Isra-Mart srl:Feed-in tariff fiasco forces solar firms to start laying off staff this week

www.isramart.com

Solar photovoltaic installers will stop taking new orders this week and start laying off employees, after the government launched a consultation this morning that could see deep cuts to feed-in tariff incentives for any project registered after 12 December.

Solar power companies and green groups have united in warning that companies "will go bust" after the Department of Energy and Climate Change (DECC) launched a fast track consultation that would slash solar incentives by over 50 per cent, cutting the feed-in tariffs available to domestic and small scale business installations from 43p per kWh to just 21p per kWh.

BusinessGreen has learned of at least one firm that is now expecting to begin redundancy proceedings this week, as it will need to give staff a 30-day notice period before laying them off. A number of other firms have similarly warned that job cuts will be announced in the coming weeks as a direct result of the government's proposed changes.

"This is not scare-mongering," one industry insider told BusinessGreen. "Those larger solar firms that have diversified will probably survive, but plenty of others will go under and even the larger companies will contract."

Under the proposals the new tariffs would apply to all new solar PV installations with an eligibility date on or after 12 December 2011, meaning installers are now bracing for a six-week rush to complete projects ahead of a dramatic drop in demand.

If brought into effect they would cut rates of return for solar installations from current levels that have in some cases topped 10 per cent to just 4.5 to five per cent.

The government has maintained that the cuts are urgently needed to stop the scheme exceeding its spending cap, a move that would result in higher energy bills as energy firms are forced to cover any extra spending.

But the recently launched Cut Don't Kill campaign has warned that such deep cuts would "kill the UK solar industry stone dead", destroying up to 4,000 companies and 25,000 jobs. It is planning to stage a protest at Downing Street on 23 November in an effort to persuade MPs to block the planned cuts to the Feed-in Tariff and agree to more modest reductions in the level of support.

Howard Johns, of the Cut Don't Kill campaign, explained that, while the industry supports cuts to feed-in tariffs, today's proposals will be too deep and quick to allow the industry to survive.

"We are happy to accept some cuts, but the government must recognise that wiping out 4,000 companies and 25,000 jobs by cutting too deeply would be an appalling waste of economic potential," he said.

"Our message to the government is cut us, but don't kill us - we want a sustainable cut that would allow us to survive and deliver the green growth that David Cameron said he was committed to.

"The government has a choice - either they can cut like this and make an entire industry go bust, or they can work with us to properly plan the phasing out of the tariff bit by bit, which will produce a flourishing industry that won't need any subsidy or support."

Meanwhile a senior executive at one PV installer predicted that the industry would see an 80 per cent drop in demand, which could lead to an equivalent level of redundancies.

"This will result in massive job losses and my company is no exception," he said.

However, other companies argued that the new rates could prove "workable", particularly for those companies which have diversified into other technologies.

David Hunt, director of Eco Environments, which installs wind turbines and heat pumps as well as PV, told BusinessGreen that he is hoping to retain all 46 employees.

However, he added that the company will stop taking new orders today to ensure that it fulfils its current solar order book ahead of the 12 December cut off.

"We've got to install three months' worth of projects in a month, and that's going to be a major headache," he said. " I think we've always suggested the feed-in tariffs were due a cut to the rate, but this deadline is going to have a devastating effect. People will go bust."

Dave Sowden of the Micropower Council warned that the pace of the proposed changes would not only trigger bankruptcies, but result in legal action across the sector's supply chain.

"The timing of the changes is disastrous," he said. "You are giving companies six weeks who will have ordered panels that will have just been put on a ship from China that they will not be able to sell. A lot of people are going to be left with stranded assets and will now be calling in the lawyers to see if they can get out of contracts. You will see people suing each other over this."

Concerns are also mounting that the pace and scale of the proposed changes will have a chilling impact on wider green investor confidence.

"There were investors who, after the early changes to support for solar farms, said they would not in the future touch UK low carbon projects that were supported by policy," said Sowden, predicting that the latest changes would again discourage investors.

Others predicted that the consultation could prompt some investors to ask whether similar unexpected changes could undermine the effectiveness of the soon-to-be-launched Renewable Heat Incentive scheme and the Energy Company Obligation element of the Green Deal.