Futures Forum: Sunshine revolution: the age of solar power
However, in the UK, things don't look too good:
Solar in the UK
Britain’s boom-and-bust in residential solar power shows how vulnerable the industry can be when it relies on subsidies. In 2010, the UK government introduced “feed-in tariffs” for people who fitted solar panels or other renewable energy systems, offering guaranteed payments from the utilities for power generated, paid for by charges added to all customers’ bills. The rates were attractive, and about half a million homes in the UK now have solar panels.
In August, however, the government said costs were rising too fast and the feed-in tariffs would have to be cut back. It proposed reducing the tariff for home systems, from a typical 12.47 pence per kilowatt hour generated to just 1.63 pence: an 87 per cent cut.
Already at least three UK solar installation companies have gone bankrupt, and jobs have been lost. The industry is urging the government to reconsider the planned cuts before they take effect at the start of next year.
The British climate means it was always going to be a more difficult market for solar power. In parts of the US, Latin America, Africa and Asia, solar is already competitive with fossil fuels, even without subsidies. In northern Europe, that could still be 10 years away.
Sunshine revolution: the age of solar power - FT.com
Since August, considerable doubt has been cast on the system of 'Feed-in-Tariffs':
Feed-in tariff future in doubt as government moves to slash renewable energy incentives - 27 Aug 2015 - News from BusinessGreen
Feed-in Tariff scheme | Energy Saving Trust
Feed-in Tariffs: get money for generating your own electricity - GOV.UK
And in early October the Government announced that it would be carrying out a review of the Feed In Tarriff (FIT) for solar energy projects. There would also be the removal of the FIT for any new wind farm projects:
Decision time for government as solar feed-in tariff consultation closes - 23 Oct 2015 - Analysis from BusinessGreen
And yet the current system seems to be very popular:
Strong public support for renewables as Feed-in Tariff consultation closes - Blue and Green Tomorrow
In late October the Government announced the removal of tax relief for community energy projects. The Enterprise Investment Scheme (EIS), also known as Seed Enterprise Investment Scheme (SEIS), would be stopped from any future community energy schemes from the 30th November 2015.
Government axes tax relief for community energy projects - 29 Oct 2015 - News from BusinessGreen
Treasury remove tax relief for community energy schemes | Regen SW
Last updated: November 11, 2015 11:13 am
One of the last remaining incentives for investors to plough money into renewables has been removed by the Treasury, pulling the rug from under local energy projects that relied on the favourable tax treatment.
The government’s decision last month to exclude solar and wind farms owned by community groups from tax-advantaged schemes has been extended to social investment tax relief (SITR), previously singled out by the chancellor as a vehicle for future investment in the sector.
“It’s a very big shock,” said Peter Capener, co-founder and chair of Bath & West Community Energy, which has raised more than £10m through share offers. “In the grand scheme of things, [the tax relief] doesn’t cost a lot of money and this will upset a large number of communities.”
On Friday, a community group in Sussex cancelled its plans to build a solar farm large enough to power the village of Balcombe, citing the Treasury’s unexpected removal of tax relief for investors.
From November 30, community renewable energy projects will no longer qualify for the enterprise investment scheme (EIS), meaning that new investors will not enjoy the generous tax reliefs that are currently in place.
In the March Budget, community energy generation was explicitly exempted from the wider exclusion of renewable projects from tax reliefs and, the government pledged, “will in future become eligible for the SITR”.
The planned expansion of SITR investment limits — currently set at very low levels — to parity with EIS was expected to galvanise the sector, according to Neil Pearson, a tax consultant who worked with the Treasury on developing the relief that was introduced in 2014. “It would have offered a great opportunity because SITR allows debt investment as well as equity.”
Mr Capener said that without access to tax-advantaged schemes, it will be much more difficult for community renewable projects to raise finance on beneficial terms.
“Without the tax relief that has encouraged people to invest in this, it will limit our plans to move community renewables from a niche investment to the mainstream.”
Mr Capener said that he found the government’s concerns about potential abuse of SITR to be “baffling” because of the restrictions placed on commercial ownership of projects. “We are all left thinking there’s a wider ideological intent to remove all support for renewable energy.”
Jan-Willem Bode, chief executive of Mongoose Energy, which raises finance for community schemes, said that while the government’s change of policy “feels like a kick in the teeth”, it will not stop the development of the sector. “Even without the tax relief, most projects deliver returns of around 7 per cent a year,” he said.
Mongoose, like Bath & West, has pulled forward share offers that target EIS qualification so that investments can be made before the November 30 deadline.
In a further setback for the sector, the expansion of SITR investment limits now looks likely to be delayed until the 2016-17 tax year, having been widely anticipated this year.
Mr Pearson said it had been “put on the back burner” as the government reviewed the rules on EIS and venture capital trusts.
A Treasury spokesman said:
“The government is committed to supporting the investment and innovation needed to achieve a cost-effective transition to a low-carbon economy, but we also want to do this in a way that is fair and provides value for money to hardworking taxpayers.
“We are aware of significantly increased interest in the use of subsidised community energy for low-risk tax planning purposes, which is why we have made changes to these schemes to ensure they remain effective at delivering investment to high-risk businesses that need funding to develop and grow.”
The announcement was made by the Financial Secretary to the Treasury in Parliament during the Report Stage of the Finance Bill who stated regulations would be laid to this effect. The Report stage debate can be found here:
House of Commons Hansard Debates for 26 Oct 2015 (pt 0002) (column 51 and 52)
and the legislation and explanatory notes here:
House of Commons Public Bill Committee Amendments: Finance Bill pages 1-6
Regen SW has asked the Treasury for an explanation and is already in contact with their partners to consider the potential for lobbying.
Lobbying – keep up the pressure | Regen SW
CFR CIC response to treasury on removal of EIS and Sitr relief from communities | Regen SW
Community letter to Chancellor of the Exchequer on EIS | Regen SW
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