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Don\’t reduce the solar feed in tariff, abolish it

Noble said that a fall in solar costs meant the government could avoid excessively reducing payments large solar schemes by cutting the rate of all solar tariff payments: \”The cost of solar is falling, because solar panels are getting cheaper and the labour costs are coming down as bigger players and more competition enter what was once a cottage industry. We think the feed-in-tariffs [currently 43.3p/kWH for solar photovoltaics] could come down by as much as 30% and still make financial sense for consumers.\”

Feed in tariffs went live one year ago, in April 2010. Here we have one of the scheme\’s supporters saying that costs have come down by 30% in just that one year.

BTW, the vast majority of this is in the cost of the solar cells themselves, not the installation costs. Cells are declining in price by over 20% a year all on their ownsome. And of course that is not driven by the subsidy scheme in the UK: it\’s technological advance. Even if we do want to attribute that to subsidy, it\’s the Chinese, German and Spanish subsidies driving that.

And at those sorts of cost declines we\’ll end up with solar being cost competitive in a very few years. Under 4 in fact if costs decline on a straight line basis. A little longer if they decline by 30% a year (ie, the difference between declining by 30% of 45 p, or by 30% of the remaining balance).

And of course this means that we\’re entirely lunatic to offer people 25 year subsidies to install the current, inefficient, technology when we know that an efficient one is just around the corner. So we should abolish the subsidy right now.

Oh, and if you\’re going to argue that, well, it\’s not actually going to decline in cost to where it does beome efficient, then, well, we don\’t want the subsidy anyway, for it\’s not going to achieve its goal of creating cost effective solar cells, is it?

Either way, abolish the feed in tariffs.

3 thoughts on “Don\’t reduce the solar feed in tariff, abolish it”

  1. I agree entirely. Feed in tariffs are a waste of money. IF the objective is to reduce carbon emissions, best way to achieve it would be a straight carbon tax on emissions.

  2. Indeed.

    But there may be a valuable window of opportunity for us capitalists here – wait for solar panel prices to drop, then sign up to a 25-year subsidy based on the old price.

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