Solar panel cuts will cost coucils 'hundreds of millions' and condemn families to fuel poverty

10 November 2011

Councils will have to pull the plug on thousands of solar panel installations and face being left hundreds of millions of pounds out of pocket because of rushed Government cuts, local authority leaders have warned.

On the day that the last of the big six energy suppliers hikes up energy bills, local authorities have warned that an earlier than expected 50% cut to the rate of Feed-in Tariffs could condemn vulnerable families to fuel poverty.

Many councils have been working flat out to get solar panels installed before the end of the financial year to take advantage of Feed-in Tariff subsidies.

But under plans announced by the Department for Energy and Climate Change, councils will now have only six weeks to get the panels up and running and signed off by Ofgem. Those who fail to meet the deadline would have the subsidy they receive over the next 25 years halved. Subsidies for social housing would be cut by 60 per cent.

The Local Government Association has written to Energy Secretary Chris Huhne to urge him to delay the proposed cut until the end of the financial year. This would giving councils a realistic amount of time to get in place solar panel installations which have been commissioned on the promise of the current incentives.

Several schemes in progress which could have provided thousands of fuel poor families with free electricity during daylight hours have been stopped immediately, because councils can no longer afford them.

The cost incurred to local authorities across the country as a result of Government cutting incentives early could run into hundreds of millions of pounds.

Cllr David Parsons, Chairman of the LGA Environment Board, said:

“It's absolutely imperative that we make sure our residents' energy bills are safeguarded from runaway schemes which do not provide value for money, but what is happening here is that local councils, and local people, are paying the price for this Government department's mistakes.

“Councils have been spearheading the roll out of solar panels for residents because many families on lower incomes couldn't afford to do it themselves. Councils weren't making a profit out of this, but were doing it to help the environment and help local people make a difference and bring down their electricity bills.

“Rushing through these cuts before the consultation has even finished is going to leave local authorities stuck between a rock and a hard place. Solar panel schemes that were commissioned based on the promise of the previous rate of subsidy will be jeopardised with many councils unable to afford to meet the shortfall.

“To expect councils and the solar industry to deliver projects and have them registered by Ofgem within six weeks is unrealistic and unacceptable. As a result many projects will now be stopped immediately. The costs incurred to councils as a result of this could run into hundreds of millions of pounds.

“Local authorities now face the difficult task of telling hard-up tenants that they will no longer be able to deliver on the promise of reducing their energy bills.

“This is going to have a terrible impact on families who could have benefitted from cheaper energy. It could also lead to the loss of thousands of jobs as energy firms find contracts falling by the wayside.”

The LGA, which speaks on behalf of more than 350 councils in England and Wales is asking Government to save renewable energy schemes from collapse. It is calling on Government to:

· Extend the deadline for solar panel schemes to qualify for the existing rate of subsidy from 12 December to then end of the financial year.

· Protect schemes beneficial to the community from cuts to the subsidy.

· Ensure that social housing landlords are not penalised by an additional reduction in tariff for owners of multiple schemes.

· Siphon off a small percentage of the profits made by energy companies to provide more money for community solar panel schemes.

Under plans announced by the Department for Energy and Climate Change, the new lower rate of subsidy will come into effect for any schemes installed after December 12 – before the consultation on cutting the subsidy has even finished.

Those installed before the deadline will have their rate of subsidy protected for the next 25 years

Where solar panel installations are currently under construction, councils may be forced to pay inflated prices to hurry along their installation to ensure they can be registered before the deadline. Local authorities are also concerned that Ofgem may struggle to process the deluge of applications rushed in to meet the early deadline.

Case studies:

· A £5 million scheme in Reading to install solar panels on schools, council and community buildings was set to have been completed by April 2012. Reading Borough Council now says that bringing the deadline forward will make it unviable.

· As a result of the early cut-off, plans to install at least 1,000 solar panels on council homes in Leeds have now been put on hold. Leeds City Council estimated the panels would have saved tenants about £120 per year.

· Waltham Forest Council has put on hold plans to install solar panels on 1,090 homes in the area.

· Torbay Council was set to install solar panels on 45 public buildings including schools and council offices next year, but has now put the plans on hold.

· Cambridge City Council was set to install solar panels on council offices, swimming pools and sheltered housing in a scheme that would have generated revenue to protect jobs and further increase energy efficiency on council homes. These are now unlikely to go ahead because it would no longer be financially viable once the subsidy is cut.

· Wrexham County Borough Council recently started work on a scheme to install 3,000 solar panels on council housing, which it had aimed to have completed by the end of March next year. The council has warned that the early cut in subsidy threatens to derail it.

Notes:

1 The current rate of subsidy for solar panels schemes up to 4kw in size is 43.3p/kWh. Under cuts being proposed by the Department for Energy and Climate Change this would fall to 21p/kWh for any schemes with an eligibility date after December 12 2011. http://www.decc.gov.uk/en/content/cms/news/pn11_091/pn11_091.aspx

2 The last energy price hike comes into effect today (10th November) - when EDF Energy increases its prices by 15.4% for gas and 4.5% for electricity

3 Under the Feed-in Tariffs scheme more than 100,000 solar panels have been installed across the country. A record 16,000 were put up in September, according to DECC figures.

4 According to figures from councils, installing solar panels on social housing would shave about £120 per year off the average electricity bill.

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