Last month the UK government announced plans to slash subsidies for solar power in the UK. The solar industry is outraged. Similar events are being played out across Europe with the German, Spanish and Italian governments all deciding to reduce the amount of public money they spend on subsidising solar power.
The debate about solar subsidies is beset by claim and counter-claim. As usual, the argument is really about how to stop climate change.
Our government sees large-scale wind farms as the primary means by which the UK can reduce its reliance on fossil fuel. Under the Renewable Energy Strategy, published in 2009, it wants 30 per cent of our electricity to be generated by renewables by 2020, mostly by wind power. Reaching 30 per cent renewable electricity would enable the UK to hit its European Union target of obtaining 15 per cent of its total energy needs from renewables by 2020.
The government sees a much smaller role for 'small scale renewables', installations of less than 5 megawatts of solar photovoltaics, anaerobic digestion and small-scale hydro power. Under the Renewable Energy Strategy just 1.6 per cent of our electricity will come from small-scale renewables by 2020.
UK missing renewables target
Incidentally, the UK is way behind its targets. The percentage of electricity from renewables has been raised just four percentage points in 10 years, from 2.7 per cent in 2000 to 6 per cent in 2010, according to a November report from the House of Commons Public Accounts Committee. The Department of Energy and Climate Change does not expect to reach 10 per cent renewable electricity until 2012, which leaves just eight years to reach 30 per cent.
Although the government sees small-scale renewables as playing a minor role, in April 2010 it launched a generous subsidy to encourage their use, called the Feed-in Tariff. This gives out different rates of pay to generators, depending on the size of their installation. For example, persons who fit a 2.5 kilowatt solar electricity system to an existing home will receive 41.3p for every kilowatt hour of electricity generated, regardless of whether they use the electricity themselves or export it into the national grid. The payments are index-linked against inflation and guaranteed for 25 years. According to one estimate, a 2.5 kilowatt system will generate tax-free payments of £1,000 a year, allowing home owners to recoup the cost of the system in 12 years, which represents an 8 per cent return on the money invested, a better rate than any savings account. A separate subsidy for solar thermal installations, which use solar energy to heat water, is to be launched in 2012 as part of the Green Deal.
Niche or serious?
Not surprisingly, the number of solar photovoltaic installations has leapt since the feed-in tariff was launched. According to Stuart Pocock, technical director of the Renewable Energy Association, the combined capacity of solar photovoltaics in the UK rose from just 30 megawatts on 1 April 2010 to around 77 megawatts a year later, with some 26,000 new installations, mostly on homes.
Installations were growing so rapidly that, according to Pocock, solar photovoltaics could have provided four to six per cent of the UK's total electricity by 2020, had the government not cut the tariffs. The association, which represents generators and equipment companies, argues that the 2009 target of just 1.6 per cent of our electricity from small-scale renewables by 2020 was 'woeful' and should have been much more ambitious, at 6-8 per cent of the UK's electricity. In the longer term, it believes that 20 or 30 per cent of the UK's electricity could come from solar photovoltaics.
'We are frustrated that the technology has been misrepresented. There is a perception that it is a niche, a tool to engage communities [in climate change issues] rather than a serious source of power generation,' adds the association's head of external affairs, Leonie Greene.
There are major sceptics of solar power within government, who make that scenario less likely. In his 2008 book Sustainable Energy without the Hot Air, MacKay, a Cambridge physics professor and now chief scientific advisor to DECC, calculates that each person in the UK currently needs 125 kilowatt hours of energy every day. He explains that even if there were 10 square metres of solar photovoltaic panels for every person in the UK, they would generate just 5 kilowatt hours per day per person, or 4 per cent of their daily needs . Alternatively, 10 square metres of solar thermal panels for every person in the country would provide 13 kilowatt hours of their daily energy needs. MacKay adds that to generate 50 kilowatt hours per person per day using solar would require 5 per cent of the UK's surface to be covered in solar panels.
He concludes, '[This] seems to be beyond the bounds of plausibility in
so many ways. If we seriously contemplated doing such a thing, it
would quite probably be better to put the panels in a two-fold sunnier
country and send some of the energy home by power lines'.
