DECC’s Comprehensive Review of Feed-in Tariffs - A statement by Sharp Solar

Sharp has invested £26 million in its UK factory in Wrexham which, in 2005, became our EU manufacturing base. 

PV’s potential to increase the UK’s security of energy supply, meet renewable targets, bring more competition to the electricity market and to help businesses and communities to manage rising electricity prices has been over-looked by Government. In the UK, the aspiration is for PV to provide only 2% of renewable electricity by 2050, yet in Germany PV has already supplied 3.5% of their entire electricity consumption in the first half of 2011 alone. 

Earlier this year the Government’s Renewables Road Map omitted PV. This was followed in October by a Comprehensive Feed-in Tariff (FIT) review that went so far to meet the restrictions of a ‘virtual’ budget framework,  that it threatens to wipe out a thriving industry that already employs over 25,000 people and, more importantly, has the potential to employ thousands more in the UK. This is despite the relatively low cost of the FIT to consumers of between £2 and £3 a year – in contrast to the inaccurate speculation that consumers will pay £26 a year by 2020.

Solar PV is a deliverable, viable renewable technology because:

• Net support for creating competitive PV markets is only necessary for a short period
• PV has high cost reduction potential. Since 2006 there has been a 56% reduction in system price and providing an industry remains in place, grid parity could be achieved by 2016.
• PV is a complete package technology because it has no moving parts and requires no maintenance or fuel to operator
• Volumes can be deployed rapidly and very quickly cost reductions occur - doubling volume leads to a 22% cost reduction (compare this with large scale energy and central power plants)
• PV solar power brings millions of small investors into the market and, unlike other renewable technologies, is popular amongst local communities
• PV solar creates high local value - local jobs, investment and generation.  Even if modules are imported (although Sharp’s modules are produced in the UK); financing, traders, system integrators, EPC contractors and construction workers would be part of a domestic PV economy. In Germany the PV industry employs 130,000 people and it is estimated that Government investment in the PV industry will have created a net positive benefit (through taxation and job creation) by 2012 (AT Kearney 2010)
• PV has guaranteed supply and proven performance in the UK and in Germany where the climate is broadly the same

The unpredicted, phenomenal response to the FIT in the UK has illustrated just how viable PV is as a future UK renewable energy source.  For Sharp Europe, the UK was the 3rd biggest market for PV last year.  

The FIT needs to be more flexible and intelligent to respond to the PV price reductions.  These price reductions have been driven by global trends in module prices (creating challenging market conditions for Sharp Solar).  It is absolutely right that the FIT needs to be reviewed.

In the run up to its publication, Sharp made constructive representations to DECC calling for a 30% cut in tariff rates and more sustained market growth of around 20% pa.  This more measured approach would increase the costs to consumers to between £2.60 and £3.60 a year – a fraction compared to increases in rates of traditional energy costs. Crucially, it would set the industry on a path to grid parity by 2016-20. Germany predicts it will reach grid parity by 2014-15. 

The proposals in the Comprehensive FIT review will destroy the UK’s PV market because:

• Imposing 50% cuts in tariff rates will take investor rates of return (IRR) to below 5%. Contrary to recent statements by Greg Barker, IRRs in Germany have stayed at or above 7%.  The IRR will be below the rate of borrowing so, without access to cheap finance, only the asset-rich will be able to install PV panels.  The lower rates for aggregate schemes have already put hundreds of community schemes on hold.
• The requirement for customers to invest in energy efficiency measures to bring their house up to Energy Performance Certificate level C will cost, it is predicted, over £5000 in a vast majority of homes in the UK.  This upfront investment will mean PV will only be available to the few rather than the many. It also creates a hurdle and an uncertainty that will dampen investor confidence.  PV itself has a significant, positive role to play
• Finally, the radical deadline of 12th December to register PV installations to receive the old tariff rates creates immense, unforeseen difficulties for companies who have invested in materials required to complete contracts.  This will undoubtedly put thousands of companies out of business.. 

Based on our analysis of the impact of these proposals on the market it is clear that each of these three issues will lead to huge job losses.  In the current economic climate of rising unemployment, the PV market, along with other low-carbon technologies, is vital to the UK economy.

It is because of the FIT the UK developed a PV market that could deliver and capitalise on global cost reductions. With no PV market in the UK, there will be no further cost reductions that will benefit consumers or society and no industry growth.  The UK cannot simply ‘turn up to the party', it needs to preserve the infrastructure and industry to take price reductions to consumers.

More importantly, what signal does this send for the future?  Without a UK Government commitment to PV industry growth through a cost effective support  mechanism, investors will turn their back on this market to avoid future shocks as great as those outlined in DECC’s proposals in October.

Sharp has invested £26 million in its UK factory which, in 2005, became our EU manufacturing base.  We are disappointed that this inward investment appears to have been overlooked and in light of the Comprehensive FIT proposals we are now in a position of reviewing our presence in the UK.  We have already had to reduce the numbers of employees in our Wrexham factory from over 1000 to 500.

We request that the Government urgently reviews the Levy Control Framework to enable the PV industry to stay on course to reach grid parity in the next few years and to prevent future ‘boom and bust’ situations like this.

For further information please contact:

Andrew Lee, Head of EU Sales, Sharp Solar - Andrew.lee@sharp.eu 

Natasha Thomas, B2L Public Affairs – Natasha.thomas@b2lpublicaffairs.com

**These are personal opinions written in the user’s language of choice and are not necessarily supported by Cynnal Cymru.**