this year, through which we lost a considerablesum of money on abandoned projects, and again when the extensions provision was curtailed in October.

14. As a result of all of these short-notice government actions we have had to reduce our full-time staff andhave had to scale back on sub-contracting opportunities. This is very disappointing coming as it does when theconstruction industry and housebuilding are already at an all-time low in terms of activity.

15. The Feed-In Tariffs were not designed to be financially capped—it is a price-based policy funded throughthe energy companies. It is clearly not public spending. No justification has ever been provided for the suddenchange in the nature of FIT funding. Germany FIT programme, which has developed the largest PV market inthe world, is funded through an energy levy entirely separated from public spending.

16. Indeed when the FIT was launched, one of the most important selling points to potential customers wasthat it was not linked to government expenditure and therefore would not be subject to arbitrary caps, limitsor cuts. The decision of many customers to install renewable energy and the decision of many companies toenter the renewable industry were predicated on this perceived policy stability.

17. The arbitrary FIT cap introduced by the Treasury following the comprehensive spending review in 2010represented a complete reversal of the principles of the FIT. The cap was arbitrarily based on forecasts of FITuptake contained in a previously unpublished consultant’s report. The report was commissioned by DECC forthe original FIT regulatory impact assessment.

18. The consultant’s report contained forecasts of annual uptake of PV installations against various scenarios.It forecast that there would be no non-domestic installations before 2013. As the report was never published,its hopelessly inaccurate forecasts could not be challenged by industry at the time. Instead the government tookthese forecasts, cut them by 10% and announced the FIT would be capped at those levels, despite their completeinaccuracy and with no consultation.

19. Indeed, the report included the following caveat “it should be noted that the data provided in thisspreadsheet are projections based upon a number of underlying assumptions that in reality are uncertain—actual uptake could turn out to be different, depending on how the market responds to the tariffs. Projectionsin the first few years of the scheme will be particularly uncertain as it is difficult to predict uptake rates undera new subsidy scheme.”

20. For the government to claim that “hot” money and overseas speculators dominate the market is alsopejorative in the extreme. There are some 4,000 UK-based companies, mostly SMEs, that have entered themarket to deliver renewable energy projects, employing over 25,000 new staff and using a UK supply chain.

21. To infer that large scale deployment of solar is a “threat” to an arbitrary FIT budget is also unfortunate.Those companies that entered the market were under the impression that they were contributing to thegovernment’s renewable energy targets rather than posing a threat to anyone. It is perverse that the governmentis happy for investors to make money in any energy market other than solar.

22. As a result of the two fast-track reviews, there has been a significant loss of investor confidence in solarand other renewable energy technologies. The proposed new tariffs provide an IRR which is below the cost ofcapital and has resulted in most investors pulling out of the market.

23. Over £1bn of investment will have been lost with the following consequences:

— Thousands of high-skilled UK jobs lost—the solar industry in the UK has created highly skilled jobsin design, planning, engineering, installation, operation and maintenance.

— Significant tax incomes lost to the UK economy—PAYE and corporation tax—it is clear that the taxtake from the sector far exceeds the arbitrary budget cap.

— Large number of community-scale, housing association and local authority “Big Society” schemesaxed.

— Millions of pounds of investment by housing associations and local authorities wasted followingproject cancellations.

— Slim likelihood of government reaching its renewables targets.

24. The tariffs should be set as before to achieve equivalent returns for all maturing technologies. As PVcosts have now come down from the levels at which the tariffs were first set, this would provide scope forsome sensible reduction which should be discussed well in advance with industry and investors.

25. DECC needs to engage with industry and needs to have a solar advocate in the department to counterthe very strong pro-nuclear and fossil fuel bias of the department.

26. It would also seem folly to base critical policy decisions which significantly affect a large number ofbusinesses on hearsay and limited market studies. Surely evidence should come before policy.



27. What is clear is that solar conveys the following benefits which will be lost if the government pursuesthe current fast track proposals:

— Solar PV provides reliable low carbon power directly at the point of use. Even in low-light conditionsthis technology is 100% reliable.

— PV reduces the requirement for fossil-fuel derived electricity on the grid in high demand daylighthours, reducing carbon emissions and also preventing the need for additional spinning reservecapacity.

— Solar PV is one of the fastest-to-deploy renewable energy technologies which in conjunction withenergy efficiency has the potential to contribute significantly to our energy security.

— The public are overwhelmingly supportive of PV on both roofs and land.

— Local government and community groups have enthusiastically seized the opportunity to developPV schemes of all sizes.

— Housing associations are developing large scale PV schemes for their housing stock to help alleviatefuel poverty.

— Local authorities had been putting PV at the heart of their plans to sell green energy to their localcommunities.

— A large number of companies had been making plans to install roof top PV to reduce their gridenergy consumption.

— Research from Germany has suggested that 30–50 jobs are created for each MW of PV installed.This generates income tax, national insurance and corporation tax income for the government whichis likely to largely offset the costs of the FIT scheme.

— Evidence from Germany suggests that large scale installation of PV is reducing daytime wholesaleenergy costs with PV now generating up to 20% of such energy supply in peak daytime summermonths.

23 November 2011

Written evidence submitted by Carillion Energy Services

Carillion Energy Services—Background

Carillion Energy Services (CES) welcome the opportunity to respond to this joint inquiry from the Energyand Climate Change Committee and also the Environmental Audit Committee—Consultation—Solar Feed-in Tariff.

In order to put our comments into context, it may be helpful to outline briefly our role in the provision ofenergy services across the UK and Ireland.

Carillion Energy Services was formerly Eaga plc prior to its acquisition by Carillion in April 2011. Carillionis one of the UK’s leading support services companies with a substantial portfolio of Public Private Partnershipprojects and extensive construction capabilities. The Group has annual revenue of over £5 billion, employsaround 46,000 people and operates across the UK, in the Middle East, Canada and the Caribbean.

Carillion Energy Services, a division of the group are a leading independent energy services provider andone of the largest installers of renewable technologies and domestic heating services in the UK. We currentlymanage Warm Front on behalf of Department of Energy and Climate Change and we also have experience ofworking for the Welsh Assembly Government on the Home Energy Efficiency Scheme, the Warm Homesinitiative in Northern Ireland and the Central Heating and Warm Deal programme in Scotland. We also workedclosely with Utilities and Local Authorities in managing the delivery of energy efficiency programmes.

Carillion Energy Services are committed to helping the environment and combating climate change; weprovide renewable energy solutions to private housing, specifically through the installation of solar thermalpanels and air/ground source heat pumps. Our Clean Energy Programme works in conjunction with theGovernment’s Feed-in-Tariff to install solar photovoltaic panels on social housing properties, we are workingwith a number of Housing Associations and Local Authorities to provide free electricity to social tenants andhave completed over one thousand installs to date. Over 1,000 properties have benefited from the Clean EnergyProgramme due to our partnership with social housing properties.

Within our Carbon Services team, we support the largest number of area-based programmes in the UK,leveraging multiple funding sources to accelerate delivery against policy objectives and drive the Government’sclimate change and carbon reduction agendas. Our work with the UK’s major utilities and energy suppliersallowed us to deliver a carbon saving of 11.9 million tonnes of Carbon Dioxide and 1.7 million innovativeenergy saving products in the financial year 2009–10.

For further information on our work please visit—http://www.carillionplc.com/



Impact to date of Solar PV Feed-in Tariffs and the state of the solar energy market

1. DECC’s Renewables Roadmap states clearly the impact that Solar PV Feed in Tariffs—“Solar photovoltaic(PV) technology has shown significant development in recent years, with ongoing technological improvementsand capital costs falling. By the end of May 2011 nearly 38,000 Solar PV installations in Great Britain werereceiving support through the Feed-in Tariff”51 A further measurement of the impact of the Solar PV Feed inTariffs is outlined in unpublished correspondence, from the Minister of State at DECC who advised us that—“Since the Feed in Tariffs scheme started, it has been successful in encouraging people in Great Britain to getinvolved in local, clean green energy generation. Over 100,000 homes now generate their own electricity,which is the start of a positive move towards a more decentralised and local energy economy—an economy inwhich homes, businesses and communities are empowered to generate their own energy, and in which lowcarbon innovation helps sustain green jobs at a critical time for our economy.”52

2. We believe that the proposed changes will have an impact upon individuals and communities. Ourexperience of working with Housing Associations and Local Authorities is that the Solar PV Feed in Tariffshave a real impact upon community engagement and raising awareness of issues around energy use. In our workon the Chale Community Project, we established “Community Contacts” to work with the local community andraise awareness. Residents reported a greater awareness on the impact of Solar and also the fact that they wereactively monitoring their energy use and the Feed in Tariffs and more importantly—speaking with each otheron energy use. “This project has also brought a lot of people out of their homes into the community. It’sprovided a great opportunity for us all to look out for each other, and will make it easier to do this in yearsto come.”53

3. Such projects also have real economic benefits at a community level by increasing local employment andtherefore socially benefiting the community.

4. The impact upon individuals is summed up by one of the many tenants to have benefited from our CleanEnergy Programme—Mrs Bray from Welwyn and Hatfield—“When Welwyn & Hatfield explained there wasan opportunity to benefit from the solar panels I was interested in taking advantage, but I really didn’t knowhow much money it would help me save. My quarterly bills were typically around £70 but my latest bill hasjust come in at £38 and I’m over the moon. It’s been the same for my neighbours who have had the systemsinstalled and we are all delighted we have these panels on our roofs.”

5. On the state of the solar energy market; we believe that this has been a thriving, developing industry andwe accept the figures that have been quoted in parliament of 4,000 businesses and 25,000 jobs.54

6. We acknowledge that installation volumes are exceeding expectations and accept that a degree of reductionto the Feed in Tariff is required to redress the balance, and avoid the potential to decrease the lifetime of theFiT scheme. However the level and speed of the cuts as proposed presents a number of negative impacts andGovernment needs to construct a proposal that works within appropriate budget restraints in an equitablemanner.

7. In particular, for the investor funded models to survive, a practical rate of return is needed to allow thebenefit to flow to those who could never afford to purchase a Solar PV installation. The proposed cut-off dateof 12 December creates a further inequity to the social housing funded programmes as these programmes haverequired considerable long term investment to develop the model and have set up secure supply chains eventhough delivery is slowed by protracted procurement processes. Much investment has been made prior to thereduction in material prices but delivery has not been able to flow through due to following due process. Theproposed cut off date allows insufficient time for extensive programmes that require tenant engagement andcoordinated quality driven installations to adapt.

The balance between affordability and delivering the objectives of the Solar PV Feed-in Tariffs, includingfactors to consider when setting the rate of small-scale Feed-in Tariffs including jobs created, emissionsreductions and energy-saving behavioural change

8. The objectives of the Solar PV Feed in Tariffs were primarily to encourage individual householders andcommunities to consider their energy use and also to stimulate the energy sector in terms of economic growth.Ed Miliband summed this up strongly at the initial launch-“The guarantee of getting an income on top ofsaving on energy will be a carrot to householders and communities across wanting to make the move to lowcarbon living.” “The feed in tariff will change the way householders and communities think about their futureenergy needs, making the payback for investment far shorter than in the past. It will also change the outlook51 UK Renewable Energy Roadmap, DECC, July 2011, http://www.decc.gov.uk/assets/decc/11/meeting-energy-demand/renewable-

energy/2167-uk-renewable-energy-roadmap.pdf, Page 15.52 Correspondence from Minister of State, Greg Barker to Carillion, 14 November 201153 Chale Community Project,—Green energy builds lasting change on the Isle of Wight—http://www.carillionenergy.com/sites/

default/files/documents/Eaga_Chale%20Village_Case_Study.PDF54 House of Common, Oral Evidence taken before the Energy and Climate Change Committee, Departmental Annual Report And

Accounts, Wednesday 2 November 2011, Chris Huhne MP, Moira Wallace, Simon Virley and Phil Wynn Owen. Availablefrom—http://www.publications.parliament.uk/pa/cm201012/cmselect/cmenergy/uc1623-i/uc162301.htm Wednesday 2 November2011



for a range of industries, in particular those in the business of producing and installing small scale lowcarbon technology.”55

9. We would suggest that jobs created, emissions reductions and energy-saving behavioural change are allmatters that need to be taken into consideration in order to find the balance between affordability and deliveringthe objectives. We have real concerns that these issues have not been taken fully into consideration, particularlyfollowing the recent Energy and Climate Change Committee on 2 November, when it was suggested in theresponse from DECC that no impact study on jobs had taken place before the decision to cut the tariffs.56

10. We have great concerns about the impact upon energy saving behavioural change. The suggested multi-installation tariff penalises those at the lower end of the economic spectrum who will not be able to invest therequired sums. These householders such as Mrs Bray, quoted above, would benefit from the saving on energybills that Solar Photovoltaic would bring through an investor funder programme.

11. The budget cap remains a key issue and we believe there needs to be further review into the 20% headroom on the levy fund cap in relation to volume of installations over the period to 2020. We would also suggestfurther discussions should be held in relation to whether there is any room for movement between renewablebudgets with the delays in the Renewable Heat Incentive being a potential area for review.

12. The impact that these proposed cuts are having on investor and business confidence in Green Deal alsoneeds to be addressed. We are already receiving feedback from our investors questioning the Government’spublished commitment to deliver in these areas. The issue of sustaining workforces through the period where,should the consultation go ahead as set out, the Solar PV market is considerably cut and Green Deal remainsunconfirmed. Without a Solar PV market—or at best a severely reduced market—there will be job losses.

The way in which the Government has managed the Solar PV Feed-in Tariff, the impact this has had to date,including the management of the Consultation

13. Like others in the industry, we have real concerns regarding DECC’s management of the announcementson the Solar PV Feed in Tariff and the impact this has had to date. In addition to this, like others, we haveconcerns regarding the management of the Consultation.

14. The management of this issue has left investors feeling unstable and reluctant to engage with the industry.The proposals to bring forward the reduction in FiTs from the date previously announced by the Governmentof 1 April 2012 has seriously undermined the confidence and trust in Government from our industry and alsothe confidence and trust of the financial investors who have supported our programmes to install Solar PVsystems, particularly for homes in fuel poverty. The industry has invested heavily in establishing supply chainsfor delivering solar photovoltaic systems and in stocks of solar panels that are due to be fitted over the periodto 31 March 2012. These commitments have been undermined by the bringing forward the date at which FiTsare reduced as we now need to stop processing new applications for Solar PV systems very quickly, given thetime from enquiry to MCS accreditation is at least six weeks.

15. We accept that FiTs have to be reviewed and revised to reflect reductions in the costs of panels andefficiencies as the industry matures. However we question how attractive a tariff of 21 pence per kWh forsingle home installations of up to 4kW will be to individuals who can afford to pay the installation costs, giventhe timescale over which they must commit to this investment. Even more at threat is the attractiveness of atariff of 16.8 pence for multiple installations, such as those we are carrying out for Housing Associations andLocal Authorities that are being funded by Carillion and a number of banks under a private finance model.Whilst we support value for money and agree that some reduction is required, we feel the proposal creates andunfair level of damage on those models that support those most in need. These programmes, which are set toprovide solar PV for many tens of thousands of homes in fuel poverty, will be stopped or at least severelycurtailed. We would reiterate that as per our answer in paragraph seven, a practical rate of return is needed toallow the benefits of Solar PV to be passed to those who could never afford to purchase a installation, and thatthese models require long term investment in the supply chain that makes an eligibility date of 12 Decembertoo short for these extensive programmes.

16. Once again, we would re-iterate that we recognise that the cost of PV materials has dropped and energyprices have risen and therefore adjustments to the levels of FiTs were inevitable and necessary at some point.However the proposed cuts have come unexpectedly and created turmoil within the industry rather than aplanned approach, engaging with the industry which would have allowed the PV sector to adjust and investorsto prepare.

17. As a result, those who will suffer the most are tenants, Housing Associations and Local Authorities.“The cuts will have a significant impact on social housing projects underway in Scotland which have beendesigned to provide low-income tenants with free electricity to help tackle fuel poverty. For example, Glasgow55 “Eaga launches Clean Energy Programme” available from—http://www.carillionenergy.com/media/news/eaga-launches-clean-

energy-programme56 House of Common, Oral Evidence taken before the Energy and Climate Change Committee, Departmental Annual Report And

Accounts, Wednesday 2 November 2011, Chris Huhne MP, Moira Wallace, Simon Virley and Phil Wynn Owen. Exchangebetween Ian Lavery MP for Wansbeck and Secretary of State for Energy and Climate Change. Available from—http://www.publications.parliament.uk/pa/cm201012/cmselect/cmenergy/uc1623-i/uc162301.htm Wednesday 2 November 2011



Housing Association has signed a contract for installations on 500 homes and Dundee City Council has starteda tender process for 1,000 homes. These projects could be stopped in their tracks.”57

18. We accept that all bill payers shouldn’t pay for investors to make excessive returns, but these fundedmodels are required to give access to those who can’t buy outright. Carillion Energy Services are not alone inoperating in this area. However we are unique in having set up a £300 million special purpose vehicle dedicatedto this initiative. This has previously been heralded by the Secretary of State as a financial and delivery modelwhich could drive forward the Green Deal. This Special Purpose Vehicle (SPV) has allowed us to work withHousing Associations and Local Authorities and their tenants to bring far reaching benefits including reducedenergy bills. This model, supported through a hybrid project financing structure, allows Solar PV units to beinstalled on domestic roofs at scale and at no cost to the tenant. The considerable advantages this fund wouldhave brought through investing in improvements in social housing is in jeopardy.58

19. In particular, Carillion Energy Services have signed contracts with a number of Housing Associationsand Local Authorities and have others waiting on funder approval. The requirement for public bodies to testBest Value and value for money means that a number of these contracts have only been signed in the last fewweeks. As a result work has not started at scale. There will be over 10,000 social housing Solar PV installationsat immediate risk as a result of the comprehensive review and shortened timeframes.

