Solar subsidies to be cut by more than half

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This article is part of our special report Solar Power.

Britain's solar subsidies will be dramatically cut by more than half, according to government documents that were prematurely published online and quickly taken down.

The cut will almost double the payback period for householders, the document revealed, meaning someone installing £10-12,000 solar panels will only be in credit after 18 years rather than the current 10. The rate will be reduced from 43.3p per kilowatt hour of solar electricity to just 21p, the document revealed, cutting returns from around 7% to 4%.

While the PDF on the Energy Saving Trust website noted that "these proposals are currently under consultation and are not final", the figure is in line with earlier speculation that the rate will be cut by over half. It also said consumers considering solar should assume the 21p figure is what they will get if they install after 8 December.

Howard Johns, MD of Southern Solar, who spotted the document, tweeted: "It seems that EST know exactly what the outcome of the Fit review already – so much for consultation." Toby Ferenczi, chief technology officer at solar company Engensa, wrote: "This isn't acceptable and will result in massive job losses – don't be fooled."

The official announcement on the slashing of the feed-in tariff rate paid to householders appears to have been brought forward to today, with energy secretary Chris Huhne slated to make a statement in parliament. Tweets from the climate change minister, Greg Barker, had previously suggested it would not come until next week.

The news comes a day after the government signalled support for the 25,000 jobs in the fast-growing solar industry. Barker said the government wanted growth in solar panel installations to continue.

"We are determined not just to drive down carbon emissions but to build a successful, thriving, prosperous low-carbon economy," he told a solar power conference in Birmingham.

"I'm personally committed to ensuring that your industry can prosper in the longer term, sustaining green jobs at a critical time for our economy, jobs that people can build a career on [and] that can help drive the recovery."

Johns told the Guardian that the cuts would be a "disaster". "If they go ahead with this, the tariff is way too low, and all the social housing and free solar schemes – which make the feed-in tariffs exciting in terms of fuel poverty – will be destroyed." He added that this was the third government review into solar subsidies this year, saying "we've invested business in PV [solar photovoltaic panels] and had it sliced up three times in a year. They [the government] have no credibility on this any more."

"You can't do u-turns like this without having to answer for it – it puts the spotlight firmly on the coaliton's green credentials," he said.

Despite its huge promise, solar energy currently provides less than 1% of energy sold globally, mainly due to its intermittent nature and low intensity. The main reason for this has been difficulties exploiting the resource on a large scale at a competitive price.

Solar electricity will become attractive when it falls below so-called 'grid parity', the point at which renewable energies become cost-competitive with conventional energy sources like fossil fuels.

Favourable regulatory regimes and rapid technological evolution in the industry helped the sector to get onto its feet quickly. But many in the industry now fear that the sudden removal of tariffs, often retroactively as seen in Spain, is damaging future growth prospects, particularly in Europe.

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