The UK solar PV industry is in shock due to the severity and speed of the government’s proposed cuts to the Feed-in Tariff for the technology.
With talk of job losses and legal action, industry bosses are searching for a way to soften the expected impact of the sudden fall in tariffs and the timescale.
Dave Sowden, chief executive of the Micropower Council, said: “Within four hours of these proposals being announced, we received our first phone call of a company starting a statutory consultation with staff over impending redundancies."
Most stakeholders understand the government's dilemma, caused by the rush of PV installations rapidly depleting the extent of the £867 million fund.
There were over 16,000 new solar PV installations in September alone – nearly double the number installed in June.
“But these proposals go much too far," Sowden warned. "Under these proposals solar panels will simply become “eco-bling” for the middle classes, paid for by all, including the fuel poor.
"Yet those on lower incomes will no longer be able to benefit from offerings such as free solar or social housing schemes, due to the financiers of these schemes pulling out.
“The speed of the changes will also leave many companies with stranded assets, a plethora of contractual disputes."
A protest by the industry and supporters is being planned at Downing Street for 23 November to lobby for more modest reductions in the tariff and a less drastic timescale.
The Cut Don't Kill campaign has warned that such deep cuts would "kill the UK solar industry stone dead".
Industry veteran Jeremy Leggett, chairman of Solarcentury, warned that 25,000 jobs could go in one of the country’s few growth industries.
“There is not even any recognition that the industry will need some time to adjust to such a change,” he said.
He said he believed that the timing of the change makes it “wide open to legal challenge and we now expect a very serious industry challenge to be mounted”.
Daniel Green, chief executive of HomeSun, an installer of 4,000 solar systems, said in despair: “There is no business left, it is finished. It just doesn’t pay for consumers to do it now.”
The government's consultation on reducing the tariffs states that from 1 April 2012 the tariff payable to retrofitted residential solar installations will be cut from the current 43.3p/kWh to 21p/kWh.
The tariff then reduces rapidly as the size of the installation rises.
In a blow to the social sector, used by housing associations and local authorities to put panels on their stock, “aggregated” schemes such as social housing and “free solar” will have an even lower tariff – 16.8p/kWh.
However, Greg Barker did say in the House of Commons that the government is considering "whether more could be done to enable genuine community projects to be able to fully benefit from FITs", as the current scheme cannot identify a community project.
Because the proposals make no change to tariffs for projects installed by 12 December, which will receive the current rates for 25 years, a rush has begun to finish any projects now in progress before this date.
According to the consultation the 21p tariff would yield a rate of return to private individuals of 4.5%, presently higher than most savings accounts, but perhaps not so for 25 years.
The consultation has two phases. The first relates to changes to the tariffs.
A second one is expected before the end of the year and will cover all other aspects of the scheme, including the tariffs for other FIT technologies, adding to the sense of panic felt throughout the sector.
The Government is defending its line by arguing that the cost of an average domestic PV installation has fallen by at least 30% since the start of the scheme – from around £13,000 in April 2010 to £9,000 now.
It says that at this rate, without changing the tariffs, the cost to all electricity bill payers by 2014-15 would be "£980 million a year, adding around £26 (2010 prices) to annual domestic electricity bills in 2020".
The revised tariffs would limit the cost to £250-280 million in 2014-15, making domestic electricity bills around £23 (2010 prices) higher in 2020.
The government now wants all PV installations from 1 April 2012 to come with energy efficiency makeovers for the property concerned.
As for the level of efficiency required, the proposals are for either an Energy Performance Certificate level of C, or the taking up of all measures potentially eligible for Green Deal finance.
If the building did not meet the energy efficiency requirement the installation would receive a lower FITs rate of 9p/kWh.
Energy minister Greg Barker said: "This new requirement will encourage the industry to make the most of their skills and expertise and work much more closely with the rapidly expanding energy efficiency market".
Some suppliers such as Sharp Solar say they are already mobilising to offer this service to customers.
In a rowdy Parliament debate yesterday, Caroline Flint, shadow energy secretary, accused the government of delivering a “kick in the teeth for those families who wanted to do the right thing by investing in solar".
"The new proposals guarantee that lower-income households will lose out, as fewer firms offer the lifetime deals that are currently available, and that solar will be available only to the well-off."
She asked why, if costs have fallen by 30%, the tariffs are being cut by 50%, and observed that so far the UK "has installed only 3% of the solar energy installed in Germany in the past two years".
Barker defended the 12 December cut-off date by saying that otherwise "there would be a massive gold-rush, and the entire budget for feed-in tariffs would be gone" by April 2012.