20. In this context the proposed changes to the FiT regime are particularly problematic both in the timingand the steepness of the reduction. It is also true to say that social housing residents and providers will havemissed out relative to private householders who have been able to pay for installation upfront. There is anobvious lack of equity in the outcome from the speed of change. Social housing schemes have just not gotgoing. We believe that there is therefore a compelling case where contracts have been signed and tenantexpectations raised for the current FiT rate to apply beyond 12 December and preferably up until 31 March2012.

21. On the management of the consultation, it is argued in the consultation document that the timeframegiven allows organisations sufficient time to complete their programmes and register with a FiT supplier.However DECC themselves acknowledge59 that OFGEM figures on competed installs are not accurate due tothe time delays in registering with a FiT supplier, but programmes that have contracts planned through to theoriginal review date of April 2012 are expected to achieve the same volumes within a remarkably short timeframe. Greg Barker has recently responded to the Shadow Secretary of State confirming that up to 32,023 sitescould be in a situation of not being able to meet the timescales laid down.60

22. There is broad agreement that the proposed multi-installation tariff is not workable at 16.8p. We believethat this model of installation should not be unfairly penalised due to the benefit it brings to low incomehouseholds who would not otherwise be able to access Solar PV, and the recognition that there are additionalcosts associated with this delivery model, as well as the need to keep investors involved.

23. In addition to this we would like to raise the issue of the Community Tariff. There are references to acommunity tariff being considered in Phase 2 of the consultation process, however, this will be too late to haveany compensation effect or real impact. Opportunities and investment will be lost and supply chains broken.The procurement process in the public sector would need to be restated which would lead to more costs aftera considerable investment would already have been wasted.

24. We fully support the concept of encouraging energy efficiency and the link to renewable energy. This ishow we have modelled our business going forward and we have been working on the whole house and wholebusiness approach for a considerable time.

25. While the concept is right we believe there are a number of questions which Government needs toanswer before we close the parameters in a way that further penalises those on low incomes and causes furtherconcern for businesses that will be find it difficult to make the equations add up.

Affordability of Solar Photovoltaic energy versus other renewable energy (given the overall levy-funded capfor energy bills) and the impact of Feed-in Tariffs on energy bills

26. We would support the Micropower Council response that identifies that by cutting tariffs now, ratherthan on 1 April, would lead to an estimated saving of just £0.60 on the average annual electricity bill (usingfigures from the DECC Impact Assessment) Longer term, the impact of even a “Do Nothing” approach wouldhave been only around £22 on the average bill in 2020. In view of this, the action proposed in the consultationdocument would appear to be disproportionate to the scale of the threat, especially in terms of the wider57 “Solar feed in tariff threat”, Scottish Government Press Release, http://www.scotland.gov.uk/News/Releases/2011/11/03121025,

3 November 2011.58 “Eaga closes £300 million in funding for residential solar programme”, http://www.environmental-finance.com/news/view/1608,

17 March 2011.59 DECC Impact Assessment, http://www.decc.gov.uk/assets/decc/11/consultation/fits-comp-review-p1/3416-fits-IA-solar-pv-

draft.pdf, 2 November 2011.60 “Government admits feed-in tariff deadline could leave thousands short-changed”, http://www.businessgreen.com/bg/news/

2125083/government-admits-feed-tariff-deadline-leave-thousands-short-changed, 15 November 2011.



repercussions of these proposals that are already affecting many in the sector.61[60] We can see that in thecurrent economic climate that the “Do nothing” approach would be seen to be adding to the burden on energyconsumers, but would suggest that delaying the cut in tariffs to April would be a much more pragmatic option,with a minimal impact on bills payers.

Experience of similar incentive mechanisms for renewables in other countries

27. Carillion do not have experience of similar incentive mechanisms for renewables in other countrieshowever we would refer to the recent answer provided by the Minister of State on FiTs in the European Union.“The structure of support for renewable energy varies considerably across European Union (EU) memberstates, so the schemes cannot be compared directly with each other. The Department collects information onthe schemes in a number of member states, but not in the form requested. Tariffs have been reduced recentlyin Germany, France, Spain, Italy and Belgium in the face of global falling costs for solar photovoltaic (PV)technology. Our proposed tariff of 21p for domestic scale installations (=4 kW) is similar to the rate offeredin Germany.62 Whilst we recognise that the tariff within many EU countries has been reduced recently, wewould urge that DECC also take wider issues into consideration particularly the economic, employment andenvironmental status of Great Britain—in comparison to these EU countries. The economic, employment andenvironmental impact of making such a sudden decision on FiTs in the United Kingdom is not comparablewith the overall FiTs levels in other countries.

23 November 2011

Written evidence submitted by Bath & North East Somerset Council

1. Executive Summary

We request that the Environmental Audit Committee and Energy and Climate Change Committee urgeGovernment to make the following changes to the current proposals to cut the solar FIT.

1.1 Retain the original date for the reduction in FITs of the 1 April 2012, rather than the early cut of 12December 2011.

1.2 Establish a “community tariff” that remains at a higher level.

1.3 Remove the Government’s £860 million cap on funds for the FIT.

1.4 Set a lower energy efficiency benchmark than an Energy Performance rating of “C” or installation of allpossible Green Deal Measures in order to be eligible for the FIT.

1.5 Exempt community schemes from the multiple installation tariff.

2. Introduction

2.1 We are a Local Authority with ambitious aims to tackle climate change, reduce fuel poverty and build alow carbon economy. Our Sustainable Community Strategy sets the aim of a 45% cut in district-wide CO2

emissions by 2026.

2.2 We are unique in that our approach to the Green Deal and meeting our renewable energy targets is basedon a Cooperation Agreement with the social enterprise Bath & West Community Energy (BWCE), who willdeliver these aims whilst also creating community capacity and resilience. BWCE’s model depends partiallyon FIT rates remaining as expected.

2.3 We are also involved in pioneering work on energy efficiency in historic homes, through the developmentof our Sustainable Construction and Retrofitting Supplementary Planning Document and our collaboration withthe Bath Preservation Trust and the Centre for Sustainable Energy. With over 6,000 listed buildings in ourdistrict and many more buildings of traditional, hard-to-treat construction, the proposed energy efficiencyrequirements for FIT eligibility are very worrying.

2.4 In addition, our Housing Services team has undertaken a project, “Freedom from Fuel Poverty” whichinstalled solid wall insulation on the private homes of fuel-poor residents and found that bringing these homesup to a decent standard is not straightforward. Therefore, we are very aware of the challenges and expense ofenergy retrofitting old homes, particularly for the fuel poor.

2.5 77% of our school buildings which have Display Energy Certificates have a rating of less than C, creatinga serious barrier to solar uptake.61 Micropower Council—response to the Energy and Climate Change Committee and Environmental Audit Committee—

Consultation—Solar Feed-in Tariff62 “Renewable Energy Feed-in Tariffs, Greg Barker, Minister of State, DECC in response to Tim Yeo, Mon, 14 November 2011

House of Commons—Written Answer



3. Factual Information

We refer the committee to the following documents:

3.1 Bath & West Community Energy’s Business Overview, showing that they are initially planning to focuson solar as a stable revenue with which to develop their organisation: http://www.bwce.coop/wp-content/uploads/2011/10/BWCE-business-overview.pdf

3.2 Warmer Bath: A report jointly developed by the Centre for Sustainable Energy and the Bath PreservationTrust about energy measures that can be taken in older homes: http://www.cse.org.uk/downloads/file/warmer_bath_june2011.pdf

3.3 The Freedom from Fuel Poverty single-wall insulation project: http://www.cse.org.uk/projects/view/1142

4. Full recommendations

4.1 Whilst we support the FIT being cut in line with reductions in the cost of solar PV, the FIT should becut on the original date of the 1 April 2012, rather than the early cut of 12 December 2011 in order to protectthe solar industry.

4.2 We strongly support the establishment of a “community tariff” that remains at a higher level. This isvital for creating the funds and capacity to deliver the Green Deal through community-based models and wouldenable us to retain the community benefits we had expected. If implemented, the community tariff would applyto schemes installed after the 1 April 2012. The Community Tariff is essential to our approach to the GreenDeal and to meeting our renewable energy targets, which is based on a Cooperation Agreement with the socialenterprise Bath & West Community Energy (BWCE). BWCE would be adversely affected by the proposed cuts.

4.3 Community schemes can be defined using the definition of “Community Enterprise” which has beenestablished as part of the consultation around changes to the provision of tax relief through the EnterpriseInvestment Scheme (EIS). If, contrary to our desire, the FIT is cut on 12 December, the community tariffwould need to apply retroactively to projects installed between the 12 December 2011 and the 1 April 2012.

4.4 We also support the removal of the Government’s £860 million cap on fund for the FIT. If the FIT fundremains capped, then when the fund is exhausted there will be no money for any schemes, including communityschemes. Instead, the FIT funds could be allocated based on the delivery of renewable energy targets.

4.5 We recommend that Government adapts the proposal to require homes to have an Energy Performancerating of “C” or to have installed all possible Green Deal Measures in order to be eligible for the FIT, so as to seta lower benchmark. Whilst energy efficiency measures are important, research has shown that the installation ofPV increases awareness of energy and stimulates households to take efficiency measures. Also, traditionalhomes in our district are likely to require more investment than will be provided by the Green Deal to achievea C rating, and 77% of our school buildings which have Display Energy Certificates currently have a rating ofless than C, creating a serious barrier to solar uptake. This is a particular problem for the fuel poor living inhard-to-treat homes, since solar PV is one of the most cost-effective ways to help them out of fuel poverty.

4.6 Finally, we urge Government to exempt community schemes from the multiple installation tariff. Manycommunity schemes, including BWCE, are installing PV on several buildings through “roof rental” agreementsso they can reinvest the FIT in community projects. Community schemes do not have the purchasing power ofthe large companies who are offering roof rental deals so cannot get the discounts available to large companies.

23 November 2011

Written evidence submitted by E.ON

Summary of Key Points

— We support cuts, but timescales are unmanageable: We recognise the need to make reductions inthe solar PV tariff, but the timescale to which cuts will be made is unreasonably short. The timescaleshave left installers with little opportunity to mitigate losses.

— Contracts committed to should be honoured at current rates: Contracts already in place andagreed before the consultation was published should be allowed to be completed at the current solarPV rate to limit installers’ financial exposure and customer disappointment.

— Suppliers’ CESP obligation is negatively impacted by changes: The proposals reduce our abilityto manage effectively our supplier obligation where solar PV contracts are no longer economicallyviable. This could result in higher obligation costs being passed on in consumer bills.

— A much smaller market will result: We would like to see a market for solar PV, but agree thisshould be better managed along with the development of other microgeneration markets. Our viewis that the newly proposed 21p tariff will result in a much smaller market, predominately based inthe south, but the 16.8p for multi-site generators is too low and is likely to close this market, therebylosing the benefits it has brought in community schemes.



— Energy efficiency first, but targets must be realistic: We support the concept of introducing energyefficiency measures in the future, but believe both proposals (linking eligibility criteria to either theEPC rating or Green Deal) are unworkable and instead customers should be asked to complete basicenergy efficiency measures such as loft and cavity wall insulation and heating controls.

— Consumer and investor confidence dented: We are concerned that, given the number of consumerswho have had to be let down due to the severity and timing of the tariff cuts, consumers will be lessconfident about participating in other Government schemes in the future, such as the Green Deal andthe RHI. Investor confidence will also have been adversely affected by sudden changes, which mayharm the ability of Government to attract finance to other schemes.

Introduction

1. E.ON is one of the leading installers of solar panels in the UK. The solar PV market has continued tocome under close scrutiny by Government in recent months and the inconsistent approach taken with the Feed-in-Tariff (FiT) towards solar PV is creating great uncertainty, not only in this market, but its impact is likelyto be felt in other Government incentives affected by the Treasury’s Control Framework for DECC Levy-Funded Spending.

Why do we support the continuation of the FiT?

2. Helping customers reduce their energy consumption is a fundamental part of E.ON’s business model. Weare focused on helping customers to “insulate, moderate and generate” by offering a diverse and complementaryportfolio of low carbon technologies, advice and monitoring equipment which improve the energy efficiencyof the property and provide better information to customers about their consumption and how they can manageit. Through a number of initiatives, E.ON is working with homeowners, businesses and social housing providersto market, sell, design, fund, install, operate and maintain microgeneration technologies, including solarelectricity.

3. The FiT has played a very positive role in opening up the microgeneration market. To date we have foundthat most of the market interest centres on solar PV. This is because solar PV is relatively easy to install, witha low visual impact compared to some alternative technologies, and it is likely to be one of the principal waysin which the public can generate their own electricity from renewable technologies. In addition, due to theattractive tariff, it has enabled industry to bring forward innovative business models, opening up theaccessibility of the solar market.

4. We recognise the need to reduce the level of the FiT to make it sustainable. We have seen some decliningcosts and it is right to reflect this in a tariff change. It is also important to manage PV support along withsupport for all microgeneration technologies. We want a range of technologies installed across the UK in theoptimum locations, which helps us meet our 2020 renewable targets in a cost efficient manner, but in a waythat also engages consumers on the issues.

5. We note that DECC has proposed that the marginal cost of meeting the UK’s renewable energy target intechnologies supported by the RO should be set at the cost of offshore wind and it would be sensible andconsistent to adopt a similar approach to smaller scale technologies covered by the FIT and RHI, while allowingtime for the supply chain to become sufficiently established to deliver at scale. Exceptions to this might bewhere technologies are still in the development phase and need higher levels of support to achievecommercial maturity.

6. It is however unreasonable to set a cut-off date which is before the end of the consultation period—sixweeks’ notice of such a significant change leaves companies severely exposed and risks letting down manycustomers. We need longer to allow existing commitments to be honoured.

The effect of the proposed changes

7. As a result of the consultation we, along with the rest of the industry, have had to take swift action tomitigate our losses and customer disappointment. For E.ON this has meant significantly scaling back our PVpropositions and we expect the solar PV market ultimately to become much smaller, with fewer installations.

8. As a result of the unusual approach taken by Government with respect to the enforcement date under theconsultation, the only rational option for developers to take is to treat 12 December as the cut-off date for PVinstallations no longer receiving the current tariff. The Government may have anticipated that prudentdevelopers would have included appropriate change in law provisions in their contracts. However, theconsequence of the exceptional approach of the consultation (where the decision on the tariff changes willoccur after the 12 December reference date) has been that those change in law provisions may have beenrendered ineffective where they require the change in law to have come into force before the affected partycan take action. We are currently in negotiations with one local authority who is unwilling to vary the agreementto recognise the particular circumstances and, as a result, we may be forced to continue to install post-12December (which is unviable on this particular project) in order to avoid breach and termination.

9. The timescale provides no time to complete all of our existing schemes in respect of which we alreadyhave contracts in place. As a result of the swift changes, we have had to reorganise our supply chain and that



has required us, in some instances, to re-open agreements to negotiate new terms. Many of our suppliers andsubcontractors, due to the spike in demand, are now requesting significant premiums to deliver and thisthreatens to exacerbate our losses.

10. There are a number of external factors beyond our control such as DNO approval timescales, stock leadtimes, mortgage lenders consent, legal cooling off periods and resourcing to complete programmes originallydesigned in some cases to take five months, which are constraining our ability to respond quickly to the changesproposed. As a result of these changes many of our social housing customers and domestic customerinstallations will not be completed. In the domestic, bought PV sales market, we have already been forced totake the decision to stop proceeding with a number of enquiries to manage customer expectations. This sort ofaction will have a negative impact on trying to engage consumers in the future to undertake other renewableenergy and low carbon measures and is likely to lead to an increase in customer complaints as we have nochoice but to stop customers progressing further through the application process due to time constraints.

11. We believe the action taken by Government to cut the tariff only six weeks after their announcementwill leave us with a very significant stock liability, estimated to be approximately £3 million. This is likely toaffect our view of investment risk associated with other Government incentive schemes operating within definedbudgets, so it is important that Government both manages the current FiT review in a way which is sensitiveto business and customer perceptions and learns the lessons for other schemes. Many customers will feel letdown by this withdrawal of funding levels in such a swift manner and this may affect confidence for othersimilar schemes eg RHI or the Green Deal.

Timescale and existing contracts

12. We believe that DECC set a precedent in spring/summer 2011 with the fast track review for large scalePV. The consultation period ran from 18 March until 6 May (seven weeks) with changes implemented on 1August (19 weeks from the start of the consultation). As much as we understand DECC’s decision to cut thetariff rates, it is unreasonable to let customers down and leave installers open to such liabilities due to poormanagement of the FiT budget.

