Feed-in Tariff subsidy cuts would have “profoundly damaging effect” on microgeneration investment

Dave Sowden, Micropower Council Chief Executive

A coalition of 69 individuals and organisations has sent an open letter to the government warning that any cuts to the Feed-in Tariff (FIT) rates would "shatter" confidence and put future investment "in moral peril".

The open letter to cabinet minister Danny Alexander and Vince Cable has come about following the mounting speculation that the government is considering cutting the Feed-in Tariff subsidies for small-scale renewable electricity generation using technology such as solar panels as part of its Comprehensive Spending Review.

The talk of cuts to the Feed-in Tariff emerged last week when the Department of Energy and Climate Change (DECC) said lower than expected wind speeds and rainfall caused a 12 per cent fall in renewable electricity generation from April to June year-on-year. However, solar PV installations have hit record numbers in the last three consecutive months up to August with September figures due to be released soon by Ofgem.

With nuclear power station output also down, greenhouse gas emissions from each unit of electricity generated would have inevitably risen when the UK has promised to cut pollution with strict emissions targets.

The failure to cut emission figures may lead to a bombardment of criticism for the government's energy policies with some demanding more funding should be pumped into the green industry.

However, talk of the rates paid for the Feed-in Tariff being cut, just six months after the incentive was launched and three years before the first planned review of the tariff levels in 2013, has been rife with the Renewable Heat Incentive (RHI) reportedly facing the axe completely.

The open letter, from small scale companies right the way up to E.ON, states: "Collectively, our organisations have invested substantially in the emerging microgeneration sector in the past two years, and created thousands of new, green jobs. This direct investment and job creation is multiplied many times throughout the supply chain in the SME sector, and has only been possible due to confidence in Government keeping a stable regulatory and policy framework in the energy sector.

"In particular, the "feed-in tariff" that guarantees small scale producers of renewable and low carbon electricity a long term fixed price for their power has given investors the confidence to grow an industry rapidly and in line with the Government's expectations. There has been recent press speculation that the Government may be considering the quite unprecedented step of prematurely cutting the feed-in tariff payments prior to next year's planned review of these tariffs, the outcome of which would be due to take effect in April 2013.

"Such premature adjustments to the tariff would have a profoundly damaging effect on long term investor confidence in the clean tech and renewable energy sectors, and may cause investors to flee altogether, thereby stifling any future investment and seriously jeopardising this country's ability to meet its climate change and renewable energy targets. It would immediately destroy the value of recent investments in any company, technology or initiative built on the back of the feed-in tariff policy, and it would have damaging knock-on consequences for investment appetites against both current and future policies in the climate change/renewable energy sectors, and possibly in many unrelated sectors as well."

Micropower Council Chief Executive, Dave Sowden, who had a part to play in the initiative added: “No right-minded investor will trust any of this Government’s current or future policies if it meddles with feed-in-tariffs prior to the planned review in 2013. Without confident investors, the Government will find it impossible to deliver the country’s CO2 reduction and renewable energy commitments.

“Customers are already responding to this speculation by cancelling orders 'in case the feed-in-tariff gets scrapped’. Thousands of jobs and hundreds of millions of pounds of investment are now hanging by a thread. It is therefore vital that the Government squash this speculation without delay by confirming it will honour the current feed-in-tariffs.”