The bizarre behaviour of DECC in presiding over not one but two damaging and unnecessary policy lurches on solar within three months has left many in the industry confused, hurt, let down, out of pocket, sacked in some instances, regretting they ever believed what they heard about solar PV and feed-in tariffs among many others reactions. I think it is the damage to any future investment in renewables based on feed-in tariff type programmes that is the worst long-term casualty of these strange events, over and above the shorter-term meltdown in the solar PV industry, just as the presence of solar in the arsenal of domestic and small scale renewables was really becoming felt.
I’ve been doing my best to support those affected by all this in Parliament over the last week: the speaker agreed to an Urgent Question last Monday on the day of the announcement, which I took part in, I managed to quiz Energy Secretary Chris Huhne about the infamous ‘capping agreement’ that includes FITs on Tuesday last, and I used a rare spot at Prime Minister’s questions to ask that the PM intervenes personally to sort the mess out. I suppose I would have been very surprised if he had agreed to do so, which he did not, of course.
As events unfolded, my conviction that much of this was predicated on Treasury strong-arm tactics on DECC following became stronger. I set out what looked to be the most likely scenario for this extraordinary behaviour in a piece for Building Magazine later in the week (here). In that piece, I asked whether any rational department would really have conducted themselves in this way, and concluded that, once DECC had signed up for the ‘cap’ apparently almost sight unseen as Chris Huhne confirmed to me, then a ‘car crash’ on FITs looked to be almost inevitable. It certainly does look like DECC have had its feet held to the fire on the agreement to cut immediately any expenditure above what has been agreed as the ‘budget’ for FITs this year.
But it didn’t have to be like this, even with the agreement signed – because it appears to say that DECC is responsible for balancing its budget overall in the spending round, and has instead been tipped into pulling the rug from underneath this year’s expenditure, even though a review and alteration of tariff arrangements in April of next year was always on the cards, and had been anticipated and factored in by the PV industry.
And that alternative possibility has been underlined now that the impact assessment for the FITS changes has been released by DECC (pdf). What it shows, among other things, is that cutting tariffs now rather than degressing them in an orderly fashion saves just 60p per year per household in each year of the spending review, but more importantly, if this had been done, then the additional spend would have brought the overall FIT outlay up to £920 million by 2015, less than 20% above the agreement budget over the period of £867 million: – 20% being the point at which ‘the acceptable headroom’ in the ‘total cap’ would be breached. In other words, as the agreement states, DECC could have adjusted its totals over the period within the overall cap and kept to within the cap ‘budget’ for the period.
But that looks like it wasn’t enough: and we know the rest. It looks like the metaphorical large blue chinned guys with baseball bats have threatened DECC into doing the dirty on Solar PV on their behalf.