The government has presented the cuts as a way to stop large solar developers from cashing in and hoovering up all the money. It says it has only cut payments for installations bigger than 50kw, after planning applications were lodged for several large-scale solar farms. 'Such projects could potentially soak up the subsidy that would otherwise go to smaller renewable schemes,' said climate change minister Greg Barker. The new rates are to be introduced from 1 August.
Pocock argues that many of the larger solar projects were actually proposed by schools, hospitals and community groups and will now be abandoned. 'It's not just greedy investors looking to make a killing, which is how it was portrayed by ministers.'
A separate cap on payments was also introduced under the Comprehensive Spending Review last autumn. Total annual payments under the feed-in tariff will be limited to £360m from 2014, which Pocock says will severely constrain the expansion of all small-scale renewables. Residential solar installations alone were on course to reach this upper limit by 2012, Pocock says, adding that the combined effect of the two cuts will be 'absolutely devastating' for the solar industry.
Pocock accepts that the subsidies were always meant to be reduced as the expansion of production allowed the cost of solar to come down. The association says solar prices have fallen 30 per cent since the feed-in tariff was launched, yet it believes the government has cut the subsidy too early, before the industry had a chance to develop some real momentum.
Solar subsidies a waste
Some environmentalists disagree strongly with this analysis. The writer and activist George Monbiot has attacked the feed-in tariff as a huge waste of money, arguing that solar panels in Northern Europe generate a pathetic amount of electricity and the money would be better spent on hydro or wind power, which is much more cost-effective. In addition, Monbiot argues that the tariff allows a privileged minority to have their solar panels paid for by the general public, through levies on energy bills.
While Germany is often held up as an example of how to develop a strong solar industry, Monbiot quotes a study by the Ruhr University to show that while the German public spent £30bn on subsidies for solar photovoltaics between 2000 and 2008, solar photovoltaics produced just 0.6 per cent of Germany's electricity in 2008. The study also found that the cost of German solar in terms of tonnes of carbon saved is astronomic, at £628 per tonne. However, more recently the industry magazine Renewable Energy World reported that solar now provides 2 per cent of Germany's electricity, with almost 250,000 individual systems installed in 2010 alone and around 2 million German households with solar panels.
A middle-class choice
Dr Jim Watson, director of the Sussex Energy Group at Sussex University, is a cautious supporter of feed-in tariffs for the UK, but stresses the need to trim the subsidies over time to encourage efficiency. He believes the original tariff would have been difficult to sustain politically, without the industry achieving some big reductions in the cost of solar. He adds, 'Even in Germany, there is quite a debate about the cost of the feed-in tariff.'
At present, the Renewable Energy Association says a 2.5kw system will cost around £8,750, which it claims will generate as much as half a UK household's electricity needs. 'For it to be a long-lived and important technology in the UK, you'd need significant cost falls,' says Watson. 'If we got this breakthrough on costs, you could see solar photovoltaics becoming a normal thing. But at moment, having solar is more of a middle class thing to do.'
Yet he is critical of the way the UK government decided to cut the tariff less than a year after it was launched. 'It's been rather destabilising for the industry and for consumers. It was an arbitrary review that no-one was expecting and that's a bad way to engender confidence in something new.'
For others, the debate about the cost of solar is less important that the likely cost of unchecked global warming. 'In countries like Britain, Germany and southern Scandinavia, we need to exploit photovoltaics quickly because we don't have too many other options, if we are going to decarbonise our electricity supply within four decades,' says Staffan Jacobsson, a professor in science and technology policy at Chalmers University in Sweden and a visiting fellow at Sussex University.
He adds, 'It is true that the costs have not yet come down as much as we would have hoped, but I expect them to do so. The more important issue is whether we can deliver clean energy on a large scale... I believe solar photovoltaics is ready for large-scale deployment. If we want to de-carbonise our electricity supply, we have to accept higher-cost techologies.'
Yet for the moment, the UK government has decided that bill payers' money would be better spent elsewhere.
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