13. We understand the need to reduce the support, but would urge Government to consider allowing contractsagreed and in place on the day the consultation was published to continue at the current rate, ie grandfatherexisting contracts. Whilst we hope to complete some installations within the six week window, it will beimpossible to deliver against all of our commitments. These contracts are typically committed to procurementlead times of two to three months. We understand that Government is likely to be concerned about fraudulentclaims. One solution could be to require the company Director of the organisation in question making the claimto sign an affidavit that the PV order (contract) was committed to and in the pipeline before the consultationpublication date (31 October 2011). In addition the property owner could verify that they were also in thepipeline prior to the consultation publication.

Effect on Supplier Obligations

14. Changes to the tariff will also have an impact on the likelihood of suppliers being successful in thedelivery of their other obligations. Specifically there is a risk with the “Community Energy Saving Programme”(CESP), which is currently coming to towards the end of a three year programme.

15. Under this programme the installation of solar PV panels is an approved method of carbon reductionand as such many local authorities and registered social landlords have agreed programmes with suppliers toinstall by March 2012, with a business plan constructed around the FiT. In many cases these programmes arenow being cancelled, leaving suppliers with a shortfall in their plans to discharge the obligations. With thischange coming late in the programme and at short notice this will make completion of the Obligation withinthe previous timescale increasingly difficult to achieve.

Questions

Q1. Impact to date of Solar PV Feed-in Tariffs and the state of the solar energy market

1. The solar market in the UK has been very successful with uptake significantly exceeding Governmentexpectations. Solar PV is an accessible technology, and for a large proportion of domestic properties planningpermission does not need to be sought. There has also been significant financial innovation in the market,opening solar PV up to the wider public with rent a roof schemes, as a result of an attractive solar tariff.Businesses were keen to invest in the solar industry because of the attractive returns it provided. Given howattractive the solar industry became, it was only a matter of time before cuts were needed. It was widelyrecognised within the industry that the attractive tariff would absorb too much of the FiT budget and neededto be reduced. We had hoped such cuts could have been introduced earlier in a more managed way.

2. Solar PV was also able to have a role in reducing the energy cost of customers on low incomes includingthose defined as fuel poor.

3. Through rent-a-roof schemes, domestic customers are able to take advantage of savings on their energybills over a substantial period of time, increasing customer engagement with their energy consumption. Through



E.ON’s private domestic rent-a-roof scheme, customers see on average a saving of £150 on their annual energybills. In addition, customers potentially benefit from an increase in the value of their home through the additionof solar. This has been proven in international markets such as Australia and the United States, and has beenbacked by recent findings of the Energy Savings Trust. We receive very positive feedback from both our privatedomestic rent-a-roof sales and the social housing rent-a-roof schemes we operate.

4. We have a number of case-studies which provide insight into the wider impact and role of the solarPV market:

— Mr Hobster who had solar PV installed as a result of a partnership between E.ON, Nottingham CityCouncil and Nottingham City Homes said, “We were hoping to save around £120 a year on ourelectricity bills, but we may save much more. I think this month our bill has been cut my half becausewe’ve had some great weather—I hope it continues! It sounds too good to be true but I’d encourageother families in the area to snap up the chance to have solar panels fitted if their house is suitable.My wife and I were a bit worried about it at first but the installation was really quick and hassle-free.”

— Other residents in the same project have been prompted by the solar install to pay closer attentionto their energy consumption. Mr Andrew said: “The electricity used when my wife and I were athome yesterday cost us nothing until I turned on the TV in the evening.”“It’s easy to keep track of how much electricity we use during daylight hours by checking the electrictimer then filling in the energy calendar E.ON gave us after the installation.”

— The scheme, which was recently completed, saw solar panels installed on almost 600 homes in theApsley area of Nottingham. The project also meant that E.ON could work with Nottingham CityCouncil to put 10 electricians through courses on working at heights and manual handling so thatthey are equipped with the knowledge they need to install and maintain solar panels.

Q2. The balance between affordability and delivering the objectives of the Solar PV Feed-in Tariffs,including factors to consider when setting the rate of small-scale Feed-in Tariffs including jobs created,emissions reductions and energy-saving behavioural change

5. Solar PV is a relatively costly low carbon technology to support in the UK, but it has been successful inengaging consumers and increasing interest in both generation of renewable electricity in customers’ homesand in energy efficiency and otherwise reducing their energy consumption. The technology has also shownsignificant development in recent years, with ongoing technological improvements and capital costs falling.Companies have geared up to take advantage of the FiT tariff offered by Government and this wide uptake isplaying a major part in driving down costs.

6. Solar PV has the potential to play a larger role in the UK renewables deployment, but a key factor of thiswould be to bring the cost of the technology down to a sufficient level that means it is no longer dependenton a high level of subsidy. The tariff stimulates the market to reduce costs and allow a technology that is notmarket ready, to become established at scale, create jobs and stimulate behavioural changes, ultimately allowingtechnology adoption to increase and subsidy to reduce.

7. The PV tariff does need to be reduced as costs have fallen and the affordability of the scheme is underthreat. Through different targeting and messaging, we believe a smaller solar market can exist. If a smallmarket is to continue, then projects in the south of the UK should just remain economically viable at 21p, but16.8p for multi-site generators (MSG) is too low and does not reflect all the relevant cost factors. We believethe MSG tariff should also be 21p.

8. There are two quite different emerging propositions within the domestic solar PV market, “bought PV”(where the consumer buys the panels and receives the FIT payment), and “rent a roof” (where an MSG buysthe panels and receives the FIT payment—a market created by tailoring the FiT regulations to allow re-allocation of the tariff). There are also examples of cases in the market where the FiT value and upfront capitaloutlay are split between an MSG and the end-consumer.

9. We strongly believe that there is a necessity to preserve both markets, each of which offers unique benefits.Ultimately, both “rent-a-roof” and “bought PV” contribute towards the UK’s 2020 renewable and carbonreduction targets, and Government’s aim to connect consumers with their energy consumption. Rent a roof canbe very relevant to different customer segments, who cannot afford the capital outlay.

10. The current structure of the FiT allowed companies like E.ON to provide “rent a roof” packages toenable customers to access energy savings which they otherwise would be unable to access. In the socialhousing sector this extends to some of the most deprived areas, helping to reduce tenants’ energy bills, provideenergy efficiency advice and to fund training for locally unemployed people.

11. We particularly believe that the “rent-a-roof” model has a substantial role to play in engendering customerengagement, making solar PV visible and accessible to the wider mass market, including those customers whootherwise could not afford a system.



12. The rent a roof mechanism operating in the social housing sector means that the rent a roof payment isoffered to the registered social landlord and the energy savings are passed onto the tenant. This is vital in asector which otherwise would not be served due to the lack of affordability of the technology for the tenant.

13. The level of additional cost incurred in setting up a rent-a-roof scheme and effectively servicing the end-customer is significant. Whilst overall in the solar PV market we have seen substantial improvements in pricesof panels over the last 12 months, it must be noted that panels make up just one of a number of elements ofthe market price of a solar PV installation. Other considerations include inverter cost, labour cost, scaffolding,cost of sale, survey, design and conversion rates. Whilst MSGs may experience some economies of scale incomparison with an individual consumer, there are additional costs to be considered for MSGs, includingfinancing costs, metering and monitoring and portfolio insurance. In addition MSGs do not benefit from thereduction in energy costs. All these factors should be a consideration when setting the tariff rate.

14. Further, when reviewing how to set the appropriate tariff, consideration should be given to the effect thisindecisive action is having on the industry and impact to existing jobs. The solar industry employs thousandsof people and a number of these will now be in jeopardy. If the tariff is set at the proposed low rate, Governmentcould consider offer training grants or support to allow people to be retrained for what is coming under RHIand Green Deal to help the people they are forcing into redundancy now, and to mitigate the concerns ofcompanies wanting to participate in the Green Deal on an ongoing basis.

Q3. The way in which the Government has managed the Solar PV Feed-in Tariff, the impact this has had todate, including the management of the Consultation

15. As noted above, we support the need for change, but we are disappointed this did not happen soonerand in a more manageable and controlled way. The timescale for the changes is unreasonable and leavesinsufficient time to unwind from existing contracts, leaving companies open to significant liabilities with no orlimited ability to manage this risk.

16. This new tariff level will have a significant impact on the economics of our products and projectproposals, and as discussed in response to question 2 we have already had to close down our domestic offering.We have also invested heavily in our own recruitment and supply chain to support what we viewed as agrowing market.

17. We have committed to installing solar panels on up to 10,000 social houses (18MW generation) in thepipeline and contracts were placed three months ago for the solar panels for 8MW of this when panel costswere higher than the prices we are starting to see in the market today. If the FiT cut were to progress to thetimetable proposed, we estimate that we would lose between £2–£3 million in inventory costs as well asjeopardising some 425 local jobs and letting many customers down.

18. As noted above, in the domestic, bought PV sales market, we have already been forced to stop proceedingwith a number of enquiries to manage customer expectations. This will have a negative impact on engagingconsumers to undertake other renewable energy and low carbon measures.

19. It is unacceptable to set a cut-off date which is before the end of the consultation period. We believesufficient time should be provided for companies to unwind from existing contacts.

20. Government could consider grandfathering existing contracts at the current FiT rate, using the 31 Octoberconsultation publication date as the cut off point. We ask that Government provides this exemption forindividuals and organisations that can demonstrate that they contracted for their PV panels before theconsultation was announced, but are unable to have them installed before the rates change.

21. We also ask that Government commit to consult more closely with business on timelines as well aspolicy content for future changes.

Q4. Affordability of Solar Photovoltaic energy versus other renewable energy (given the overall levy-fundedcap for energy bills) and the impact of Feed-in Tariffs on energy bills

22. Whilst solar PV is a relatively costly technology for application in the UK given the limited levels ofsolar radiation, it has a potentially useful role to play in meeting the UK’s renewable energy target, given thepotential for reducing PV generation costs and its relative ease of deployment compared to some alternativerenewable technologies. As noted in response to Question 2 above, it also reduces customers’ exposure torising electricity bills and goes someway to making them more energy aware. However, it is evident that areduction in the tariff was needed both in the light of declining costs and to ensure the available budget agreedbetween HM Treasury and DECC was also available for other technologies eligible for FITs with potentiallylower costs.

Q5. Experience of similar incentive mechanisms for renewables in other countries

23. Experience in Australia is relevant and similar to the UK. The Australian Government reduced the solarPV FiT from $0.60/kWh to $0.25 because the 100 MW cap for scheme was reached earlier than planned dateof 2024. The impact of this was consistent in all Australian states, with a reduction in residential sales of 80%because organisations were not given sufficient notice on Premium FiT closure, with each state managing the



closure differently. A number of major manufacturers went into receivership and solar retailers are struggling,with reports of businesses downsizing. One of the major solar retailers, Solar Shop, also went into receivership.The lessons from this are that, as far as possible, the available budget or cap on take-up should be consistentwith the level of incentive provided by the FIT set, and that the transition to a lower level of support needs tobe managed in a way which provides sufficient time for suppliers to adjust.

24. In Germany they have a system of predetermined annual tariff degression for renewables in an effort toreflect falling costs. Given the risk that the predetermined degression rates may depart from actual costs,Germany has more recently introduced “responsive degression” schemes for solar PV. In this design, the rateof degression is adjusted according to the rate of market growth. One of the reasons for the success of thepolicy in bringing forward investments is that the German framework has fostered a high level of investorcertainty by framing its FIT policy as a central part of a long-term strategy to meet its overall objective ofprogressively increasing the proportion of renewables in the total energy mix. Long-term continuity of policyobjectives will also be important in supporting investment in a UK context.

23 November 2011

Written evidence submitted by Low Carbon Developers

Following the request for evidence from the Environmental Audit Committee and Energy and ClimateChange Committee joint inquiry into Solar PV, please see below our response addressing the impact of Feed-in Tariff (FiT) to the solar market, the way in which the Government has managed the Solar PV FiT, theaffordability of Solar PV versus other renewable energy, and a brief view on other countries with similarfinancial mechanisms.

Impact to date of Solar PV Feed-in Tariffs and the State of the Solar Energy Market

The FiT mechanism allowed for a nascent renewable energy industry to thrive and build electricity capacityacross the UK, from the roofs of people’s homes and schools to farm-scale developments (up to 5MW) ownedprivately or in partnership with the local community. A financial stimulus designed to taper off to a pointwhere no subsidy is required; a short term effective kick start intervention.

The excellent way in which the FiT was crafted allowed for investments to be made by individuals,communities, local authorities, Social Housing landlords, hospitals, schools or development companies likeours, bringing people greater control over energy generation and consumption, whilst de-carbonising theeconomy to meet necessary and important climate change targets.

With a background in Solar PV developments in Spain and the UK, and wind developments in Scotland,Low Carbon Developers aims to become the leading renewable energy developer of at scale projects in theUK. The FiT could have enabled us, if it had been left uncapped and with the clear digressions in tariffsaligned to cost reductions, to build 100MW of solar within a balanced timeframe, and for the returns on theseinvestments to be looped back into our portfolio of renewable energy developments including onshore windand tidal lagoon projects.

We have developed 28MW of Solar in the UK and are in the early stages of developing two tidal lagoonprojects off the south and north coasts of Wales.

Renewable energy deployment will be achieved but currently not at the pace at which we believe is requiredto fill the energy gap by 2020–30.

The way in which the Government has Managed the Solar PV Feed-in Tariff

The untimely and draconian interventions to reduce the FiT by significantly more than the reductions incosts (we estimate these to be approx. 35% with panel costs down from €1.3 to €0.85) have reduced the rateof return to untenable levels to stimulate investment in Solar PV beyond some individual homeowners whohave access to low interest loans or other credit facilities. This new direction from the Coalition Governmentis in clear opposition to the earlier commitments to encourage decentralised energy generation and ownership.

The second round of tariff digressions to 50–250kW schemes of a further 30%, amounts up to 80%reductions in less than six months for this scale development, which can have only one effect on deploymentlevels.

The tariff level themselves are only part of the issue in relation to this second round (or phase one of theComprehensive Review as it is being framed) of changes.



The timing of the proposed tariff cut-off date, 12 December does two things:

1. undermines any government consultation process and/or trustworthy governance; and

2. puts at risk £millions invested into schemes which will not complete in time along with the thousandsof associated jobs (25,000 employed as estimated by Industry and 39,000 as estimated by BIS63).

The additional changes to the goal posts for multi-sites, with a reduction of a further 20%, and in essenceintroducing a new category for tariff consideration, and the introduction of an EPC level C, potentially fordomestic and on-domestic buildings, will impact heavily on deployment in the foreseeable future.

To note on energy efficiency, this focus is moreover welcomed, as the end game is carbon reduction and thisprovides the greatest amount of money and CO2 saved moving forward. However, the consequences ofintroducing this policy in the time frames suggested is disproportionate and will again only have one effect,intended or not, and that is to minimise the take-up of Solar PV.

Affordability of Solar Photovoltaic energy versus other renewable energy (given the overall levy-funded capfor energy bills) and the impact of Feed-in Tariffs on energy bills

Solar prices have come down quickly (as above we estimate these to be approx. 35% with panel costs downfrom €1.3 to €0.85) and will continue to fall, however we can only capitialise on global cost reductions is wemaintain the industry and infrastructure. For example, the Sharp facility in Wrexham made significantinvestment to encourage this process based on the aspirations of the Solar PV and wider renewables sector andthe framework set-up by the FiT, kick-starting jobs and growth at a crucial time in our economic “recovery”.

Comparing other technologies within a spending cap is problematic as the deployment timeframes and costreductions for each are different, but a mix of energy is required and therefore we need to see growth in eacharea. The false spending cap has meant that other technologies, potentially technologies which are currentlycheaper than Solar PV but more difficult to deploy, could be artificially squeezed out of the FiT scheme asuptake has been much slower.

The non-financial barriers are more significant with other technologies, something which Solar PV has notfaced with any real impact, as it is well received by local communities and planning committees alike.

Most importantly, the misleading figures in relation to the cost to the consumer of the FiT must be addressed.The saving of this intervention in the consultation Impact Assessment is acknowledged to be just £1 perhousehold, which in any circumstance feels disproportionate to the overall impact on what could have been athriving industry.

Experience of similar incentive mechanisms for renewables in other countries

There has been digression in all FiTs across Europe, and Germany is often given as the reference. However,Germany has had a FiT for 10 very successful years, aiming to install 52GW of Solar by 2020, 20 timescurrent UK projections. This is a fantastic achievement and one which the UK could have mimicked if industrygrowth was allowed. Instead the Government have created boom and bust which they, and the rest of industry,could have avoided.

Consequences of this intervention and on-going delays to the detail of the Electricity Market Reform, createwide spread crisis in confidence for investment and this is reflected in the latest report from the World EnergyCouncil (WEC), which confirms the UK has slipped from eighth to 14th place in the Energy SustainabilityIndex since last year. This annual review of the energy investment climate, across 92 countries, is based ongovernments’ approaches to tackling the “energy trilemma” of security, access, and environmental impact.Significantly the UK’s performance has dropped from 22nd to 58th in tackling energy security.

Finally, Ernst &Young’s latest Country Attractiveness Indices report, published 22 November 2011, whichassesses performance in the wind, solar and other sectors, places the UK at 22nd out of 40 Nations (down 3places) in the solar rankings after the further proposed reductions to FiTs.

