Tariff Cut - What it really means

The_Green_Hornet

I see that a number of people are welcoming the feed in tariff cut as they see the solar subsidy as being unfair and discriminatory against the poor. But will it make any difference? Let us look at the true impact.

1) The 'free' solar panel option is no longer financially viable for the firms involved so this product will be removed from the market. Not good for the rent-a-roof companies but also bad news for people who haven't any savings who want to reduce their electricity bills or for councils who want to install solar for their social housing tenants.

2) It is now extremely likely that only householders with large roofs situated in the sunniest areas in the UK can make a justifiable financial case for installing solar panels and even then they have to be rich enough to be able to ignore the loss of interest on the capital invested.

3) The amount of green 'tax' loaded onto everyone's electricity bills (poor and rich alike) is not going to change as there was always a finite subsidy available for the FIT scheme. It will just mean that this limit will be reached later rather than sooner.

So in summary, the cut in the feed in tariff will have not have the desired effect in stopping the redistribution of wealth from the poor to the rich, in fact it makes the situation worse.

Time to put your champagne corks back in the bottle.

Cardew

Welcome to the forum.

Would it be fair to assume you have a vested interest in installing PV systems?

The fact is that there are approx 100,000 PV systems installed. I understand the majority by Rent a Roof companies who obviously found a loophole in the regulations.

So if there are approx 25 million electricity account holders, it means that 99.6% of house holders are paying toward 0.4% of the population(if my arithmetic is correct) and the majority of that into the coffers of firms funded by venture capitalists.

The proposals envisage a return on investment 4% to 5% inflation proofed - is that not enough?

The_Green_Hornet

I personally have no vested interest in installing PV systems nor do I have anything for or against venture capitalists. I am just pointing out that the cut in feed in tariffs has actually made solar panels solely the plaything for the rich.

You can't agree with that surely?

BornAtTheRightTime

OP, you are missing the most salient point which is that wholesale panels prices have crashed up to 70% over the last 2 years giving installers extremely high margins, which provide plenty of room for the FIT cuts to be balanced by installer margin cuts, without necessarily forcing RaR schemes out or decimating the domestic investor market.

WestonDave

Tariff cut was inevitable as the market has moved on from the point at which it was set up.

1. Panel Prices have dropped.
2. Electricity prices have continued to rise (increasingly the savings from actually using the solar power rather than grid power)
3. Expectations of early interest rises have dampened so reducing the potential investment cost.
4. Rent a roof has come into existence in a massive way.

All of these have combined to produce a feeding frenzy not so dissimilar to the early days of double glazing sales. A sure sign of excessive profits in a market is huge numbers of new entrants. So what will most likely happen is that instead of loads of solar installer cowboys rolling around in new BMW, the market will move to a new equillibrium around the new tariffs. There was clearly a specific pot of money set aside to get this going, and its been spent so the future will have to be nearer to self financing. That should have always been the intention - use subsidies to get it going and drive down the costs so that in future it works without subsidies.

I think its the right decision despite the fact that I've missed out due to needing to decide on other home projects (e.g. whether we want to change the roof) before we could get too far into looking at solar.

Egg_custard_2

I think we will see the price of solar panels drop significantly over the next 12 months. I personally believe prices were being artificially inflated because installers knew the returns people were getting justified the outlay.

Solar panels are becoming cheaper to produce, and although I'm sure the new FIT rate won't seem attractive when it first starts because it will be compared to the previous rate, I'm sure the solar panel installation costs will drop sufficiently enough to mean solar panels will be as good an investment in 12 months time as they were when FITs were first introduced.

Cardew

Why cannot councils install on some roofs - bear in mind that many live in flats, or houses with unsuitable roofs(shaded/wrong orientation/wrong size etc) so won't benefit.

Also bear in mind that with the economies of scale, and without Rent a Roof companies taking a huge cut, the new FIT will make a modest return on capital invested - where else can they get 4%+ (inflation linked) on an investment? If the new FIT is insufficient then fit to tenant's roofs who are prepared to pay say £1 a week extra.

bjohnson

The trouble is that while 4% return may sound good at the moment who knows what interest rates will be in ten or twenty years time.

grahamc2003

The_Green_Hornet wrote: »

I see that a number of people are welcoming the feed in tariff cut as they see the solar subsidy as being unfair and discriminatory against the poor. But will it make any difference? Let us look at the true impact.

1) The 'free' solar panel option is no longer financially viable for the firms involved so this product will be removed from the market. Not good for the rent-a-roof companies but also bad news for people who haven't any savings who want to reduce their electricity bills or for councils who want to install solar for their social housing tenants.

2) It is now extremely likely that only householders with large roofs situated in the sunniest areas in the UK can make a justifiable financial case for installing solar panels and even then they have to be rich enough to be able to ignore the loss of interest on the capital invested.

3) The amount of green 'tax' loaded onto everyone's electricity bills (poor and rich alike) is not going to change as there was always a finite subsidy available for the FIT scheme. It will just mean that this limit will be reached later rather than sooner.

So in summary, the cut in the feed in tariff will have not have the desired effect in stopping the redistribution of wealth from the poor to the rich, in fact it makes the situation worse.

Time to put your champagne corks back in the bottle.

Ouch, slowing down a gravy train certainly rattles some people's cages doesn't it.

Pity the train wasn't stopped altogether in my view, thus releasing resources to be deployed into efficient generation technologies, not dead loss ones, but I doubt you'll ever see a macro view of things. true, some champagne corks won't be popping anymore, but you'd be better looking to rar company directors for that effect.

If you can't thiunk of a better way of giving £100 to a tiny percentage of poorer people than sticvking £15ks worth of kit on their roof for 25 years then you need more imagination. Of course, giving them a £100 benefit also involves giving others not so poor a £1500 benefit, tax free no less, indexed linked no less. And of the £100 benefit, currently £70 will be loaded onto bills to pay for these and other green subsidies, so a net £30 benefit (but still a net £1500 benefit for rar directors).

The principle of the largesse of 'green' initiative being unaffordable has now been established. I just hope this smidgen of common sense rapidly spreads to every other highly subsidised 'green initiative' (most of which imv are engineering nonsense) and our economy is wrecked no further by them.

The_Green_Hornet

I seemed to have strayed onto a forum where people don't seem to read the original posting before bashing out their pre-determined prejudicial responses.

Please re-read my post again and you will see that the point I am making is that even after the tariff cut the poor will still be subsidising the rich, and I think you actually agree with me . Solar PV will continue but it will be solely for the filthy rich large home-owners who want to display their 'green' credentials for all to see.

BornAtTheRightTime

The_Green_Hornet wrote: »

the point I am making is that even after the tariff cut the poor will still be subsidising the rich, and I think you actually agree with me.

I think many on here would agree with this statement to some extent (although I'd certainly argue that it's the majority including the poor, subsidising a reasonably well-off minority with suitable housing).

The_Green_Hornet wrote: »

Solar PV will continue but it will be solely for the filthy rich large home-owners who want to display their 'green' credentials for all to see

There are many reasons for installing solar PV; not everyone doing it is (1) filthy rich and (2) purposely displaying their 'green' credentials for all to see in some bizarre holier-than-thou competition.

The_Green_Hornet wrote: »

I seemed to have strayed onto a forum where people don't seem to read the original posting before bashing out their pre-determined prejudicial responses.

Actually, you've come into a friendly forum and are using highly emotive language ("filthy rich", "plaything for the rich" , "time to put your champagne corks back in the bottles") to make various negative points about solar PV & FITs, and haven't responded at all to the persuasive and well-argued facts and ideas other posters have made. You are the one demonstrating prejudice here.