Thursday, 17 November 2011

Government’s Feed-in Tariff cut was a masterpiece of miscommunication

I’ve had a series of very interesting conversations with parties involved at various points in the supply chain for solar PV products over the last few days. Invariably, there is bemusement at the Government’s ham-fisted changes to the Feed-in tariff. As I said to one contact, “You know something has been b#&*%ed up when it creates an alliance between the CBI, the Local Government Association and Friends of the Earth.”

However, it is the manner of the communication and timing which has left me truly dumbfounded. The decision to announce a 50 per cent cut in the tariff, but delay implementation for over a month has created chaos in the marketplace.

It is the equivalent of the Chancellor of the Exchequer announcing that he intends to double cigarette duty in his April Budget but delaying actually starting until May. I think we all know what would happen. There would be a gigantic surge of fag buying with a stockpiling of Benson & Hedges on an unprecedented scale! Of course, that boom would lead to an inevitable bust as soon as the change came in.

Much the same is now happening in the solar PV market. Much better in my view would have been a solution which has been rumoured in another sector, namely a fuel price stabiliser, whereby consumers would be cushioned from the impact of fuel price rises by a corresponding reduction in fuel duty.

It is easy to see how this sort of solution could have been implemented in the solar PV market. Unit cost of solar PV has been falling sharply of late. A stabiliser system would have reduced the Feed-in tariff in line with any reduction in the unit cost of equipment, thereby ensuring that nobody was making a killing, but at the same time not collapsing the entire market.

Instead, the heating industry runs itself into the ground trying to satisfy short-term demand, all the time knowing that the market is going to go into free fall on December 12th.



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