23 November 2011

63 Caroline Flint: To ask the Secretary of State for Energy and Climate Change what recent estimate his Department has madeof the contribution of the solar industry to gross domestic product. [79098]Mr Prisk: I have been asked to reply. HM Government have made no estimates of solar industry contribution to gross domesticproduct.However, independent research commissioned by the Department of Business Innovation and Skills estimates that photovoltaicrenewable energy (ie solar power) together with its supply chain resulted in nearly £5 billion of sales in 2009–10, employing39,000 across 2,000 businesses.



Written evidence submitted by The Society of Motor Manufacturers and Traders

Introduction and Summary

1. The Society of Motor Manufacturers and Traders (SMMT) is the leading trade association for the UKmotor industry, providing expert advice and information to its members as well as to external organisations. Itrepresents companies throughout the automotive sector ranging from vehicle manufacturers, component andmaterial suppliers to power train providers and design engineers. The motor industry is a crucial sector of theUK economy, generating a manufacturing turnover of £51 billion, and contributing well over 10% of the UK’stotal exports.

2. SMMT welcomes the opportunity to provide evidence to the joint Environmental Audit Committee andEnergy and Climate Change Committee on Feed-in Tariffs for small-scale Solar Photovoltaic (PV) renewableenergy. SMMT members have made significant progress towards reducing energy use and emissions from theproduction process and make ever more efficient products for users. Industry is disappointed the Feed-in Tariffs(FITs) rates were changed so abruptly and believes the changes will damage the competitiveness of UK basedbusinesses and also restrict their ability to lower their carbon footprint.

3. A summary of the response:

(a) Several automotive companies had plans for solar PV installations in the 1–5MW range underdevelopment, but the announcement of the review and subsequent reduction in rates undermined theviability of those projects and caused for some to be abandoned.

(b) Several solar PV projects did take place, but as their timing was accelerated the projects were notalways as optimized or cost effective as they could have been.

(c) Automotive sites allow for high quality solar PV projects, due to their size, location, connections tothe grid and on-site demand levels.

(d) The current review of rates for smaller solar PV projects could similarly affect installations at smallsupply chain businesses or vehicle retail dealerships.

(e) SMMT believes the government should have provided industry with sufficient time to react andadapt plans to the proposed and subsequently introduced changes to the scheme.

(f) FITs rates in the UK provide less of an incentive compared with other member states, which meansUK industry will be working at a competitive disadvantage.

(A) Impact of FITs

4. SMMT members are committed to improving their environmental footprint and the SMMT publishes anannual Sustainability Report (www.smmt.co.uk/publications). Our members have made impressive reductionsin energy use in both absolute and on an energy per vehicle basis, with corresponding performance in carbonemissions. Energy use in the automotive sector shows that between 2000 and 2007—ahead of the recession—energy use per vehicle fell by 43.6% and in absolute terms energy fell by 33.4%. Since 2007 energy per vehiclehas increased, as output fell due to the recession, but absolute energy use has continued to fall. Despite therecession energy per vehicle levels in 2009 remain 27.7% below 2000 levels. SMMT expects the downwardtrend of energy use per vehicle to resume in 2010, as production levels recover and further investment is madein improving efficiency.

5. The FITs scheme had been welcomed by the industry and most volume producers where assessing solarPV projects as a measure to help further reduce their total carbon footprint. The announcement earlier in 2011that DECC would fast-track a review of the scheme and proposed to cut FITs rates by some 70% wasunexpected and created uncertainty and disruption to planned projects. Reducing the rate of return to below20p/kwh means solar PV projects are not viable. Several schemes were abandoned, although some were stillundertaken in the timeframe allowed. However, even those undertaken were in some instances rushed throughand the installations not fully conceived as they could have been (for example not complete system put inplace, not originally planned types of solar panels were used and higher installation costs may also havebeen borne).

6. Industry is concerned that the market for solar PV will now collapse and so suppliers and installers willnot be able to survive and provide a service as the rate of return is too low. This will limit the ability ofindustry to install solar PV at a competitive price.

7. Industry is further concerned that the wider review will see rates cut for small solar PV projects, whichmay limit smaller supply chain companies and dealers to install low carbon electricity supplies. Earlier thisyear SMMT launched, alongside the Retail Motor Industry Federation and the Carbon Trust, a dealer energyefficiency guide. This identified significant energy cost savings could be achieved. Industry believes cuttingthe FITs rates will make the government’s ambition of delivering a lower carbon economy more challenging.



(B) Balance between Affordability and Delivering FITs Objectives

8. SMMT believes that there was insufficient time between the FITs scheme coming into effect and the fasttrack review. The system had appeared to be working well and encouraging investment. The sudden change inpolicy meant that resource deployed in scoping work on solar PV projects was wasted.

9. SMMT believes that the cut to the FITs rates will have curbed the uptake of “high quality” projects. TheFITs scheme could have been adjusted to ensure that key business sectors, such as the manufacturing sectorwhich is being called upon to help support wider economic growth and wealth creation, could continue toinstall “high quality” schemes. Automotive industrial sites, in particular, offer attractive sites to undertake thelarger solar panel EV installations. Large projects may be more effective, easier to manage, install and operatethan hundreds or thousands of much smaller projects. The automotive manufacturing sites often benefit froma capable high voltage electric grid infrastructure already being in place. On site there will also be a stablehigh demand for electrical energy during the peak generation period. Brown field or industrial sites also makefor ideal locations, given they are already in place and usually distanced from public sight. Vehiclemanufacturers would in some instances install them on their roofs or within the confines of their grounds, egtest tracks, where the land is not viable for other purposes. These sites also benefit the local economy and havestrong community links.

(C) Government Management of FITs Scheme

10. Whilst SMMT understands the balance necessary to constrain spending whilst at the same time deliveringenvironmental aims, however, the timing and depth of the cut in rates will have deterred projects that couldnot be completed before the rates were cut. The short-termism of the approach taken is likely to undermineachieving renewable targets, damage the competitiveness of the solar PV supply industry and also thecompetitiveness of UK industry as a whole. The actions on FITs follow on from the announcement thatrevenues from the Carbon Reduction Commitment (CRC) will not be recycled, and together such moveshave undermined industries confidence in government’s commitment to promoting and delivering improvedenergy efficiency.

(D) Affordability of Solar PV and Impact of FITs on Energy Bills

11. SMMT members reported that whilst the government cited solar PV projects had become cheaper, as thecosts of panels had fallen, members noted the costs were only down around 30%. In addition the cost ofinstallation had not fallen by a similar proportion and so the costs of a solar PV project may have only fallenby around 15%. The FITs rates were cut by 70%.

12. It is not only affordability that may limit the uptake of other renewables, like wind turbines and biomassboilers, for example issues around planning restrictions or availability of systems could reduce uptake.

(E) Experience of similar incentives mechanisms in other countries

13. Automotive companies in other EU Member States have and continue to benefit from FITs and installlarge scale renewable technology on industrial buildings and sites. This supports our competitors to becomesustainable low carbon vehicle manufacturers and improve the life cycle CO2 performance of their vehicles.In Spain operators reportedly receive five times the unit cost, eg if electricity costs six cents/kwh, thegovernment support pays 30 cents/kwh. In Germany FITS has been in place for several years. The rates startedoff considerably above the existing 29.3p/kwh, and whilst have been scaled back over time as projects havebecome more widespread, rates offered are still at least double the new rates in the UK. Several vehiclemanufacturers have installed solar PV in other member states in the EU, but future installations in the UKnow look very unlikely given the much lower level of support and so UK-based manufacturers will be at acompetitive disadvantage.

23 November 2011

Written evidence submitted by the Energy Technologies Institute

Summary

1. The ETI’s modelling of future UK energy system indicates that an affordable, secure and low-carbonenergy system can be delivered through 2050 with a clear plan and sustained investment in the relevanttechnologies. Options consistently highlight major contributions from fossil fuels with Carbon Capture andStorage (CCS), bioenergy, nuclear and wind as parts of the future UK electricity generation base alongsidemore marginal contributions from marine energy.

2. ETI’s “ESME” modelling focuses on identifying the lowest cost options for the UK’s energy system outto 2050 and the likelihood of deployment of specific technologies.

3. Efficiency measures are highly economic and include increasing the thermal performance of the UKbuilding stock, albeit in a selective manner. Improved conventional vehicle engine technology, heat pumps andwaste heat recovery schemes are also important contributors.



4. ETI assessment of UK energy system options for 2050 estimates the additional system costs to the UKof not introducing certain technologies. The equivalent “option value” for nuclear energy is £5–10 billion peryear and for CCS over £60 billion per year. Nuclear and CCS appear in over 98% of system design options.Against this context, solar photovoltaics do not appear as a significant contributor to UK power provision.

5. In the absence of subsidies, achieving cost competitiveness through substantial cost reduction with othergeneration systems will be critical if Solar Photovoltaic energy is to be available as anything more than a“niche deployment” in the UK.

Context and Background on ETI

6. The ETI has two modes of operation—(1) modelling and analysis of the UK energy system to allowidentification of key challenges and potential solutions to meeting the UK 2020 and 2050 targets at the lowestcost to the UK, and (2) investing in major engineering and technology demonstration projects which addressthese challenges with the aim of de-risking solutions—both in technology and in supply-chain development—for subsequent commercial investors.

7. ETI has six industry members (BP, Caterpillar, E.ON, EDF, Rolls-Royce and Shell) who offercomplementary capabilities in the energy area. Their financial support (£5 million p.a. each), skills, businesscapabilities and market access routes are made available to the Government through the ETI partnershipstructure. HMG (through BIS) provides matching support to industry member financial contributions. ETIinvests in projects as a commercial entity, it is not a grant awarding body.

8. ETI’s in-house strategic modelling capability has been developed with the strong involvement of the UKindustrial base (not just ETI Members). The ETI capability addresses the full UK energy system and centreson first developing robust, shared understanding of critical issues for the UK in reaching 2020 and 2050energy targets.

9. Having identified the key engineering and technology barriers associated with achieving the 2020 and2050 goals the ETI then establishes projects to demonstrate potential solutions to these challenges. Thisapproach forms a key part of demonstrating the industrial capabilities needed to meet the UK’s future needs,incentivising industry by informing them of the potential business opportunities and creating the embryonicsupply-chain and skills to deliver solutions for the UK.

10. To date the ETI has invested in over £133 million of projects to benefit the UK.

11. Uniquely, the ETI’s energy system modelling focuses on identifying the lowest cost solutions to the UKand provides an assessment of the option value of key technologies in the 2050 energy system (ie; answeringthe question “what is the cost to the UK of NOT implementing a specific technology ?”). The primarymodelling tool is a bespoke toolset developed by the ETI and termed “ESME”.

12. ETI modelling was used by DECC in support of its 2050 pathway work and also supported theCommittee on Climate Change (CCC) development of the fourth Carbon budget proposals and the recent CCCRenewables Review. The ongoing “Technology Innovation Needs Analysis” activity led by DECC is also usinginputs from the ETI ESME system. The ETI modelling systems have been successfully peer reviewed by aninternational review team led by Imperial College.

24 November 2011

Written evidence submitted by Colchester Borough Council

1. Executive Summary

1.1 Colchester Borough Council has developed a solar PV project to install over 2,000 properties with PVthrough a roof rental agreement with our supplier. The Council has already been significantly affected by thefeed-in tariff consultation announcement and as such would like to express the following concerns:

— The severity of the proposed reductions to feed-in tariff (Fits) for small scale PV installations willdeem many large scale projects unviable.

— The large scale projects developed by local authorities and social housing providers are aimed atsupporting the most vulnerable in society, it is likely that the lowest income families are likely tosuffer the biggest impact of the proposed changes.

— The short notice given for the proposed changes by 12 December will not allow projects to completebefore the changes are imposed.

— The sudden changes to the Fits will damage confidence in an emerging sector. It will affect supplyand demand both within the UK and internationally.

— The Fits helped to create thousands of UK jobs and helped to establish a low carbon economy. Manyof these jobs are now at risk because of the proposed changes.



2. Introduction

2.1 The Council and our housing organisation CBH worked in partnership to establish a large scale PVproject aimed at supporting thousands of social housing tenants to access low carbon, free energy. Theimplementation of the scheme started in October and was due to scale up in January—March in order toachieve around 9.68MW of electricity generation (around 2,000 properties). Due to the specified timescales itis unlikely that the Council will be able to continue this project past 12 December, meaning that only arounda quarter of the planned generating capacity will be achieved.

2.2 It is extremely disappointing that a project developed in good faith, which would support the mostvulnerable residents, reduce fuel poverty and reduce carbon emissions will now be brought to an end. Theefforts in establishing such a project were significant and included work to engage with tenants and Councilmembers to highlight the benefits of the project. The sudden changes will not only impact on our project aswell as many others across the UK but will remove confidence of organisations to put resource into suchprojects in the future.

2.3 The level of Fits allowed the Council to develop the project that previously would have been impossible.The project was developed with minimal outlay by the Council—the Council felt it would not have been ablefund the £24million project through Council budgets given recent pressures and as such entered into a roofrental agreement with our supplier. The project would enable thousands of local residents to benefit from greenenergy, whilst generating an income for the Council to re-invest in further energy efficiency measures.

3. Impacts for Colchester’s PV Project

Affecting the viability of projects

3.1 With diminishing budgets across the public sector, CBC found that the Fits provided a means toimplement a large scale renewable energy project which would have previously been not viable. As such aproject has been developed in partnership with our housing organisation CBH and a preferred supplier thatwill significantly reduce emissions, generate a small income (through a roof rental scheme) and help to reduceand prevent fuel poverty for our most vulnerable residents.

3.2 The income generated for the Council would be recycled to create further energy efficiency projectsfurther benefiting our communities and reducing carbon emissions. The level of Fits enabled the Council toestablish a leasehold agreement with external funders to supply and install the panels, the reductions to the fitsare likely to deem this project unviable past December 2011.

Impacts on vulnerable residents

3.2 The purpose of the Fits was said to “Empower people and give them a direct stake in transition to lowcarbon economy”. The original rates did achieve this aim and allowed the Council to create a partnership withour supplier to empower social housing tenants to have a stake in the transition to a low carbon economy. Alower Fit rate will not empower people to benefit from PV projects, it will make it unaffordable for mosthouseholds and stop social housing schemes such as our own.

3.3 The proposed reductions to aggregated schemes and “roof rental” scheme impacts even further on this.Schemes such as our own allowed social housing tenants, some of the most vulnerable residents to benefitfrom solar PV, helping to reduce fuel poverty now and in the future. This particular proposal in the review willhelp to exclude the most vulnerable people from accessing low carbon technologies and incentive schemes.

Impacts of short timescales

3.4 On of the most significant impacts for Colchester project is the timescale. It seems to be reckless forsuch a significant cut to Fit rates at such short notice given the number of planned PV projects such as ourown. It will not allow time for projects to be pushed forward in order to achieve the expected Fit rates andwill leave thousands of organisations and residents out of pocket. It also threatens a relatively new PV marketcreating instabilities for work force, supply chain and future demand both locally in Colchester and Nationally.

3.5 Public sector organisations were actively encouraged by the government to harness the income potentialof Fits by implementing large scale schemes, as such many organisations have done so and will now beseverely affected by these changes. A reduction in Fit before 31 March 2012 is likely to lead to costlycontractual disputes as suppliers will seek to protect their financial positions by trying to pull out of contractsor negotiate their positions within contracts, while Local Authorities will seek to impose the contractualconditions as they will be hindered by the procurement procedure rules and could be challenged by othersuppliers under this rule.

Impacts on local solar PV market

3.6 The government made clear a commitment to creating a green economy and ensuring that green jobswould be a priority in stabilising our economy. The positive uptake in the Fits scheme has helped to achievethis goal by creating jobs, strengthening the industry and giving consumers confidence to purchase technologiessuch as PV. This sudden change to the Fits will undoubtedly see jobs being lost along with uncertainty within



the industry and for consumers. Colchester’s PV project is also now at risk of losing its PV supply chain asinternational suppliers consider whether it is still worthwhile supplying PV to the UK due to possible pricereductions that would be necessary to make projects viable. As a country we rely on importing good qualityPV systems and the Fits reduction could be jeopardising this supply.

3.7 The consultation claims that there has been a significant reduction in equipment and installation costsfor solar PV, however we do not feel that this is the case. Companies with large bulk buying power will havebenefitted from lower costs, however as with our own supplier they have seen prices of around £9,000 fordomestic installations since 2010. Smaller local installers will not have this buying power and therefore willnot have seen these reductions. In is also likely that although the cost of PV may have reduced, the costs ofinverters and labour will have increased.

Impact on local jobs

3.7 The original tariff rates helped to create a strong supply chain, evidenced by the number of local suppliersthat tendered for our project and by the number of smaller installing companies that have been in touch since.Many of these installers started solar PV businesses to access customers through the Fits, the reduction willensure that business is “booming” until December however the “bust” created from the Fit’s reduction will seejobs being lost in our local area.

3.8 The Council and CBH chose a local Essex based company as its suppliers in order to support local skillsand jobs within the low carbon industry, as such we now feel that the local area will now take an even biggerhit because of the possible redundancies that will result.

