Feed-in flip-flop: UK renewable energy policy goes schizophrenic

He subsidizes me. He subsidizes me not. High Court prevents latest government shift in program that pays people to generate electricity. Wake up and go to sleep! A cautionary feed-in tariff tale.
Written by Mark Halper, Contributor
Moe! Larry! The feed-in tariff!

To understand what's happening with Britain's controversial and ever-changing feed-in tariff scheme, just recite the old Three Stooges line: "Wake up and go to sleep." The vicissitudes kept people guessing again yesterday, as Britain's High Court blocked the latest change to wishy-washy government policy.

The well-intended FiT program started in April, 2010 as a way to encourage renewable energy, paying people handsomely to generate their own electricity using solar panels and wind turbines.

A solar rush ensued, as homeowners mounted solar panels that would net them 43 pence (68 cents) per kilowatt hour they generate - an astounding 4 times the amount that the average utility customer pays to buy electricity. As a cherry on top, the FiT cake also included a 3.1 pence (4.7 cents) per kwH payment for electricity they feed into the public grid.

Then, Change Number One. In August of this year, the UK government slashed FiTs by between 42 percent and 72 percent on any installation over 50 kilowatts in capacity, choking funding for small-scale solar farms.

With the public still enjoying too much of a good thing, the government in October announced Change Number Two: It would cut the the FiT in half for anyone joining the scheme starting Dec. 12, from 43 pence to 21 pence (33 cents). This paring had been originally scheduled to take effect in April, 2012. (The 3.1 pence cherry would remain in place).

Woosh went the rug from under the feet of the British solar industry, which was already in an uproar and reeling over the earlier change. Solar companies were going out of business. This time the industry went to court to prevent the zaniness, arguing that the changes were unlawful and had led to the scrapping of unfinished and planned projects.

Yesterday, the High Court agreed, ruling the latest change "legally flawed."

Stay tuned: The ruling is a sort of temporary stay, and the government will appeal. It argues that the FiTs had created an unsustainable bubble and that the prices of solar panels have plunged, making a 43 pence rate unnecessary. Indeed, as SmartPlanet has noted, solar panel prices are in free fall, driven in some measure by FiTs that stimulate economies of scale, and also by low-price Chinese products that are forcing western solar companies out of business. Yesterday, Germany's Solar Millennium became the latest victim, as it filed for insolvency.

But the government started this whole FiT business in the first place. Two parliamentary committees are saying that the government is right to make changes, but that it has gone about things "clumsily", the BBC reports.

On top of the flip-flopping, FiTs are hammering rate payers who can't afford the capital outlay to put panels on their roof. In Britain, the money doesn't come from the government. Rather, have-not utility customers effectively pay the tariffs of those who have the dosh to equip their rooftops with polysilicon. The funding vehicle? Rising utility bills.

This is a cautionary tale for any country that would have a feed-in tariff (are you listening, America?). Advice: Do it, but do it right. Otherwise, you might find yourself screaming, "Moe, Larry, the feed-in tariff!"

Image: Wikimedia

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