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THE REVIEW
The FITs Scheme has to live within the budget, so while I welcome the fantastic success of the scheme, with over 100,000 installations representing more than 305 MW of installed capacity you don’t have to be a Nobel prize winning economist to realise that solar is burning through the budget at an unsustainable rate.
So we will be launching a consultation very shortly that focuses on addressing the budgetary problem. I believe that Solar PV can have a strong and vibrant future in the UK, and making changes are vital if we are to ensure a lasting FITs scheme to support that future. We have inherited a scheme in the UK that wasn’t fit for purpose, so now we must do the same in order to preserve it.
Yes, the decisions we need to take are tough. I know that many of your businesses depend on the FITs levels for your success, at least in the short term. But we cannot escape reality: this is a different world to the one in which FITs were launched. In particular we must provide value for money to bill payers. I cannot preside over a scheme which allows a solar panel installation in some of the least sunny locations in Britain to generate returns of more than 12%.
Being sensible with tariffs means there will be more money to go round, to spread more widely and thus allow more people to benefit. In the long term this should mean more customers for your companies, not fewer. It should also mean more interest in your products and the solutions you provide and that are on show here today and more opportunities for diversification.
The 100,000 FITs installations we have today are only the start.
Lower tariffs would mean uptake with FITs support could continue to grow in a sustainable way, and the microgen sector can be the engine of a green economic recovery. The future of solar PV in the UK needs to be one based not on subsidy but on sound underlying economics.
We also need more transparency. You need to know how much money there is and what has been installed to date. The public needs access to the best information to make informed decisions about all Microgeneration. The scheme needs to be intelligent and responsive to changes without the need for stop start reviews, we owe you that much.
We will look at streamlining the scheme to make sure it works for industry and consumers with the minimum of bureaucracy. We want a system in place to provide the longer term certainty investors are seeking.
And we will make sure that the interests of bill-payers are protected by making sure the scheme is not open to abuse.
I am also keen that we should establish FITs as part of a whole-house approach which prioritises energy efficiency and supports the right low-carbon heat and electricity technologies, so the consultation will look at how we can use the scheme more smartly to drive this holistic approach.
BIG SOLAR
Many thought I should not have reduced the tariffs of large scale PV installations this summer. But politics, particularly in tough economic times, is about clear priorities. I am even clearer now that we did the right thing. As much as 150 MW of large-scale generation was able to install at the old high rates.
Had I not acted when I did, the run on the budget could have been disastrous. There would be even less money for households, schools and communities and instead of amending the tariffs today, I could have been closing the Scheme.
BUSINESS OPPORTUNITIES (GREEN DEAL AND FITS)
I am also clear that there needs to be much greater coherence right across the green agenda. The Green Deal and energy efficiency measures, Feed in Tariffs for Microgeneration and the RHI need to work much more effectively together, and so must the industry.
The wider context is also vital in deciding what we do next with FITs. Fuel bills are only going in one direction. You are all energy users, and I’m sure the recent hikes in bills will affect your family this winter. Our top priority must be to help drive energy savings to help keep bills down. And the new Green Deal will a key part of delivering these savings.
The Green Deal will be the biggest home improvement plan since the second world war, helping to insulate people against rising energy prices and creating homes which are warmer and cheaper to run. We all need to become more efficient, our houses, schools and offices.
To help deliver the most cost-effective building carbon savings, the Green Deal and the Feed in Tariff must be brought together as a coherent package for consumers.
So, I can announce today that we will be bringing forward proposals to ensure that all new domestic PV sites from April 2012 must meet minimum energy efficiency standards.
It cannot be right to encourage consumers to rush to install what are still expensive electricity generating systems in their homes before they have thoroughly explored all of the sensible options for reducing their energy consumption first.
Frankly, such a standard should have been a pre-requisite for accessing the FIT subsidy from day one. And I know many in the industry saw this from the outset. So I will be working closely with you, through the Comprehensive Review, to put this in place.
The consultation will also ask how we might do the same for business premises and non domestic sites in the future.
No more PV subsidy for energy inefficient buildings.
But this is not a brake on your businesses but a new green business opportunity. This will encourage companies like yours to diversify into new sectors and join the transformation of the energy efficiency market with the same gusto as you have microgeneration. We will be consulting on the detail of those standards to make sure we get them absolutely right, because we recognise the need to keep the policy simple, cost effective and deliverable.
I also want to say a few words about solar thermal and the host of exciting heat technologies that will be supported by the world’s first Government programme to support renewable heat: the RHI. The fact is the UK is leading the world in renewable heat, completing the picture.
The domestic pre-cursor to the RHI, the Renewable Heat Premium Payment, was launched this Summer and has already allocated thousands of vouchers to cut the price of a solar thermal system. Following a short delay from Brussels I am pleased to announce that the full RHI is all set to launch next month.
As part of the new effort to drive a whole-house approach, solar thermal will have an important role to play alongside PV and other innovative technologies. I am keen to see a much greater integration of solar thermal and PV offerings in the marketplace – providing consumers with the best advice and the right technologies for their situation.
In addition, following a recent competition for social landlords, I will shortly be announcing support for 34 renewable heat projects from social housing providers, to the tune of more than £4m – an increase of 33% on the original budget set aside for this competition.
However, unlike FITs the take up under the RHPP is marginally slower than expected, particularly for solar thermal, and I would urge you all to embrace this scheme which is due to finish at the end of March next year.
There are opportunities for smart, agile companies to take advantage of a brand new market, creating green jobs and helping to drive forward the growth this country needs.
SUM UP
So in conclusion, this conference, the biggest PV event in the country, is testament to the entrepreneurship that this industry has shown, I am determined that together we will forge a sustainable future for Solar PV in the UK.
To do that we have to navigate our way through a challenging time for the industry, staying within budget and showing the critics and sceptics that solar can deliver good value for money.
Let me be absolutely clear, I haven’t come here to kill the tariff scheme, I want to fix it, enhance it and put the whole industry on a sustainable, credible economic path to a bright and exciting future.