So last night the government’s decision to cut feed in Tariff’s on December the 12th was ruled unlawful by a high court judge. The judge also said that the government had been “incompetent” in the way it handled the cuts.
The result of this decision has seen many people in the industry celebrating that common sense and justice prevailed. Everyone in the industry agreed the tariff’s need to be cut to ensure longevity of the scheme and stability for years to come. However the timescales provided by the government to cut the tariff’s before it had completed its consultation period was the key issue. It was quite clearly rushed through and didn’t take into full account the impact on the industry, consumers and the cost of energy in the future.
So what happens now?
Despite the fact that the government was not given leave to appeal, they are applying for permission to do just that. This must be done by the 4th January. If it isn’t then the higher rate of 43.3p per kwh will apply until the end of the parliamentary process meaning thousands more homeowners will benefit from better returns probably until April 2012.
This means that many installers who have been working around the clock in the past few weeks will be doing so again in the New Year as another rush to complete numerous projects may ensue.
What is likely to happen in the future?
Whatever happens the tariff’s will need to come down to ensure they can be maintained long term. It is possible that the government will appeal and win, however we believe this is unlikely based on the rulings of the high court judge yesterday. We expect following a proper period of consultation the government will recognise the tariff supports not only a growing industry, but also much tax revenue. It should also recognise that many studies confirm that the main increase in the household energy bills is due to the rising cost of gas and In fact the better than expected uptake of solar PV will in reduce the cost of energy in the future.
So following proper consultation and review we expect that cuts will happen in April and further into the future but should be carried out in a more realistic and manageable way. If the review takes all of these factors into account then it is likely that the cuts will not be so deep and so quick. Whatever happens it is clear that solar PV is going to be here for some time to come and is clearly a very important part of the renewable energy market. Despite the original cuts in December many installers still found orders coming in for the New Year and demand remained above levels seen at the start of 2011 for many that we spoke to.
In the short term the real winners here are likely to be homeowners who have had installations booked in after the 12th December deadline many of which at a greatly reduced price. Not only will they have paid less but they are likely to receive the higher tariff.