Isra-Mart srl : U.K. Solar Executives Criticize ‘Asinine’ Review of Subsidies

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Cuts in the U.K.’s guaranteed prices for electricity from solar photovoltaic panels would threaten job creation just as the industry is taking off, executives at Sharp Corp. and Solarcentury Holdings Ltd. said.

U.K. Energy and Climate Change Secretary Chris Huhne said last week that all areas of his department are being examined as part of a government-spending review. “Nothing is safe until everything is safe,” he said. The subsidies, called feed-in- tariffs, may be cut before a planned review in 2013, the Financial Times reported today.

“They said they would give the industry breathing space to grow,” Andrew Lee, head of Osaka-based Sharp’s U.K. solar unit, said today in a phone interview. “Here we are, trying to create jobs, and they’re now putting huge hurdles.”

Since the subsidies were started on April 1, the U.K. has installed 25 megawatts of solar panels in about 10,000 homes and 41 commercial installations, according to energy regulator Ofgem. That’s just under the total fitted before this year. Even so, it’s nowhere near installations in continental Europe, said Derry Newman, chief executive officer of Solarcentury.

“If you compare that to Germany, which just this year will install 7,000 megawatts, and France, which will install 700 megawatts, and we’re already worrying and talking about adjusting tariffs? It’s asinine,” Newman said. “Adjusting a policy which took years of work when it already has adjustments built into it for the end of 2012 is very strange.”

Jobs Created

Newman said his company added 20 jobs since the tariffs came in. Sharp said in July it would double production capacity at its factory in Wrexham, Wales, with “hundreds” of jobs created.

Governments across Europe are reducing subsidies for photovoltaic energy because of declining costs of solar panels and installation growth.

France and Germany announced cuts in August of 12 percent and 15 percent, respectively. Spain and the Czech Republic are planning cuts of up to 50 percent. Italy this month approved a staggered cut in incentive levels for the next three years.

The French government’s move, announced with a few days notice and without consultation with the industry, came after it said a year ago that tariffs would be fixed until 2012.

U.K. Spending Cuts

“If you go for an installation now, you know exactly what the return is going to be all the way through,” Huhne told a cross-party panel of lawmakers who scrutinize energy policy on Sept. 15. “I’m absolutely determined that, unlike in some other EU countries, there will be no question of investors being able to call us and criticize us for having retrospectively changed terms.” At the same time, he left open the possibility of changing the tariffs awarded to new projects.

Prime Minister David Cameron’s coalition of Conservatives and Liberal Democrats is proposing 113 billion pounds ($179 billion) of spending cuts and tax rises to cut a record deficit of 11 percent of economic output. Chancellor of the Exchequer George Osborne is due to set budgets for each department in a spending review on October 20.

The feed-in tariffs are paid for by utilities rather than the government, and they can recoup the costs through customer bills. When they were introduced earlier this year, the tariffs were set up to 2013, and people who install solar panels can earn as much as 10 times the market rate for electricity.

With the price of solar panels falling, a cut in tariffs may not harm the industry, according to Jenny Chase, a solar analyst at Bloomberg New Energy Finance. The U.K. solar industry will continue to grow even if tariffs are cut by more than a quarter, she said.

“This is not a surprise, nor is it a reason for the solar industry in the U.K. to panic,” Chase said in an e-mail interview. “Without such a cut, it is vulnerable to a boom, massive cost overrun, and backlash scenario.”