4. Recommendations for Action

4.1 The Council does understand that economic pressures will impact on such incentive schemes but feelsthat the reductions should come after March 2012 as planned to allow existing projects to complete. In orderto minimise the impact of a rush to install before March 2012 the government should only allow proven“planned projects” with relevant signed contractual agreements to receive the full tariff, any projects that arenot already planned to this stage could receive the lower proposed tariff. By allowing the planned projects tocontinue the government will help to reduce the detrimental impact on employment, financial risk to companiesand investors and also to maintain confidence in the market.

4.2 The Council would suggest that a multi-installation tariff is restricted to commercial projects, whereprojects that will benefit social housing tenants still receive the higher rates.

23 November 2011

Written evidence submitted by Reading Borough Council

1. Summary

1.1. Within 13.2 miles of Reading, 50 companies have registered as MCS PV installers.

1.2. The total number of employees working for PV installation companies which use just one local solarPV equipment supplier in the local area is estimated to be over 4500.

1.3. Reading residents voted renewable energy as the fourth highest priority for the town.

1.4. A local equipment supplier said: “Two of our customers have already filed for bankruptcy leaving baddebts behind with significant values”.

1.5. The Climate Change Campaigning organisation 10:10 singled Reading out as a leader in solar and ispiloting its solar schools programme here.

1.6. Rent a roof type schemes are unlikely to be available in Reading.

1.7. The affordability of solar is in question after the latest review of the feed in tariffs and the Councils£5m project installing solar panels on schools is now in question.

1.8. Reading Climate Change Partnership was planning a social enterprise that would combine the FiT withthe Green Deal to enhance its ability to work for the fuel poor.

2. Impact of Solar PV Feed-in Tariffs and the State of the Solar Energy Market

2.1. Whilst the Reading climate change strategy 2008–12 included targets relating to renewable energy;investments were not forthcoming and reports showed a lack of progress in this area before 2010 and theintroduction of the Feed-in Tariff:

We have 35 customers in our database with postcodes starting with RG. However if we were to look atincluding postcodes SL, SP, SO, GU and SN, the total number would be 215 solar installation companies.On average each of our customers employs 22 people directly (some 8 employees others up to 38).



The general feedback we are getting from them is that the proposed feed in tariff will have a severeimpact on their business causing up to 70–80% loss of turnover in Q1 2012.

The two main culprits are: the short notice provided by DECC which is not allowing for efficient businessmodel, supply and margin adjustments throughout the supply chain (manufacturers, distributors, installersand end users)and the proposed minimum home energy efficiency requirements (C) in order to qualify forthe new FITs (statistics show that a large majority of UK homes will require £5,000 investment to achievethis). Of course as a fighter of green cause we understand and support DECC’s thinking, but it is the rushnature of the proposal and implementation that will damage the industry unnecessarily.

Based on our conversations with customers and competitors redundancies are currently taking place andwill continue to do so before Christmas and in January. More than anything it is the uncertainty that isworrying new comers into PV specially and in our past experience in other markets these changes createvery tough conditions for both distributors and installers.

Luckily at Krannich Solar UK we are in a strong position as we are now one of the top 3 UK solarsuppliers and have the back up of our €450 Million international group. However many UK-only basedbusinesses will not find themselves in the same position and could start struggling with their cash flowsand access to finance. Two of our customers have already filed for bankrupcy leaving bad debts behindwith significant values.

Having said that, if demand for PV continues to decline throughout Q1 and through Q2, I will be forcedto reduce my current head count of 34. Sadly I can also confirm that I have stopped all recruitmentinitiatives and agency temporary staff as we recently took on an additional business unit in SuttonsBusiness Park and were looking to add 12–15 additional employees.

In 2010 the consultation on the town’s 2030 vision, highlighted “A step change in renewable energy” as thefourth priority in the list of “building blocks” for the future. Not sure if this is influenced by FiT.

2.2. A local equipment supply company in Reading provides equipment and training to the local solarindustry. They made the following statement about the impact in the local area.

2.3. Since the introduction of the FiT, large scale projects began to be planned. This included a projectfrom the Council, for the installation of £5m worth of solar PV to be installed primarily on schools andcommunity buildings.

2.4. The introduction of the Feed-in Tariffs was a critical element in bringing forward crucial local projectsthat otherwise could not have been implemented.

2.5. The Climate Change Campaigning organisation 10:10 singled Reading out as a leader in solar and ispiloting its solar schools programme at primarily reading based schools, before it’s intended national launch,next year.

2.6. Local press articles have been regularly reporting on solar power in the town, reporting both on projectsand new business opportunities.

3. The Balance between Affordability and Delivering the Objectives of the Solar PV Feed-inTariffs including Factors to Consider when Setting the Rate of Small-Scale Feed-in Tariffsincluding Jobs Created, Emissions Reductions and Energy-Saving Behavioural Change

3.1. The Feed-in Tariff was designed to encourage deployment of additional small-scale low-carbonelectricity generation, particularly by organisations, businesses, communities and individuals that have nottraditionally engaged in the electricity market, allowing many people to invest in small-scale low-carbonelectricity.

3.2. There are number of ways in which the objectives of the Feed-in Tariff were being met in Reading.

3.3. “Rent a roof”

The private sector saw in the Feed-in Tariff an opportunity to provide packages whereby the building ownerwould receive benefits (normally free electricity) and the FiT alone would provide sufficient returns oninvestment to make them a profitable venture alongside the market. In Reading, whilst many of these schemeswere offered, there was little uptake for commercial projects, on account of the issues with leases and legalpermissions. The industry was working to overcome this problem and this business model would have broughttogether those with suitable roofs with those with suitable finance to provide a mutually beneficial low carboninvestment. The change in the Feed-in Tariff means that this model is now unlikely to be an option in Reading.

3.4. Schemes for Community Benefit

The Reading Climate Change Partnership identified the opportunity to use any profits which could be madefrom administering a solar scheme to re-invest into fuel poverty projects and planned to combine the FiT withthe Green Deal to develop a scheme that could enhance the workability of the Green Deal and its ability towork for the fuel poor. A scheme was designed which planned to install solar panels onto houses of the fuelpoor, community centres and small businesses which wish to champion green business activities. The income



from the Feed-in Tariff would then be recycled into a fund that could enhance energy efficiency measures forthe fuel poor. In addition free electricity would be made available to those in, or at risk of fuel poverty. Witha reduced Feed-in Tariff the ability to tackle fuel poverty will be significantly reduced.

3.5. New companies have been setting up their operations in the area.

3.6. Within 13.2 miles of Reading, 50 companies have registered as MCS PV installers.

3.7. The total number of employees working for PV installation companies that use just one local solar PVequipment supplier in the local area is estimated to be over 4,500.

3.8. There is evidence that the mere presence of solar panels on a building encourages the building occupantsto save energy. The investment in solar panels on school roofs could have had this very desirable effect on thebehaviour of the younger generation in Reading.

4. The Government Management of the Solar PV Feed-in Tariff and the Consultation

4.1. The FiT scheme enabled the Solar PV to develop rapidly. After the first change to the FiT which cameinto force in August 2011, Reading Borough Council, which had been intending to use its larger roofs to installsystems of around 150–200 kWp at a cost of up to £5 million, had to completely remodel the business case.This caused delays and increased costs.

4.2. Following, this initial review, the Council has set up project teams appointed surveyors and conducteda procurement exercise to identify a suitable supplier. This has amounted to many hundreds of hours of workby dozens of employees.

4.3. The second review, announced on 31 October, was unexpected, unplanned for and has required a secondremodel. This time, in addition to delays and increased costs, there is the possibility that some of the proposedsites will no longer offer a viable proposition for the investment in solar panels. Of the number of roofs beingconsidered for the project over ¾ became unviable without making a charge for electricity. For schools, inparticular, the provision of reduced electricity bills was a key consideration. By introducing a charge forelectricity around one half of projects are unviable with the remainder being marginal business cases. Currently,it is unclear how many of the projects will be able to go ahead. Given the scale of work to deliver the scheme,the abortive costs are estimated to be significant and for a reduced scheme the project management costs willbe high in proportion to the size of the scheme.

4.4. It is felt that the Government should have been clearer about the budget cap, from the beginning of thescheme. They should have set interim budgets and managed the process through its life. The rates wereappropriately set, to ensure that the market invested and to kick start the industry, but the rate of uptake wasunder-estimated, when considered against the budget cap. Given that it is very difficult to predict the market’sresponse, there should have been an in-built mechanism to reduce the rates that provides visibility for theindustry.

5. Affordability of Solar Photovoltaic Energy versus other Renewable Energy and the Impactof Feed-in Tariffs on Energy Bills

5.1. Solar power was given the highest FiT rate as it is regarded as the most expensive form of energygeneration. The FiT scheme offers a maximum payment of around £8,600 per kWp of capacity, over the 25years. (variable depending on yield—assumes yield of 800kwh p/a). The equipment costs average £3,200 perkWp, (average of 2 to 50 kWp systems) but it is necessary to include additional project, maintenance andinverter costs which add an average of approximately 50% to the costs. Although Councils have access to lowcost finance, the cost over the life of the project adds 60% to the purchase price. This means that the totalcosts are £7,680 per kWp over the period, making a small revenue.

5.2. When modelling the income to the scheme, we found that an investment of £5 million would generatean income of around £200k p/a (4% p/a), once the cost of finance had been met. (This modest profit was to bere-invested into energy efficiency and community low carbon programmes). A reduction in the tariff by morethan one half removes all of this working profit and creates a loss making situation, when all of the projectcosts are considered.

5.3. The price changes, which have been evident since large orders began to be placed for solar electricitygenerating equipment, have been encouraging, with panel prices dropping by around 30% over the course ofthe last year.

5.4. Whilst prior to the review we expected panel prices to continue to fall, the reductions to the tariffs meanthat projects will be cancelled. We expect this will cause the industry to contract, forcing prices back up, onceexcess stocks have been sold.

5.5. Solar PV provides electricity, which can be used on site or fed in to the national grid. The panels offerone of the most dependable and simple to generate forms of energy, with the least amount of infrastructure.This means that projects are the most accessible to low carbon communities.



5.6. The impact of having panels widely distributed on energy bills nationally is much debated, but the costof the £870 million levy cap would add £1.74 p/a to electricity bills over 25 years. This compares to a predictedelectricity cost rise of 7% p/a or £56, coming from upgrading the aging grid, new power generation facilities,scarcity and volatility of fossil fuel prices and utility company profits.

5.7. The positive impact of micro-renewables, is the creation of an industry leading to jobs in an otherwisecontracting economy and better public awareness and personal responsibility for energy consumption.

5.8. Whilst the provision of large scale renewable energy plants plays an important role in the energy mix,they do not benefit local economies, do not provide local resilience to volatile energy prices, and do not offera practical, local understanding of the energy sources of the future.

6. Experience of Similar Incentive Mechanisms for Renewables in Other Countries

6.1. While the proposed new tariff for electricity generation is comparable with the current tariff in Germany,Germany has been reducing their feed-in tariff year on year since its introduction in 2000. France announcedearlier this year that it was increasing its feed-in tariff so that a typical building-integrated PV system earnsaround €0.58 per kWh—much higher than the proposed UK tariff.

6.2. The important difference between the German mechanism, which has been extremely effective, and theUK mechanism is the planned and predictable way in which the tariff has been reduced allowing business andconsumers to plan accordingly.

23 November 2011

Written evidence submitted by John Husk

Submission from a Private Individual who was in the Process of Ordering a Domestic System

I consider myself an ideal candidate to install a PV domestic system. I was in the process of ordering asystem when the tariff change was announced. I have now reviewed the new tariff and found it to beuneconomic. I have now requested the return of my deposit and will not be investing circa £12,500 in thisindustry.

My point is that if it is uneconomic for an ideal candidate it will be uneconomic for all.

In addition, it is now likely to be miss sold to those who have not done a careful financial analysis.

The tariff reduction has been too great.

1. I am an Ideal Candidate(a) My house has a large unshaded roof that faces South East, so is a good house for the installation of

a domestic pv system

(b) I am a family man in my fifties who is actively saving for his retirement and can afford to invest formy family’s future.

(c) I am young enough to be likely to install the system to my property and gain benefit over the 25year payback period.

2. I was in the Process of Placing an Order(a) On the date of the announcement of the tariff change, I had received a quotation for a domestic

system and was about to place an order, having given instruction to cash in an endowment.

3. The New Tariff is Uneconomic(a) I have had several quotations. I have considered two systems in this submission. One at £12,500 and

one at £9,975.

(b) The payback on these systems is £19,831 or £22,814 over the 25 years, allowing for limitedmaintenance.

(c) The rate of return from the bank is £25,569.64

(d) This financial analysis is shown in Appendix 1.

In conclusion the new tariff is uneconomic and it is too low.

64 4% ISA for three years are currently available from the Halifax and Northern Rock for three years.



APPENDIX 1

Domestic PV Panel Viability

Northants

Option 1 PV System fromCompany 1

System cost £ FIT £ price per unit£12,500 £0.210

Year £/year from export £/year total income £ of system capital cost ROI %generated remaining

1 £45.23 £874.35 -£11,625.65 7%2 £47.05 £910.62 -£10,715.03 7%3 £48.94 £948.33 -£9,766.70 8%4 £50.90 £987.54 -£8,779.17 8%5 £52.94 £1,028.29 -£7,750.87 8%6 £55.05 £1,070.66 -£6,680.22 9%7 £57.25 £1,114.69 -£5,565.53 9%8 £59.53 £1,160.45 -£4,405.08 9%9 £61.89 £1,207.99 -£3,197.09 10%10 £64.34 £1,257.40 -£1,939.69 10%11 £66.89 £1,308.72 -£630.97 10%12 £69.53 £1,362.03 £731.06 11%13 £72.26 £1,417.40 £2,148.46 11%14 £75.10 £1,474.90 £3,623.36 12%15 £78.05 £1,534.61 £5,157.97 12%16 £81.10 £1,596.60 £6,754.58 13%17 £84.26 £1,660.96 £8,415.53 13%18 £87.54 £1,727.75 £10,143.28 14%19 £90.94 £1,797.07 £11,940.36 14%20 £94.46 £1,869.01 £13,809.37 15%21 £98.11 £1,943.64 £15,753.01 16%22 £101.89 £2,021.06 £17,774.06 16%23 £105.80 £2,101.36 £19,875.42 17%24 £109.85 £2,184.63 £22,060.05 17%25 £114.05 £2,270.98 £24,331.03 18%

Total income generated Total profit @ year 25over 25 years from utilty savings &

FIT and export aftercapital paid off

£36,831.03 £24,331.03

Maintenance Costs Estimated1 inverter replacement 2,000system annual check/ clean

(£100*25) 2,500

Gain after 25 years 19,831



APPENDIX 1

Option 2 PV System from

Company 2

System cost £ FIT £ price per unit

9,975 0.21

£/year total income £ of system capital cost remaining£/year from export generated ROI %

£49.30 £888.97 -£9,086.03 £0.09

£51.28 £925.58 -£8,160.45 £0.09

£53.34 £963.62 -£7,196.83 £0.10

£55.48 £1,003.16 -£6,193.67 £0.10

£57.70 £1,044.26 -£5,149.41 £0.10

£60.01 £1,086.96 -£4,062.45 £0.11

£62.40 £1,131.32 -£2,931.13 £0.11

£64.88 £1,177.41 -£1,753.72 £0.12

£67.46 £1,225.29 -£528.43 £0.12

£70.13 £1,275.01 £746.59 £0.13

£72.91 £1,326.66 £2,073.24 £0.13

£75.79 £1,380.28 £3,453.52 £0.14

£78.77 £1,435.96 £4,889.48 £0.14

£81.86 £1,493.76 £6,383.24 £0.15

£85.07 £1,553.76 £7,936.99 £0.16

£88.40 £1,616.03 £9,553.02 £0.16

£91.85 £1,680.65 £11,233.67 £0.17

£95.42 £1,747.70 £12,981.36 £0.18

£99.13 £1,817.26 £14,798.62 £0.18

£102.96 £1,889.41 £16,688.03 £0.19

£106.94 £1,964.25 £18,652.28 £0.20

£111.06 £2,041.85 £20,694.14 £0.20

£115.32 £2,122.32 £22,816.45 £0.21

£119.74 £2,205.73 £25,022.18 £0.22

£124.31 £2,292.19 £27,314.37 £0.23

Total £ generated from Total income Total profit @ year 25 from utiltyExport generated over 25 savings & FIT and export after

years capital paid off

£2,041.52 £37,289.37 £27,314.37

Maint 2,000

2,500

22,814



APPENDIX 1

Option 3Investment at Banks

Investment Interest at %9,975 4

Year Balance Gain from interest1 £9,975.00 3992 £10,374.00 4153 £10,788.96 4324 £11,220.52 4495 £11,669.34 4676 £12,136.11 4857 £12,621.56 5058 £13,126.42 5259 £13,651.48 54610 £14,197.54 56811 £14,765.44 59112 £15,356.05 61413 £15,970.30 63914 £16,609.11 66415 £17,273.47 69116 £17,964.41 71917 £18,682.99 74718 £19,430.31 77719 £20,207.52 80820 £21,015.82 84121 £21,856.45 87422 £22,730.71 90923 £23,639.94 94624 £24,585.54 98325 £25,568.96 1,023

25,569

30 November 2011

Written evidence submitted by SSE

0.1. SSE (formerly Scottish and Southern Energy) welcomes the opportunity to respond to the Committees’inquiry into the Feed-in-Tariffs for small scale solar PV.

