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Death of the Solar Salesman

Poor dear Greg Barker MP. As he attempted to answer questions in the House of Commons today on his disastrous decision to cut the solar photovoltaic feed in tariff, his face became progressively redder. His temper clearly became frayed as he got quite cross, and asked female Labour Members of Parliament to calm down, and even asserted that one question from a female opposition MP was “hysterical”, which I think was borderline sexist.

For some reason, nobody asked the Department of Energy and Climate the basic question – why don’t you increase the Feed in Tariff budget, instead of trying to whittle down the pence paid per kilowatt hour produced ? The Feed-in-Tariff scheme is working really well at the moment. It’s preventing the country having to subsidise the construction of several new power stations, and it has been providing, until now that is, new jobs and economic productivity.

I have received a number of e-mails from people highly concerned about the sudden change of the tariff, scheduled for a cut-off date of 12th December 2011, about which the Minister was very firm. I’m only going to include a representative couple here, and I hope others publish more. Greg Barker seems to think that by cutting the feed in tariff, that magically the cost of solar power systems will reduce as he assumes that solar companies are greedy and charging according to the size of the tariff. But as with most industries, the cost of labour is the largest element of any solar power installation and the management of solar power businesses. The net result of chopping the feed in tariff in two so suddenly is simply going to result in redundancies, as will become obvious in the next couple of weeks.

31st October 2011
“A further perspective on FITs”

Dear Friends, Suppliers and (former) Competitors,

I am XXXXXXXXXXXXXXXXXXXX, the Founder and CEO of XXXXXXXXXXXXXXXXXX, a company set up 18 months ago to focus on developing solar projects in the UK. I wanted to share some personal thoughts and my preliminary reflections on the latest government announcement on solar PV. These are my thoughts and do not necessarily reflect the views of XXXXXXXX’s investors.

We have all have gone through our financial models by now and have realised that the proposed cuts and restrictions will probably wipe out the bulk of the UK solar industry by the 12th December. Clearly the Coalition Government has not thought through the full implications of their proposed cuts:

Impact on jobs. There are an estimated 25,000 jobs in the solar PV industry. The proposed cuts make most solar PV in the UK completely uneconomic. As a result, most of those 25,000 jobs will be gone. Most, people in the sector will be told that they will be made redundant this week or next, if they have not already been told. I have already warned all of my employees that they should be preparing for the worst. Impact on government finances. This is one of the more ironic situations. 25,000 extra people could be on the dole next month, resulting in a jump in the amount of money that taxpayers will have to fork out. To keep the maths simple: lets assume £300 per person per month = £7.5 m per month for six months = £45m for unemployment insurance. In the meantime, if you assume that 25,000 all earn £35,000 per year that equates to about £15,000 of NIS and tax revenue to the government: £375 million per year of tax revenue that will now lost. This excludes VAT payments on equipment and corporate tax revenues to the government. This also excludes all multiplier effects of other jobs being created as a result of those people having jobs.

Impact of investor confidence in the UK. One of my investors was a European solar company operating in the Mediterranean area. One of their reasons for investing in XXXXXXXXXXXX was that they felt that the UK was a safe country to invest in. A place where you could have confidence in the government’s pronouncements, unlike Spain and Italy, where they had seen issues. The latest Coalition Government proposal changes all of the rules and not just the goalposts, but the actual location of the lines and the pitch itself. Investors take country risk seriously when looking at a place to invest. High risk countries require higher IRRs than low risk countries to offset that risk. The UK has now become a high risk country for renewables, which will make the deployment of renewables here more expensive than previously. Impact of technology investment. If you are an investor looking at new renewable technologies one of the primary questions is “what is your route to market?” If you are a solar PV technology company, the UK has suddenly become a far less appealing place to be located. Once your technology is ready, what assurance do you have that the rules will remain in place when you are ready to deploy. You don’t. Impact on balance of trade and national security.

North Sea oil and gas is in decline. We are importing increasing amounts from abroad, frequently from countries that are hostile to the UK and its values. This is bad for our balance of trade. It is bad for national security. The wars that we have waged in Iran, Afghanistan and Libya would not have been fought had we not needed those energy supplies from abroad. It is reasonable to say that the entire cost of those wars, in lives and treasure, would not have been spent had we not been reliant on foreign oil and gas. Hundreds of billions of pounds wasted, that had they been invested in solar, wind, wave and biomass energy in the UK would have been able to provide the entire UK with indigenous, safe, clean energy for decades to come.

Impact on entrepreneurs. Being an entrepreneur is hard. It is hard on your family. It is stressful and it is risky. Many of you on this email list are entrepreneurs, like me. We thrive on new challenges and are creative when backed into a corner. But we are not cats. We do not have nine lives. Your wallets and families can only manage a few hits before there comes a point at which they cry out “Enough is enough! Go get a real job!” And just like that, the businesses and thousands of jobs that could have been created by those entrepreneurs don’t happen.

Impact on their re election prospects. Need I say more? MPs are a renewable resource too.

So how do we bring the Coalition Government to its senses? They claim that this is a “consultation document” but that seems an aspirational statement. They do not appear to be a government wants to listen. They are frightened that a change will be seen as a U-Turn. Frightened that that would make them look foolish.

It should not. If they genuinely listen and see the devastating impact of their proposal they should pull back. We should applaud them for that. We need to be loud and visible and support all of the grass roots campaigns that have been kicked off over the past 48 hours. Sign the petitions, join the marches.

With enough noise and frantic waving even the deaf and blind may hear and see us, those who are drowning.

Good luck to you all.

Re: Solar PV FIT review
Fri, 28 Oct 2011 14:40:17 +0100

I am at the UK solar power event – perhaps now the last hurrah for an industry currently employing 30,000 people in the UK. The view is that the government no longer wants a pv industry having been captured by big energy. So 50% cuts to all fits from Dec 8th. No time to plan, no time to construct projects already ordered, no time even to make planned redundancies.

Many people walking around here seeing all their lifetime personal investments going up in smoke. Instead of paying for renewable energy the country will now be paying a much higher level of unemployment benefits.

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