"Worldwide solar costs have fallen much faster than policy can be changed, to the embarrassment of every government which has tried it. The UK government is only the latest to face slightly self-righteous outrage from parts of the solar industry after panicky and botched attempts to control consumer costs.
The government had accidentally written homeowners and installers a blank cheque for high profits, payable by electricity consumers, and responded by pushing through cuts without due process. The lawsuit brought by installers in response was technically valid, but lacks pragmatism. I suspected at the time that the programme would end altogether, as the UK does not need it to meet its binding EU targets.
Spain, South Korea, the Czech Republic, France, Ontario and even Germany have already staged almost exactly the same story. The Spanish and Czech governments did worse, with changes in tariffs applying to solar projects that had already been built, and almost no on-going solar support after the boom. The newest proposals are probably the best the UK solar industry could hope for: sharp cuts which will squeeze margins and enforce competitive practices, but a much more ambitious long-term plan, for 22 GW by 2020.
I am sceptical that a residential tariff rate of 21p/kWh (25 €cents/kWh) from April, or 13.5p/kWh (16 €cents/kWh) from July, will ‘kill’ the industry. It still compares quite well with the German residential rate of 24 €cents/kWh when some of it can also be used to avoid buying residential electricity (at about 12p).The Germans are expected to keep installing in 2012, even in the north, which is no sunnier than parts of the UK. Module price falls continue to filter slowly through to lower consumer prices, and the solar industry in other countries has usually managed to cut costs in line with tariff reductions and continue growing, albeit at a more sustainable rate. In the long run, an incentive regime which is affordable at large volumes is good news."
Note: Bolded by me
Translation: Don't look a gift horse in the mouth.
But wait a second... what if it's not just any horse, what if it's a Trojan Horse. Let's compare, consider and conclude.
The UK FiT for small systems is 21 p/kWh (25.4 cents/kWh)
The German FiT for small system is 16 p/kWh (19.5 cents/kWh)
FiT rates alone don't tell the story very well. You need to look at the effective FiT rate to get a better feel for what's going on. To help with keeping things distinct I'm going to call the effective FiT rate the Value of Production (VOP). The generalized form of the VOP is:
VOP = FiT x Export Factor + Retail rate x (1 - Export Factor) + Bonuses
Germany has done away with their self-consumption bonus so their Value of Production calculation is simplified to:
VOP = FiT x Export Factor + Retail Rate x (1 - Export Factor)
VOP = 19.5 ct/kWh x .7 + 26 ct/kWh x .3 = 21.45 ct/kWh
In the UK the FiT rules are rather funky. All production qualifies for the FiT whether you consume it on site or ship it off (This situation strongly encourages self-consumption). As an additional bonus, the production that is exported to the grid gets an extra 3 p/kWh. Assuming a 70% export factor the VOP for the UK is:
VOP = FiT + Retail Rate x (1 - Export Factor) + Bonus x Export Factor
VOP = 24.5 ct/kWh + .3 x 16 ct/kWh + 3.63 ct/kWh x .7 = 31.8 ct/kWh (26.3 p/kWh)
Conclusion: The Brits still have generous FiTs. I'd argue that solar advocates shouldn't be complaining about this level of generosity. Keep your head down and shut up. It's going to look rather fishy when installations keep piling up over the coming months despite all the sky is falling claims from some in the industry. Had the industry collectively acquiesced with this last round of cuts they'd have some good faith bargaining currency to use during the next FiT review. Oh well... Maybe next time around the pragmatic voices calling for the greater good will drown out the whiners.
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