0.2. SSE, the UK’s broadest based utility, is the largest generator of renewable electricity and the secondlargest generator of electricity in the UK. It is also involved in the transmission and distribution of electricity,in the storage and distribution of gas, and has interests in telecoms and water. In addition, SSE is also thesecond largest supplier of electricity and gas in the UK with over nine million customers. SSE is committedto an annual investment program of £1.5 to £1.7 billion for each of the next five years.

0.3. In reference to this inquiry, SSE has a significant interest in the solar PV market as our contractingbusiness, SSE Contracting, is one of the country’s leading mechanical and electrical contractors and offers arange of renewable and low carbon energy solutions, including PV installations. SSE also has an interest inthe solar PV supply chain, holding 12.3% of Solar Century through its ventures arm, SSE Ventures.

0.4. The key points included in this response are:

— Speed and timing—The timing and speed of this review is a major concern to companies of all sizesin the industry. SSE believes that a more suitable eligibility date for the new tariffs rates would havebeen 1st April 2012. However, SSE would suggest that if there is a requirement for an earliereligibility date then a January or February date would be more appropriate.

— Policy certainty and investor confidence—The Feed-in-Tariff has been successful at providingincreased uptake in micro-generation, particularly solar PV and led to the development of asignificant solar PV market and subsequent jobs by providing certainty on investment. But themultiple reviews of the scheme has added significant costs on to business and damages investorconfidence by creating policy uncertainty in the micro-generation market and wider energy policy,weakening the Government’s commitment to be the “greenest ever”.



— Cost on bills—SSE is fully aware of the need to keep the costs of environmental and social policieslevied on bills to a minimum, at a time of significant pressure on prices. SSE would recommend thatthe Government look at the possibility of recouping the costs of policies that have a wider benefitto decarbonisation and economic growth from general taxation which is means tested, as opposed tolevies on bills, which are regressive and disproportionately impacts on those households in fuelpoverty.

1. Impact to Date of Solar PV Feed in Tariffs and the State of the Solar Energy Market

1.1. The introduction of Feed-in-Tariffs for renewable micro-generation has created a significant increase inuptake and interest in microgeneration and solar PV in particular, with the competitive rates of return offered.This growth has created a large and rapidly growing market for solar PV, which employs a large number ofskilled workers in the sector.

1.2. The recent proposals however, are likely to significantly stunt the solar PV market, particularly in theshort term. Although, SSE agrees with DECC that the proposals to reduce the tariffs to originally intendedrates of return, putting them in line with other technologies, will be beneficial in the long term.

1.3. SSE is concerned that the speed and timing of the reduction will cause damage to the solar PV industryin the short-term, particularly SMEs and create significant investor uncertainty in the medium to long term.

2. The Balance between Affordability and Delivering the Objectives of the Solar PV Feed inTariffs, including Factors to Consider when Setting the Rate of Small-Scale Feed in Tariffsincluding Jobs Created, Emissions Reductions and Energy Saving Behavioural Change

2.1. Whilst it is clear there are further benefits to the installation of solar PV, SSE would like to see moreresearch in this area. For instance, the current evidence for engaging wider energy saving behavioural changesis weak. It would be extremely useful if research could be conducted on both electricity and heat micro-generation to strengthen the evidence and to quantify the impacts so its value can be properly assessed inpolicy development.

2.2. We believe that if there is evidence that significant energy saving behavioural change results from solarPV installations, alongside the noted economic benefits, then a high level of support can be justified. Howeverwith limited budgets for such measures, funds must be distributed to the policy areas and technologies whichdeliver the most cost effective results.

3. The Way in which the Government has Managed the Solar PV Feed in Tariff, the Impact thishas had to Date, including the Management of the Consultation

3.1. SSE would like to raise serious concerns over the speed of this review, the job losses that it will create,and in particular the resulted uncertainty this sends out across the entire policy framework, particularly withthe upcoming Electricity Market Reform. This significant reduction in tariffs and proposal to introduce aneligibility date prior to the end of the consultation is likely to result in financial losses for investors, installersand end users. SSE is unsure as to why this decision comes shortly after the Government called an early reviewthis summer of Feed-in-tariffs, which changed the tariffs for large scale solar PV and Anaerobic Digestion.

3.2. SSE understands the need to keep within allotted budgets to ensure the best deal for all electricityconsumers, but believes that it would be better to adopt longer transitional periods to allow businesses to adaptand reduce policy uncertainty.

3.3. Therefore, on the timing of the eligibility date, SSE’s believes that a more suitable eligibility date forthe new tariffs rates would have been 1 April 2012. However, SSE would suggest that if there is a requirementfor an earlier eligibility date then a January or February date would be more appropriate. This is to allow fora notice period longer than six weeks to protect existing contracts, stop it falling inside the consultation periodyet still benefitting from budget savings.

3.4. Additionally, it should be noted that the publication of the latest review to the Feed-in-Tariff has addeda huge volume of additional work to the team that administers the Feed-in-Tariff. With regard to the latestproposals, SSE’s feed in tariff team have received nearly a 120% increase in incoming calls and 200% increasein application forms with no extra resource to cope with the increase due to the short notice of theannouncement. SSE recommends that DECC reconsiders its review process to ensure that there is not a repeatsituation where three amendment orders are published in a single year.

3.5. Despite this, SSE would like to acknowledge the Feed-in-Tariff team at DECC for assisting with queriesand for producing useful documents to aid communication of these changes to customers.

4. Affordability of Solar Photovoltaic Energy versus Other Renewable Energy (given theOverall Levy-Funded Cap for Energy Bills) and the Impact of Feed in Tariffs on Energy Bills

4.1. Solar PV had become particularly attractive to investors due to its comparatively high rate of returncompared with other technologies. For this reason SSE agrees with Government that the subsidy needed to be



reduced, so that the rate of return should be equivalent with other cost-effective and scaleable renewabletechnologies.

4.2. Within all of this is must be remembered that these policies are levied onto consumer bills. Applyinglevies on bills is regressive, and has the effect of pushing vulnerable households into fuel poverty, at a time ofsignificant pressure on prices given the rising costs of the components that comprise consumer bills.

4.3. SSE would recommend that given the benefit to decarbonisation, economic growth and jobs, that ratherthan levy subsidies onto bills, it may be beneficial to recoup the costs of these subsidies from general taxation,like the Government has committed to with the Renewable Heat Incentive. An interesting proposal could beto ensure the potential differential Feed-in-Tariff for community schemes be extended to social housing, andbe paid directly from general taxation and thus allow those households who do not have the access to upfrontcapital to benefit from the scheme through community groups and social housing, whilst not having to putadditional pressure on energy bills.

5. Experience of Similar Incentive Mechanisms for Renewables in Other Countries

5.1. SSE has no direct experience of similar mechanism in other countries, as SSE only operates in the UKand Irish markets.

24 November 2011

Written evidence submitted by the Centre for Energy Policy and Technology, Imperial College London

Introduction

ICEPT is an interdisciplinary research centre focused upon the interaction of technology and policy. Fromits base at Imperial College, the centre is uniquely placed to gather insights into technological and scientificdevelopments relevant to contemporary debates in energy policy. The centre also has policy analysis expertise,drawing upon a wide range of system modelling, scenario and technology assessment techniques. ICEPT runsthe Technology and Policy Assessment function of the UK Energy Research Centre. The reports it produceshave been widely cited by both select committees and in policy documents. Imperial College has considerablestrengths in many aspects of the science of photovoltaics (PV), co-ordinated through the PV network of theImperial Energy Futures Lab (http://www3.imperial.ac.uk/solar).

ICEPT is also leading the techno-economic work-package of the UK’s leading scientific consortium oninorganic photovoltaic devices, PV21 (http://www.pv21.org/). Dr Candelise is a leading specialist in theeconomics of PV, and she and Dr Gross have published extensively on solar technology and policy65. DrGross has undertaken extensive research in a wide range of energy policy areas, specialising in innovationpolicy, and is a Co-Director of the UK Energy Research Centre (www.ukerc.ac.uk). Dr Gross acted as SpecialistAdvisor to the ECC Committee during the spring of 2011. He has interacted extensively with the EnvironmentalAudit Committee. He was Specialist Advisor to the House of Lords European Union Select Committee in 2008.

This submission is based upon their combined knowledge of the global PV sector, insights into policydevelopments internationally and perception of the emerging UK market. It is structured in accordance withthe list of topics put forward by both committees in the evidence call.

a. Impact to date of Solar PV Feed-in Tariffs and the state of the solar energy market

Main Points

— Globally, the use of FITs has been hugely important for the solar PV industry and market growth.This in turn has driven cost reductions.

— There is still a huge potential for further innovation and cost reductions both at module and PVsystem level—this requires both investment in RD&D and crucially market stimulation

— Analysts of the PV sector describe global support as “buying down” the cost of PV.

— The argument that this is better done in sunnier regions is misplaced. Given the position the UKwishes to take in the climate arena, a robust market support environment for PV in the UK is bothappropriate and desirable.

— UK companies are also active in many aspects of the supply chain for PV.65 Candelise C, Spiers J, Gross RJ, “Materials availability for thin film (TF) PV technologies development: a real concern?”,

Renewable & Sustainable Energy Reviews, http://dx.doi.org/10.1016/j.rser.2011.06.012; Candelise, C. Winskel, M. Gross, R.“Implications for CdTe and CIGS technologies of indium and tellurium scarcity” invited paper to special issue of Progress inPhotovoltaics, under review, due to be published by Autumn 2011. Candelise, C. Winskel, M. Gross, R. “Toward thin filmtechnologies cost reductions: module components costs and the role of technological innovation” PVSAT-7 Conference, 7thPhotovoltaic Science, Applications and Technology, Heriot Watt University, 6–8th April 2011Candelise, C. Leach, M. Gross R.“Conditions for photovoltaics deployment in the UK: the role of policy and technical developments” Journal Proceedings of theInstitution of Mechanical Engineers, Part A: Journal of Power and Energy, Publisher Professional Engineering Publishing,ISSN0957–6509 (Print)2041–2967 (Online) Issue Volume 224, Number 2 / 2010,DOI 10.1243/09576509JPE768, Pages 153–166



Internationally, feed in tariffs (FITs) have been hugely important to the development of the solar PV industry,and to cost reductions. Since mid-2000 an increasing body of literature and evidence have supported thecontention that FITs are the most cost effective policy mechanism for renewables deployment66.Implementation of FIT schemes in key countries has driven an exponential PV market growth in the pastdecade, with worldwide annual installed capacity increasing from 280MW in 2000 to over 16.5GW in 201067.Market growth and development has been central to the cost reductions that have been delivered in PV modules.In turn, the existence of a range of market support measures has been essential to market growth (see figure 1).

PV is a highly innovative technology and the effects of “learning by doing” have had a huge impact onoverall cost reductions. Examples include the development of a dedicated silicon feedstock supply; innovationsin manufacturing processes; economies of scale in module and inverter manufacture and the supply of otherbalance of system components; falling installation costs68 . In common with other devices usingsemiconducting materials, not least flat screen displays and the consumer electronics sector, PV is subject toinnovation right through the so called “innovation chain”—improvements come from fundamental science andnew materials, in manufacture and processing, and in applications and marketing.

Figure 1. Historical PV module price decline against market expansion as driven by FIT

implementation in key countries

O'Rourke, S., H. Polavarapu, and P. Kim, Solar photovoltaic industry. Solar PV industry outlook andeconomics, in FITT Research Report. Deutsche Bank. May 2008. 2009

Moreover, the existence of a thriving market for PV modules acts as a spur to device development andinnovation, manifested most dramatically in the emergence of low cost thin film devices a few years ago (seefigure 2). In our view it is impossible to separate the role of market growth from that of support for PV R&Din the overall picture of PV development. Both are essential.

In addition, PV systems should be seen as compound learning system, where module costs reduce alongwith the cost of Balance of System (BOS)—which includes other system components as well as system designand installation. Although installed costs generally differ among countries as a result of a wide variety offactors (including differences in technical standards for grid connection, installation labour costs, exchangerates and the degree to which components are manufactured locally) evidence from other countries suggests66 del Río, P. & Gual, M. A. (2007) "An integrated assessment of the feed-in tariff system in Spain". Energy Policy, 35, 994–1012.

EPIA (2009) "Supporting solar photovoltaic electricity. An argument for feed in tariffs". European Photovoltaic IndustryAssociation Report. Ernst & Young (2007) "Impact of banding the Renewable Obligation—Costs of electricity production",DTI. EU Commission (2008) "The support of electricity from renewable energy sources". Commission Staff Working Document.January 2008. L.E.K. Consulting (2006) "Policy frameworks for renewables. Analysis on policy framewroks to drive futureinvestment in near and long-term renewable power in the UK". Carbon Trust, London. Stern Review (2006) "Policy responcesfor mitigation: accelerating technological innovation (Part IV, Chpater 16)". The economics of climate change. Cambridge, UK,Cambridge University Press.

67 EPIA, “2015. Global market outlook for photovoltaics until 2015”, 2011. Available at: http://www.epia.org/publications/photovoltaic-publications-global-market-outlook/global-market-outlook-for-photovoltaics-until-2015.html

68 Jager-Waldau, A. “PV Status Report 2008”, “2009”, “2010”. “2011” Joint Research Centre Reports, European Commission. EUPV Technology Platform “A strategic research agenda for photovoltaic solar energy technology” Edition 1, 2007 and Edition 2,2011. Available at: http://www.eupvplatform.org/publications/strategic-research-agenda-implementation-plan.html#c2783



that more developed national PV markets reach lower PV system cost level thanks to steeper BOS learning69.Indeed, more mature PV markets can offer greater competition between players; reduced margins; a moreexperienced network of installers, developers and retailers; reduced installation labour costs; increasedpurchasing power of national players in the global market of modules and system components. All theseelements contribute to cost savings along the whole supply chain and lower PV system prices.

Figure 2. Experience curve for crystalline silicon (c-Si) and Thin Film PV modules

Despite the tremendous progress made in PV in recent years the scope for innovation is still large. PV is awell proven and reliable technology, yet it is in many respects still an “infant” option. The scope for ongoinginnovation is extremely large with much to gain from R&D and leaning by doing. Examples include, at themodule level, novel materials for photon capture, new techniques for encapsulation and deposition, efficiencyimprovement, reduced materials utilisation and, at system level, new module types for PV system diversificationand easier/cheaper building integration (flexible cells, windows, etc), improvements in power electronics andsystem performance.70 This means that continued support for the PV market and ongoing research efforts arevery likely to continue to drive PV along a declining cost curve, with system prices (module plus BOS)expected to decline of 36–51% over the next 10 years, depending on the market segment (see Figure 3).71

Some analysts suggest that PV could reach grid parity (the point where the levelised cost of PV electricityequals the cost of an equivalent amount of grid power) by 2015 in Southern Europe and by 2017–2018 inNorthern Europe72.

Many analysts of the PV sector describe global market support as “buying down” the cost of PV73. Webelieve this to be an appropriate and useful conceptualisation. It has been suggested by the Committee onClimate Change among others that solar should not be a priority in the UK since we can wait for investmentselsewhere to deliver cost reductions. This is an argument for free riding, which appears inconsistent with theleadership position the UK wishes to take in the climate arena. UK companies are also active in many aspectsof the supply chain for PV.

We would like to submit an addendum on the UK supply chain.69 Wiser, R., Barbose, G. & Peterman, C. (2009) "Tracking the sun. The installed cost of photovoltaics in the U.S. from 1998–2007".

Lawrence Berkeley National Laboratory. February 2009. Schaeffer, G. J., Anselma, E., Seebregts, A., Beurskens, L., De Moor,H., Van Sark, W., Durstewitz, M., Perrin, M., Boulanger, P., Laukamp, H. & Zuccaro, C. (2004) "Learning from the sun. Analysisof the use of experience curves for energy policy purposes: the case of photovoltaic power. Final report of the Photex project".ECN publications http://www.ecn.nl/en/ps/research-programme/energy-innovation/photex/publications/.

70 EU PV Technology Platform “A strategic research agenda for photovoltaic solar energy technology” Edition 1, 2007 and Edition2, 2011. Available at: http://www.eupvplatform.org/publications/strategic-research-agenda-implementation-plan.html#c2783

71 EU PV Technology Platform “A strategic research agenda for photovoltaic solar energy technology” Edition 2, 2011. EPIA“Solar photovoltaics, competing in the energy sector” European Photovotaic Industry Report, September 2011.

72 Breyer, C., Gerlach, A., Mueller, J., Behacker, H. & Milner, A. “Grid parity analysis for EU and US regions and marketsegments—dynamics of grid parity and dependence on solar irradiance, local electricity prices and PV progress ratio”. EuropeanPhotovoltaic Solar Energy Conference. Hamburgh, September 2009. EPIA “Solar photovoltaics, competing in the energy sector”European Photovotaic Industry Report, September 2011.

