Solar still a good option despite subsidy cut and VAT hike, says industry
Solar panels still make financial sense for consumers despite a double whammy of subsidy cuts and a rise in VAT rates, the industry has said.
Midnight on Thursday marks the final chance for homeowners to secure the current incentive of 12.47p per kWh for electricity from solar panels. The feed-in tariff scheme then closes to new applicants for three weeks and anyone installing panels will get 4.39p per kWh, a 65% cut that was branded “huge and misguided” when it was announced just before Christmas.
The cost of solar panels could soon go up by as much as £900 for the average home after the government said they should no longer qualify for a lower rate of VAT because of EU state aid rules. A consultation on the VAT change ends on 3 February.
The Solar Trade Association said solar was still attractive even though the payback period for an average system – costing about £6,000 – would now be about 14 years, up from eight years with the current incentive rates.
“It’s still a great investment,” said a spokeswoman for the trade body. “And for anyone who is replacing their roof, it’s a no-brainer to be replacing with solar.” A significant part of installation costs are for scaffolding.
The Liberal Democrat peer Lynne Featherstone has tabled a regret motion in the Lords over the subsidy cuts. If the motion wins significant Labour and Lib Dem support, it could potentially block them.
The shadow energy secretary, Lisa Nandy, has written to the environment secretary, Amber Rudd, calling on her to abandon the changes or at least allow a debate in the Commons.
She said: “Just as solar energy is reaching cost parity with fossil fuels, the chancellor’s cuts to the feed-in tariff are shortsighted and misguided. The government is derailing an industry with the potential to be a new British powerhouse.”
After the revised feed-in tariff scheme reopens on 8 February, the total paid out to new homeowners will be capped each year at £100m, with caps set every quarter. The government expects the cap will limit the number of solar installations to about 15-16,000 each quarter this year. If a homeowner misses out on a quarter because of the cap, they can “queue” for the next quarter.
“[The] industry will survive in the long-term but we could see a big decline for the next two years,” said Alasdair Cameron, a renewable energy campaigner at Friends of the Earth, which is unhappy at what it sees as a cap on aspiration for solar.
Cameron said the 4% return that consumers are expected to get with the lower solar payments was inconsistent with the higher returns new nuclear is expected to get, which is also being subsidised by government.
He said: “It’s hard to avoid the assumption that the government is treating renewables differently.”
This article first appeared on the Guardian
edie is part of the Guardian environment network