UK delays solar subsidy cut by a month to August

LONDON Thu May 24, 2012 1:51pm BST

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LONDON (Reuters) - Britain will delay a planned cut to subsidies for solar power projects until August 1, a month later than initially planned, after low demand for panels in March and April, Energy Minister Greg Barker said on Thursday.

"Following detailed consultation with industry and consumers, the government is introducing a range of changes to the FITs (feed-in tariff) scheme with effect from 1 August to provide better value for money and allow businesses and householders to plan with confidence," Barker said.

The government last year announced an emergency review of the country's subsidy scheme for large-scale solar installations after higher-than-expected demand threatened to deplete the government's renewable energy budget early.

The review resulted in a subsidy cut of up to 50 percent for solar projects from April 1 this year and further cuts were planned from July 1 if demand rates remained high.

SUBSIDY CUTS

The tariff for a small domestic solar installation will be cut to 16 pence per kilowatt hour (kWh) from 21 pence, and is set to decrease on a three-month basis thereafter, with pauses if the market slows down, Barker said.

However, the tariff will not be adjusted in November, he told Parliament.

All tariffs will continue to be linked in line with the retail price index (RPI), and the export tariff will be increased to 4.5p from 3.2p.

The energy minister said the new tariffs should give a return on investment of over 6 percent for most installations, and up to 8 percent for larger bands.

He said the new tariffs would help an industry that has been hard hit by falling prices for the panels that convert sunlight into electricity, denting manufacturers' margins.

"The sector has been through a difficult time, adjusting to the reality of sharply falling costs (panel prices), but the reforms we are introducing today provide a strong, sustainable foundation for growth for the solar sector," he said.

Solar will be included in the UK's future energy mix when the government updates its renewable energy roadmap later this year, Barker said.

"Uptake by 2020 will however depend on when solar PV becomes viable with little or no subsidy and 22GW (gigawatt) by 2020 is an achievable ambition if industry can get its cost down quickly," he said.

The Solar Trade Association in the UK said it broadly welcomed many of the government's decisions on the new tariffs.

"Despite the currently slow market, the industry can have some confidence that the new tariffs are tight but workable," Alan Aldridge, chairman of the solar lobby said.

"Households should be reassured the new tariffs will provide more attractive returns than can be found elsewhere today."

(Reporting by Karolin Schaps and Jeff Coelho; editing by Jason Neely)

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