What Homeowners Need to Know About the Sudden Subsidy Cuts to Solar Panels in the UK

exclusively for: www.alternativeenergy.com

The latest round of government attacks on the renewable energy sector has effectively reduced the earning potential of solar panels by approximately £8,000. What does this mean for homeowners and the industry?

What was the FIT?

The Feed-in Tariff (FIT) is a government subsidy paid to homeowners and some businesses that generated their own renewable energy. The scheme is intended to encourage the take up of new technologies, such as solar panels, and to help the UK transition to a low-carbon energy model as obligated by the legally binding 2008 Climate Change Act. The FIT has perhaps been even more successful than was anticipated, with industry experts saying that it was at least partly responsible for the installation of 650,000 systems in 2014 alone.

What just happened to the solar panel subsidy?

In September 2015, the Department of Energy and Climate Change (DECC) announced massive proposed cuts to the FIT payments, reducing the amount paid to homeowners by 90%. This means that anyone who buys a set of solar panels after the 2016 deadline will be roughly £8,000 worse off than anyone who manages to get their panels installed before the 2016 deadline. This change will save the average energy bill payer just £6, but it has the potential to derail the future of renewable energy in the England.

What does this mean for homeowners?

The result is that solar panels will be effectively much more expensive for homeowners due to these changes. Whereas up until now the return on investment for solar panels was roughly even with the returns you might get from small scale investments on the stock market, after the deadline solar panels will pay for themselves much more slowly than before.

However, homeowners that are fortunate enough to already have solar panels installed will continue to receive payments at the original rate because FIT payments are guaranteed from the moment you get your solar panels installed. This also means that anyone in the UK who is able to get solar panels installed before the subsidy changes are enacted on 1st of January 2016 will also be guaranteed the larger rate of payment for the 20 – 25 year lifespan of their solar panel system.

What next for the solar energy industry in the UK?

The solar industry in the UK is gloomy about these changes. Though the FIT payments were not expected to last forever, there was an understanding that they would be scaled back gradually. The sudden cut has left many feeling as though the rug has been pulled out from under their feet.

Major companies, including Panasonic, have also warned the government that the subsidy cuts will have a lasting and damaging effect on the renewable energy industry. Already solar jobs have been lost in Scotland. It’s also thought that these changes will make green energy even less affordable. As explained by former Shell chairman Lord Oxburgh of Liverpool, “the changes… will have the perverse effect of increasing the cost of clean energy.”

About the author: Clive Rolison is the founder of a small renewable energy company based in Essex. He also writes about renewable energy news for several publications, including Alternative Energy HQ.