73 IEA (2000) “Experience curves for energy policy technology”. OECD/IEA. IEA (2010) “Technology Roadmap. Solarphotovoltaic energy”. International Energy Agency Report. Available at: http://www.iea.org/papers/2010/pv_roadmap.pdf.Nemet, G. F. (2006) “Beyond the learning curve: factors influencing cost reductions in photovoltaics”. Energy Policy, 34,3218–3232. Neuhoff, K., Nemet, G. F., Sato, M. & Schumacher, K. (2007) “The role the supply chain for innovation. Theexample of photovoltaic solar cells”. EPRG working paper, www.electricitypolicy.org.uk



Some commentators also suggest that the UK is not a sensible place to deploy PV, because PV offerselectricity at lower cost where insolation is higher. PV works in many latitudes and climates, but it is of coursecorrect that output is a function of incident sunlight, so PV deployment in desert, equatorial and warm temperateregions in principle offer the best economic proposition for solar technologies. However the highest insolationcountries are often not the best placed to provide incentives for PV, given financial constraints, infrastructureissues and competing policy priorities. As yet there is no mechanism to allow wealthy but less sunny countriesto support the deployment of PV in poorer, but sunnier locations. Viewed in terms of global learning curvessolar resource is in any case largely irrelevant. Module, system and installation costs come down withdeployment, irrespective of insolation levels. Recent market growth in Germany, with a similar climate toBritain, has played a substantial role in driving PV along the learning curve. At least for now, we believe thatcountries like the UK and Germany have an important role to play in buying down the price of PV.

With all these factors in mind, we believe that a robust market support environment for PV in the UK isboth appropriate and desirable.

Figure 3. Potential of PV system price decrease in Europe, across different PV market segments

Note: Estimates presented in this figure are consistent with those provided by other studies and contributions,including EU PV Technology Platform estimates and IEA PV Roadmap scenarios.

b. The balance between affordability and delivering the objectives of the Solar PV Feed-in Tariffs, includingfactors to consider when setting the rate of small-scale Feed-in Tariffs including jobs created, emissionsreductions and energy-saving behavioural change

Main Points

— The argument over the affordability of PV is completely at odds with the impact of the PV FIT onbills—currently less than £4 per customer per year.

— PV FiTs are intended to help move PV down the global learning curve and encourage consumers toengage with their energy use. It is difficult to disaggregate the UK contribution to learning, but thecontribution is real and should not be neglected. There is evidence of behaviour change, though thisneeds more research.

— Both factors need more effective measurement, but representing PV FiTs in terms of £/ton carbonsaved is inappropriate and unhelpful.

— Recent UK PV sector growth driven by the FIT has resulted in a significant amount of employmentin the UK, and many SMEs have come into the sector.

The arguments around affordability appear to us to be at odds with the overall impact of the FiT on bills.Whilst costs are expected to decline, there is no doubt that PV is currently an expensive way to make electricityon a pence per unit (p/kWh) basis. However the total contribution of PV (measured in GWhs per year delivered)in the next few years will remain extremely small. This means that it is most unlikely that the high unit costswill translate into a large overall burden on consumers. Indeed, we estimate that support specific to PV is



currently costing between less than £4 per customer per year74. This compares to around £50 per year for theRenewables Obligation75. In absolute terms therefore the burden of the FiT is, and is likely to remain, verysmall. The key questions then become how to weigh the benefits of the FiT against the benefits it delivers interms of UK jobs and capabilities, engagement, and a UK contribution to global cost reduction trends. RecentUK PV sector growth driven by the FIT has resulted in a significant amount of new companies and employmentin the UK with over 2,400 installers accredited to date. If we use the EPIA estimate of 30 jobs per MWinstalled this implies 2,500 new jobs created in 2010.

The debate over value for money often appears to centre around a representation of the FiT payments thatis expressed in terms of £/tonne carbon76 . This is an inappropriate metric for evaluation because carbonsaving it is not the sole, and arguably not the main, goal of the FiT. There is an urgent need for DECC todevise a more effective and robust measure of value for money for a scheme explicitly intended to promoteengagement and innovation/learning. Our view is that the main problem is not that the tariff for PV is too high(though we accept that it needs to be reduced in a timely fashion, see below) but that the overall fiscal cap theTreasury has imposed on the money flowing through the FiT is incompatible with the enthusiasm with whichthe public has embraced PV.

The difficulties that DECC now faces are largely created by the existence of a cap that now appearsprofoundly un-ambitious relative to the growth the PV market has experienced. It may also fail to accountproperly for the benefits the FiT can provide. Benefits linked to engagement are difficult to quantify becausethey are non-monetary. There is evidence that households with PV systems use energy more efficiently, butmore research is needed on this77. The UK contribution to global cost reduction is difficult to disaggregatefrom developments internationally. We believe that a thoroughgoing review of the evaluation metrics utilisedfor technologies that are further from mainstream cost competitiveness would be extremely valuable and couldgreatly enrich the debate around the FiT.

c. The way in which the Government has managed the Solar PV Feed-in Tariff, the impact this has had todate, including the management of the Consultation;

Main Points— The FiT was created just two years ago with cross party support with the explicit goal of creating a

stable climate for investors and bringing a UK micro-generation sector into being.

— The way the consultation is being handled is highly inappropriate, particularly the timeline forchange.

— Rushing through change so quickly and in such a damaging way runs completely counter to theincreased long term investor confidence that is being sought through electricity market reform.

— The FiT has encouraged a raft of UK based SMEs into the sector and these will be the hardest hitby the change, least able to cope with the speed with which the tariff cut is planned to comeinto effect.

— The level of degression being suggested goes beyond current price reductions and leaves little roomfor social providers to share the benefit of the FiT with the least well off.

— It appears that preoccupation with the notional fiscal cap that the Treasury has imposed has beenallowed to over ride all normal expectations of policy in terms of timeliness of change andproportionality of response.

In our view the way the current consultation is being handled is entirely inappropriate and extremelyregrettable. The consultation proposes a level of tariff reduction that is not commensurate with cost reductions.It proposes to make changes on a timescale that is so rapid and unexpected consumers and industry cannot failto be caught out. We deal with the latter point first.

The timeline for change

DECC will in effect impose a cut off date that is just 6 weeks after the changes were proposed and is inadvance of the consultation closing. Whilst not strictly speaking a retroactive change this gives the industryscant notice, and will almost inevitably lead to the cancellation of projects that are already under development.This will lead to losses on the part of suppliers, for example through excess inventories. As a result DECC iseffectively punishing a nascent industry for success, penalising customers who have taken an interest in PV inrecent months and comes very close to undermining the government’s commitment to grandfathering.

A long established and widely acknowledged principle of policy is that policymakers should make everyeffort to provide industry with advance notice of proposed changes and avoid stranding investment. The DECC74 Our estimate using the DECC Sept 2011 data on installed capacity— 200 MW in the sub-4kW tariff bracket, approximately 30

MW stand alone and 10 MW each in intermediate tariff bands. We assume UK average of 900 kWh/kWp per year in each case.We assume 20 million households. On this approximate basis the cost per household is £3.80 per year.

75 http://www.decc.gov.uk/assets/decc/what%20we%20do/uk%20energy%20supply/236-impacts-energy-climate-change-policies.pdf

76 http://www.policyexchange.org.uk/publications/publication.cgi?id=19777 Keirsted, 2007, Behavioural Responses to photovoltaics systems in the UK domestic sector http://www.sciencedirect.com/

science/article/pii/S0301421507000651



consultation document has a preoccupation with the Treasury cap that is so overarching it appears to completelyneglect the impact that the changes, particularly their timing, will have on the industry and on investors.DECC’s determination to avoid a “rush” of applications has in our view led them into territory that is extremelybad for investor perceptions of the UK market for renewable energy. This runs completely counter to theincreased long term investor confidence that is being sought through electricity market reform.

We completely accept the need for flexibility and for policy to be as cost reflective as possible, hence a rateof degression that is accelerated relative to the reductions originally scheduled for 2013–14. Flexibility in theface of cost reduction has been discussed in other contexts78. Achieving a balance between flexibility andcertainty is not easy. Striking the right balance requires that lead times for policy changes are reasonable andfair. The instability of the UK regulatory regime is reducing the attractiveness of the UK market to investors,which is likely to increase the overall cost of finance for solar PV above levels that would have existed undera stable FIT regime.

We are also concerned that the timing of the tariff change may be particularly difficult for smaller, UK basedsystem developers/installers and newer entrants. The small players are unlikely to have enough time (or volumeof sales) to adjust to rapid global module price reductions, may not be able to renegotiate contracts withcomponent suppliers and may not yet be able to match current “best practice” PV system prices (which allowprofitable returns under reduced tariffs). They may well be carrying stock that they will end up having to installat a loss. If many of the new players go out of business and the UK market becomes less competitive the rateof cost reduction could decline in the long run and the UK could revert to its “pre-FiT” status as a relativelyexpensive place to install PV. Moreover, larger PV system developers from well established overseas marketsmight find themselves in better position than relatively young UK players. This might result in a missedopportunity for the UK to successfully develop a healthy and sustainable PV sector of its own.

For all these reasons we urge the committees to do all they can to encourage DECC to reconsider thetimeline for tariff reduction.

Tariff levels

With regards to the level of tariff proposed by DECC it is notable that the consultation intends that returnsavailable on the smallest scale installations reduce from the 5—8% range highlighted in the original proposalsto 4.5%. This is justified in part on the basis that alternative investment options have become less attractive inthe period since 2008. DECC provide very little further justification. We have reviewed the argumentationprovided by Cambridge Econometric Research Associates in the supporting analysis cited in the consultation.This suggests that returns of around 4% will be attractive primarily to wealthy, possibly altruistichouseholders—those with spare cash who are relatively unconcerned about the zero liquidity associated withan investment in PV (unlike most other investments the PV investment cannot be recovered unless the houseis sold and its sale value fully reflects that of the PV). A return of 4 or 5% certainly precludes debt finance bymost people. As we discuss below, cutting tariff levels makes the potential for social finance provision lessfeasible, hence reduces the opportunities for the fuel poor to benefit from the FiT.

We are cautious about the appropriateness of continuously adjusting the hurdle rate applied to policy. As ageneral principle it is probably more appropriate to define a level of return that is appropriate and stick to it.

DECC also note a 30% reduction in capital costs. This is broadly consistent with our own view, based uponsoundings taken with industry79. However the government is not proposing to cut tariffs in line with the capexreductions the industry is delivering, it is instead proposing cuts of around 45%, because DECC is acting inanticipation of both continued reductions in the cost of PV and a further 7% rise in domestic electricity prices.The upshot is to take the returns to the limit of what is likely to be acceptable to some (not all) consumers andto push prices below the level needed by many installers, at least at first. On the whole it is regrettable that aslightly more measured and gradual trajectory could not have been followed, which would not be inconsistentwith arriving at the same end point. Again, the main priority appears to be the Treasury’s notional tax takerather than the best deal for consumers or fairness to the sector.

Overall, tariff cuts are far from cautious. We believe that the timing for the changes are wholly inappropriate,and represent bad practice. We would stress overall that the implications of change should be keptproportionate. In the case of PV the absolute impact on consumers almost negligible. It is very hard to avoidthe perception that DECC are more concerned about rules set by the Treasury for an imputed tax than eithergood practice or the implications for an industry that government policies brought into being less than twoyears ago with cross party support.78 Deutsche Bank, 2009, Paying for Renewable Energy, TLC at the right price

http://www.dbcca.com/dbcca/EN/_media/Paying_for_Renewable_Energy_TLC_at_the_Right_Price.pdf79 Saunders, Gross and Wade, 2011, Can FiTs and RHIs help the fuel poor, and if so, how? http://www3.imperial.ac.uk/icept/

publications/workingpapers (forthcoming in Energy Policy)



d. Affordability of Solar Photovoltaic energy versus other renewable energy (given the overall levy-fundedcap for energy bills) and the impact of Feed-in Tariffs on energy bills

Main Points

— As set out above the PV FiT costs less than £4 per household at present. It is by no means the maincontributor in terms of the various policies that contribute to increased electricity prices at present.

— The media have made a play of the FiT as a “reverse Robin Hood” policy. Yet much of the installedcapacity to date has been on social housing, with occupiers benefitting from lower power bills, orhas been commercial “rent a roof” offerings, which also benefit people unable to afford the upfrontcost of PV.

— Research undertaken at ICEPT indicates that innovative social finance provision can allow the leastwell off to share in the benefits of FiTs. We believe greater attention to realising this would havebeen a more helpful response to the potentially regressive nature of the FiT scheme than the cutsDECC has proposed.

— The FiT is the least impactful place to start addressing consumer bills. The least effective of thevarious policies currently in place is the carbon price floor. This, not the FiT, would be where wewould advise the government to seek cuts.

Our basic proposition on affordability was set out in response to question b above. Whilst the per-unit costof PV is high the overall burden is extremely small, far smaller than that of the Renewables Obligation or EUEmissions Trading Scheme. DECC’s own numbers in the consultation show that PV installations have reachedjust 255 MW, which of course accounts for the very modest overall impact on bills.

A great deal of media attention has focused upon the supposed “reverse Robin Hood” nature of the FiT. Yetmany of the installations to date are by social housing providers, offering free electricity to their occupants orare “rent a roof” schemes offered by commercial outfits. The notion of a tax on the poor that benefits only therich is not borne out by the facts.

Research at ICEPT, published in Energy Policy and available on the ICEPT website80, indicates thatinnovative social finance solutions can be used to allow FiT revenue to reach the fuel poor, including those inhard to heat homes. This can go beyond “rent a roof” and offer a share of the FiT income to the occupier.However maximising the potential for doing so requires enough return to allow a share out between the socialfinancier and the household that does more than merely provide “free” electricity. The changes to the FiTproposed by DECC reduce the scope for this and as noted above are most likely to restrict investment to thealtruistic and wealthy.

We contend that innovative solutions for reaching the least well off could be found. We suggest that this(along with a raft of social and energy efficiency measures beyond the scope of this submission) would do farmore to benefit the least well off than cutting the FiT. To return to a theme, the FiT is the least burdensome ofthe various policies currently in the DECC panoply. The potential to impact the poor is commensurate with this.

We generally support the government’s efforts to make support for renewable energy cost reflective and haveargued for reform of the RO to this end for several years. As an aside it appear to us that the measure thatdelivers least value in terms of new investment in low carbon is the carbon price support, which is largelysuperfluous given the existing RO and proposed contract for difference and will depress the carbon priceoutside the UK. The FiT appears to us to be the least impactful place to start cutting support levels.

e. Experience of similar incentive mechanisms for renewables in other countries.

We have not sought to address this question. The international experience has been extensively reviewedelsewhere, including both lessons from the flexible, volume based approach to degression used in Germany andthe retroactive changes made by Spain. See the various Deutsche Bank reviews of FiT schemes for example 81

29 November 2011

80 Saunders, Gross and Wade, 2011, Can FiTs and RHIs help the fuel poor, and if so, how? http://www3.imperial.ac.uk/icept/publications/workingpapers (forthcoming in Energy Policy)

81 Deutsche Bank, 2009, Paying for Renewable Energy, TLC at the right price http://www.dbcca.com/dbcca/EN/_media/Paying_for_Renewable_Energy_TLC_at_the_Right_Price.pdf



Written evidence submitted by A M Borrill & Son

We are writing about the consequences our business faces due to the government’s management of thecurrent FIT’s consultation in particular the deadline date of the 12 December.

A M Borrill and Son are a mixed arable and poultry farmers based in North Lincolnshire. In April this yearwe installed a pilot 10kw scheme. We planned to expand this scheme to 30kw and also install a 50kw schemeto supply 30% of the electricity to the poultry unit and potato store this coming winter.

Installation contracts were signed with Renenergy on the 21 October 2011 and a substantial deposit madeby bank transfer at the same time. We were therefore contractually and financially bound to the project.

Being such a large project for the business, our bank had agreed to 100% funding for the two schemes overa 10 year period.

However we were unable to push on with the project as both needed planning permission which could takeup to nine weeks. Both also required a G59 grid connection application which could also take up to nine weeks.

The Minister’s decision on the 31 October came as a complete blow to our business because there is no waythat the projects could be completed within the 12 December deadline. The new Feed In Tariffs make theprojects complete non-starters. Who knows what bank interest rates could be in 10 years time? Both schemeshave been put on hold even though we are contractually bound to our installers.

How can businesses make long term strategic decisions with such knee jerk decisions?

We can see the government’s point that the FIT budget may be stretched but it is totally unreasonable totarget existing projects such as ours. It would have made more sense to stop all new projects with contractssigned after the 31 October until the end of the consultation period.

We are therefore asking the committee to propose that all existing projects that were contractually boundand can provide through bank statements that deposits were paid to installers before the announcement on the31 October should be allowed to go ahead at the current FIT rates even though the completion date may beafter the December deadline.

I hope the Committees find my evidence useful and if further information is required please do not hesitateto contact me.

18 November 2011

Written evidence submitted by Transition Town Letchworth

1. Background

1.1 About this document

1.2 About Letchworth Garden City

1.3 About Transition Town Letchworth

1.4 Transition Town Letchworth’s Two Solar Schemes

1.5 Why set up the Schemes?

2. Reducing the Feed in Tariff

2.1 Impact on the Domestic Scheme

2.1.1 Falling costs of solar PV systems

2.1.2 Return on investment

2.1.3 Rising energy costs

2.2 Impact on the Community Scheme


2.2.2 Proposed multi-site tariff

2.2.3 Considerations for community schemes

2.2.4 Other community initiatives

3. Timing of the Proposed Reduction


3.1.1 Letchworth’s difficulties with the proposed reference date

3.1.2 Uncertainty around the proposed reference date




4. Strengthening the Link with Energy Efficiency


4.1.1 Landlord’s Consent restrictions

4.1.2 Financial barrier to investing in solar PV

4.1.3 Connecting thermal efficiency with electricity generation

4.1.4 Raising awareness of energy use


5. Further Points to Note

5.1 Strategic vision

1. Background

1.1 About this document

This is a response from Transition Town Letchworth to the Department of Energy and Climate Changeconsultation on Feed In Tariffs: consultation on Comprehensive Review Stage 1, Solar PV.

1.2 About Letchworth Garden City

As the world’s first Garden City, Letchworth is a town of historical importance. The appearance of the townis controlled by the Heritage Foundation who are the town’s freeholder. The Heritage Foundation operate asecondary planning permission process (known locally as “landlord’s consent”) to preserve the look and feelof Letchworth. This applies to a large proportion of domestic property in the town, in addition to the towncentre built environment. Some of Letchworth’s buildings are also subject to Grade II listing.

1.3 About Transition Town Letchworth

Transition Town Letchworth (TTL) is a grass-roots, community organisation set up to tackle the twinchallenges of climate change and peak oil at a local level. We work to achieve our aims through awarenessraising, influencing and co-ordinating projects. We are run entirely on the good will, enthusiasm and passionof volunteers and have no paid employees.

At present we are made up of over 500 households based in Letchworth Garden City, Hertfordshire. We areproud to be affiliated with the worldwide Transition Network.

1.4 Transition Town Letchworth’s Two Solar Schemes

Transition Town Letchworth have been working on two solar projects:

— The Domestic Solar SchemeEssentially a partnership arrangement between TTL and a reputable supplier / installer to offerLetchworth householders the opportunity to buy competitively priced PV systems designed to meetthe Heritage Foundation’s Landlord’s Consent requirements.

— The Community Solar SchemeA solar farm development, providing Letchworth people with the opportunity to invest in the energyresilience of their town. This is planned to be sited on a substantial building within the town. AnIndustrial and Provident Society is in the early stages of being set up and it is intended that investorsshould receive a dividend based on the size of their share.

With the changes DECC have proposed to the solar FiT, the future of both of these schemes looks uncertain.

1.5 Why set up the Schemes?

The Domestic Scheme was conceived as a way to encourage the take up of solar PV in Letchworth. It wasfelt that as a large group we could negotiate a good deal with a reputable partner supplier to the benefit of ourtown’s residents. We could also ensure that the partner supplier was fully aware of the Heritage Foundation’sdesign requirements and therefore able to both advise potential customers whether landlord’s consent wouldbe granted and, where permitted, design a system to meet those design requirements.

The Community Scheme is an important flagship development for the town and potentially the first of furthercommunity energy generation projects. It is also important because it removes barriers to investment by:

— allowing householders who are restricted by the Heritage Foundation’s landlord’s consent process orwithout suitable roof space to invest in the production of local energy;

— allowing local residents without access to the funds necessary to purchase a domestic installation toinvest a smaller amount.



2. Reducing The Feed In Tariff


2.1.1 Falling costs of domestic solar PV installations

Both TTL and the solar industry generally accept that FiTs should decline over time and that costs ofpurchasing domestic PV systems have reduced. From its conception, the FIT was always designed to decrease.The reduction is not necessarily the issue; our concern relates to the size of the cut.

Prices of installations have indeed come down, driven partly by demand and partly by increased competitionbetween installers. A sudden influx of raw materials onto the market (due to short selling of silicone)contributed to a reduction in panel costs in the global market. However, panel costs are only one element ofthe total cost of an installation. The proposed cut to the FiT is in excess of the reduction of the price ofpurchasing an installation in total.

The proposed reduction to the FiT will increase price pressure in the market further and will be likely toincrease demand for cheaply manufactured panels from China. This is likely to prove detrimental to the UKmanufacturing and engineering sector at a time when they need custom.

The FiT proposals have also had an impact on price stability. Costs of panels spiked by as much as 30%immediately after DECC’s announcement due to a rush by installers to purchase hardware to fulfil customerorders before the reference date of December 12th. Ironically, DECC’s proposal designed to respond to the fallin prices has actually caused a temporary increase in prices.


The proposal to reduce the FiT from 43.3p to 21p will increase the payback for an average 2.9kWp systemfrom 11 years to around 20 years (Source: Energy Savings Trust website http://www.energysavingtrust.org.uk/Generate-your-own-energy/Financial-incentives/UK-Government-proposed-changes-to-solar-PV-Feed-in-Tariffs) based on spending £11,500 on an installation which will be guaranteed for 25 years.

It is our view that this will prove a disincentive for people to invest. Most people do not want to wait 20years to see a surrendered investment return, especially when the period of the investment is only 25 years.Furthermore, if the funds to pay for the installation are borrowed (for example, against a mortgage at a 5%interest rate) the investment may not break even over the guaranteed life of the hardware.

Homeowners often do not wish to commit to staying in their current home for a 20 year period. It is alsolikely that any potential investor over the age of 55 will not wish to invest in solar PV at the 21p rate asthere is a high likelihood that they will move house, or even die, before the investment has broken even bytoday’s estimates.

Rather than reducing the FiT rate 0ver 25 years, it may be worth considering maintaining a higher rate FiTand reducing the duration of the payment. This would ensure a faster return which would certainly encourageinvestment. The investor would receive the benefit from reduced energy costs over the remaining life of thesystem. It would also reduce the length of liability placed on bill payers who fund the FiT.

If local projects are to succeed, the FiT must compete with other options for people with cash and a desireto invest in building renewable energy infrastructure. For example, Ecotricity bonds are offering a 6.5% grossinterest rate over a four year term; the money is invested directly into building infrastructure. The incentivemust be there to allow both domestic and community solar projects to compare favourably with this.

It is our view that if the government wishes to encourage the private investor to invest their own funds inenergy generating infrastructure and cover the costs associated with this (maintenance, replacement of inverter,increased house insurance etc) then the return on investment offered needs to be not only realistic but alsoattractive. The proposed 21p tariff is not enough of an incentive and TTL’s Domestic Scheme will havedifficulty encouraging householders to invest in solar PV at this rate of return.

2.1.3 Rising energy costs

The proposal uses rising energy costs to justify a reduced FiT by off-setting future price rises against thehouseholder’s investment. It is our view that energy prices will indeed rise, both in terms of direct costs (dueto resource scarcity) and indirect costs (due to international friction caused by resource wars).

Whilst we agree that resource scarcity and energy security issues are likely to push up the cost ofconventional energy further, it seems unjust to place the risk of this unknown return on the private investor,particularly when their decision to invest in energy generating infrastructure benefits all.

Generating renewable energy can result in more stable prices once the infrastructure is in place, relativelyfree of the fluctuations caused by markets. However, it is not realistic to expect private homeowners to fund agreen energy revolution through philanthropy. They need a good, secure incentive to invest.




2.2.1 Return on Investment

The community scheme profits were never going to be as high for investors as they could get from a wellsited solar installation on their own home. Community schemes have the additional overheads of the cost ofrenting roof space, the cost of setting up and maintaining a company, the cost of a share offer, the cost ofinsuring the installation and the legal cost of putting in place a roof lease. The cost of renting roof space isoften met through offering a large amount of the electricity produced for free, and in our case even if we tookpayment for some of this electricity it would be no more than an industrial user pays which is significantlyless than 13p per kwh. For the share offer to be successful we believe we have to be slightly more attractivethan a five year fixed term bond rate with the promise of paying the money back to share holders.

We were in the process of getting quotes for our first installation when the consultation on reduced FiT ratescame out. With the current quotes our project will only be viable if the roof owner will agree to receive 50%or less of the generated electricity in return for the right to use their roof. They were expecting somethingmore. We will also not be able to start paying back any shareholders until year 15—a long time to wait.

Your proposed FiT rates have fallen more than the cost of an installation. Having learned from experienceover the last year, would it not be better to link FiT rates to the cost of a particular installation size as part ofa “contingent digression option”. The costs of an installation used should also be for reasonable quality panels,not some cheap panels that do not perform well. We would not support quotas for the number of installations,this would be too complex to administer and would waste money that could be spent on supporting furtherinstallations.

2.2.2 Proposed multi-site installation tariff

There may be a case for lowering the FiT rates for multi-site installations where they are being financed bya large solar PV supplier who can negotiate very good deals or where an organisation or individual owns lotsof property and can negotiate a good deal. However, for a community group like ours, if we found and installedon a second roof the only cost we would save is company set up costs, for example, we would need to do anew share offer, we would need a new lease agreement and we would tender again to install the panels. Wewould not support the multi-site installation for community schemes.

2.2.3 Considerations for Community Schemes

In considering the tariffs for community schemes, there is a need to consider the step changes in FiT rate.During the last year these have been set to prevent businesses building large solar farms and taking moneyfrom householders. We were going to opt for a 49kwp installation on our local leisure centre because the stepchange in FiT was such that we could not justify to shareholders going for a larger system. However, theleisure centre has the space for a larger system and can use the electricity. There is no benefit for communityschemes in scaling them down and so the FiT rates should be set to allow for the reduced costs from economiesof scale from a larger installation but not to deter larger installations when they are for the benefit of thecommunity.

2.2.4 Other community initiatives

In recent months we have seen lots of community schemes launching share offers. Many of these werelooking to put solar PV on community building including schools. These groups embody the ideals of the “BigSociety” and may prove to be the people that will make the “greenest government yet” a reality. Solar PV isa technology where community groups can start off on a relatively small scale and gain experience andconfidence in putting in place renewable energy sources. As time goes on, they have the potential then to gofor schemes involving the more expensive technology. Without a good deal to start these community schemes,the benefit of any follow on initiatives will also be lost.

3. Timing of the Proposed Reduction


3.1.1 Letchworth’s difficulties with the proposed reference date

The impact of the government proposal of implementing the lower tariff for systems registered after the 12thDecember reference date affects Letchworth residents more negatively than householders in other parts of theUK. The requirement to obtain Landlord’s Consent for an installation (a process taking anything between fiveand 10 weeks) made it impossible to meet this deadline following the DECC announcement.

It is unfair to expect a private investor to commit a substantial amount of money to PV at a time when thereturn on investment could vary from 10 to 20 years. Even in a scenario where the change is not implementedfrom the proposed reference date, Letchworth is likely to face a similar problem prior to the April 2012 FiTadjustment caused by these proposals. By the time the findings of this consultation are available it will beJanuary at the earliest. Householders basing their decision to invest on the outcome of this consultation will



have only three months to obtain quotes, technical surveys, Landlord’s Consent and commission theirinstallation at a time when there is certain be high demand.

Due to the Landlord’s Consent process, which prevents Letchworth homeowners responding quickly, theproposal to change the tariff at such short notice now effectively excludes anyone in the town who hasn'talready invested from receiving the higher level FiT.

The Domestic Scheme was about to be launched at the time of DECC’s proposal. The Scheme had everyreason to expect the change in FIT would take effect in April 2012. It has not been able to plan for theunpredictable, sudden change in demand in the solar installation market created by these proposals.

3.1.2 Uncertainty around the proposed reference date

It’s also worth noting that the date of December 12th is prior to the end of the consultation, and the dateitself will be up for review during the consultation. No potential purchaser can plan around this with anycertainty. Difficulties are created on a small and large scale, both for individual investors and businesses bythese changes. It creates a trust issue, generates concern about the reliability of the return and discouragesinvestment.


With community schemes to be considered as part of the second stage of the DECC review, our scheme isnow on hold. We cannot put an agreement in place with our roof owner or put together a share offer documentwithout some certainty on the FiT rate that will apply. Some clarity on the date when the community schemeproposal will be sorted is important to keep the momentum going.

4. Strengthening the link with energy efficiency


It is our view that linking energy efficiency with qualification for the FiT will actively deter investment insolar PV. The disincentive caused by linking the FiT with energy efficiency will be felt disproportionately inLetchworth where control is tight on the changes householders can make to their properties.

4.1.1 Landlord’s Consent restrictions

The Heritage Foundation’s design standards currently prevent owners of properties in certain areas of thetown altering their home in a way which is considered to alter the historic appeal of the street. For example, ahouseholder may obtain landlord’s consent to install a solar system on their rear-facing roof, but preventedfrom doing work to make their house more thermally efficient (eg external insulation on street facing wall).Through no fault of their own, they will fail to meet the energy performance level required to qualify for thefull FiT.

In Letchworth, your proposal to link energy efficiency to qualifying for the FiT makes it more likely thathouseholders subject to the Heritage Foundation’s Landlord’s Consent process will not qualify for the full FiT.A substantial proportion of Letchworth households will therefore make a decision not to invest in solar PV.

4.1.2 Financial barrier to investing in solar

The costs of obtaining an Energy Performance Certificate, together with the cost of implementing carbonreduction measures to meet energy efficiency requirements before solar can be installed cost-effectively mayrun into thousands of pounds. This would certainly act as a further disincentive for the householder to investin solar PV.

This is particularly true in current economic conditions, where many households are unlikely to have accessto the spare cash to perform the required work.

4.1.3 Connecting thermal efficiency with electricity generation

Whist we absolutely endorse the view that homes should be upgraded to make them as energy efficient aspossible, there is no connection between thermal efficiency and electricity usage for homes reliant on gas forcentral heating and hot water. Linking the two contradicts common sense. It would be more logical to ensurea household has done as much as they can to reduce electricity consumption (ie through energy ratings ofwhite goods within the home etc). That said, we would not encourage this. We are of the view that it ispreferable use green electricity inefficiently, rather than brown electricity inefficiently.

Alternatively, the incentive to export micro-generated electricity to the grid could be strengthened toencourage export over usage. Householders who generate would then be encouraged to lower consumption.



4.1.4 Raising awareness of energy use

It is our view that conservation of energy is just as important as investing in micro-generation. It is commonlyfound that once households start thinking actively about energy usage and generation, their increased awarenessresults in them becoming more cautious and using less. With this in mind, many people will subsequentlychoose to invest in other carbon reduction measures (eg increased insulation, energy efficient boiler) in thefuture.

These two things are likely to happen naturally at a time convenient to the householder and it is our viewthat they do not have to be linked explicitly through policy. It would be a shame if appropriate south facingroofs were not used for generation because, for example, the householder’s boiler was not ready to be replacedfor a number of years.


It is our view that placing a minimum energy efficiency requirement on non-domestic buildings as arequirement for qualifying for the FiT will hinder the implementation of our Community Scheme and otherslike it.

The building currently favoured for the TTL Community Scheme is our town’s leisure centre; our Councilwill be the beneficiary of the power which will reduce running costs of the facility, indirectly benefiting allcouncil tax payers.

Criteria for selecting this building included it not only having a suitable south facing roof, but also thestructural strength to support the panels, no planning restrictions, and an appropriate customer for the powergenerated. Many buildings were dismissed as unsuitable and impractical before this selection was made.Introducing a requirement for energy efficiency into this decision making process further reduces the chanceof a suitable site being found.

Buildings of this type are frequently pre-fabricated structures, often poorly insulated with a high demand forenergy. If it is impractical or cost prohibitive to improve the energy efficiency of buildings such as this toqualify for FiT, this scheme will simply not happen. In an ideal world, all buildings would meet minimumenergy efficiency requirements. In reality this is simply not practical. It is our view that the enforcement ofthis proposal would result in no steps being taken to reduce the carbon footprint of facilities such as these.

5. Further Points to Note

5.1 Strategic vision

The work that Transition Town Letchworth has been undertaking in regard to solar PV has already takenmuch time, none of which is paid, and will involve a lot more volunteering. People will not invest their timeand money into renewable energy if the level of uncertainty that we have seen over the last year continues,credibility is being lost.

The perception of this review is that it has been rushed through undemocratically, with conclusions drawnprior to commencement. So far it also appears to have disregarded what may be better options. It is imperativeyou stop these continual reviews and put in a clear, long term, strategic policy which will be robust and fairfor the foreseeable future so that individuals and community groups can make sensible plans and decisions.

30 November 2011

Written evidence submitted by Sudbury Market Town Partnership

On behalf of the Sudbury Market Town Partnership, which represents over 250 voluntary and communitygroups, churches and schools, I write to express our extreme disappointment at the Coalition Government’sdecision to reduce the FiT for alternative energy systems with only six weeks’ notice of this change.

The Partnership and its sub-committee, Transition Sudbury and District, have been working very hard overrecent months to seek to persuade local people to fit solar PV panels, not just private households, but commerceand industry in this area too, in an attempt to help cut greenhouse gas emissions and assist in carbon reduction.

The reduction in the amount of feed-in tariff will be a huge disincentive to all of those who were keen toget involved with this initiative. In particular, it is hugely disheartening to the many people who have orderedsolar PV systems but who are unlikely to have them installed before the tariff changes.

This Government really does need to encourage all initiatives which will help cut carbon emissions.

Shame on all of those who state they are dedicated to promoting a “green” agenda. There is very littleevidence of this.

1 December 2011

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