Thursday, 22 December 2011

UK Solar Tariff mess

As the year winds down (volumes in the markets have dropped right off now to just white noise) there are still the odd tidbits still that make interesting reading.

One is here about the hand-wringing around solar energy tariffs. The Government has made a sensible decision to hugely reduce the subsidy to the industry which is not economic without it, even with massive Chinese dumping of excess solar panels on the markets. Put simply, there is not enough sun in the UK and the installation costs outweigh benefits on balance.

Across Europe, subsidies have been slashed during these touch economic times. Yet Politicians always grapple with the basic fundamental issues. The Committee reviewing this decision agrees the Government is right to reduce the subsidy but then cannot understand that this will lead to job losses and so wants things done more slowly.

Of course, this it the basic point, excess subsidy builds up an industry at huge taxpayer cost. One this is reversed the industry has to shrink to get back the savings for the taxpayer - this means job losses too. After all, the industry only grew through artificial stimulus.

Why is it that politicians can never get these simple points? Not that the BBC help with their over-done headlines as per usual.


alan said...

I get the feeling politicians make policy based on the BBC over-done headlines.

If only Cameron had an ounce of Thatcherism about him. Its like British coal all over again.

The problem is these stupid renewable energy targets.

Why not use Blackpool gas to generate electricity as a stop gap measure. And then put in place a credible long term nuke strategy.

The additional CO2 produced is insignificant in the big picture. We would meet the targets in the long term without bankrupting the country in the process.

The Greens might get in a hissy fit, but why worry? no one voted for them in the first place (or second, third, or forth).

Budgie said...

The renewable energy targets are set by the EU. As usual, to prove our inferiority and to be ingratiating towards foreigners, we Brits have gold plated the EU's instructions.

Jan said...

Don't forget it was the last government which introduced the subsidies. Being Labour they were not known for their financial acumen, just very keen on spending. So it's yet another thing for the Coalition to sort out.

Anonymous said...

CU, I think a lot of this business on politicians not understanding, seems to be a basic lack understanding of economics ie if you do something in one place it has effects somwhere else eg increase Vat and demand goes down. When politicians have been in the HoC for a certain time, they stop living in the real world, a basic lack of joined up thinking, that goes for all parties, some more than others.

Mark Wadsworth said...

As the UK's leading authority on FiT's and the other taxes on or tax-breaks for solar panels, allow me to point out that even with the old higher FiT rates, the 'rental value' of the panels (i.e. capital cost x 5%) was added to the rateable value of business premises for Business Rates purposes, and that the extra Business Rates (approx. 2% per annum of capital cost) more or less wiped out the value of the subsidies.

That's what you call joined up thinking! A sensible system would just have ignored the value of the panels, or indeed any other improvements in assessing Business Rates (i.e. make it more like Land Value Tax) and the markets would have sorted out whether they were economic or not.

Anonymous said...

Have to disagree Mark.

Its plain that a) the subsidies were as daft as the "science" behind global warming i.e. buy at 40p to sell at 10p. b) Barker is not the brightest having like Danny Alexander been in a PR job (for an energy co) c.) this has the look of a botched political decision even if it was the right one.

Dressing it up in leading accountancy speak does not get away from the laws of thermodynamics which is insulate before you generate.

UK building regs and planning laws have more effect than any diktat from the EU

Nick Drew said...

live by the subsidy, die by the subsidy

Anonymous said...

If the BBC were in complete(instead of merely verbal) control of Government policy, they would be subsidising stagecoach factories and re-opening the flint mines.

And the charcoal-burners up in the woods clearly need more public funding. "Their tightly-knit communities ..."

Sebastian Weetabix said...

One of the three Anonymous (Anonymi?) has it 100% right. It isn't so much politicians being ignorant of economics (all classical economists are guilty of that, otherwise we wouldn't be in the shit we're in) as being utterly unknowing regarding physics in general and thermodynamics in particular. You won't find a qualified chartered engineer anywhere who thinks this renewable stuff is worth the bother.

As always... if it's any good, it doesn't need a subsidy. If it isn't, no amount of subsidy will fix it. The rent seeking buggers masquerading as the solar industry should be slung out on their ears.

Anonymous said...

" these touch economic times. "


Sebastian Weetabix: ".. politicans [snip] as being utterly unknowing regarding physics in general and thermodynamics in particular "

And anything else. But yes.


Budgie said...

Anon 4:55: "UK building regs and planning laws have more effect than any diktat from the EU".

Rubbish - until we revoke the ECA, EU laws override purely national non-constitutional UK laws [Laws et al, Metric Martyrs Appeal].

SW: "You won't find a qualified chartered engineer anywhere who thinks this renewable stuff is worth the bother."

Regrettably, if you read the IET house journal you will find that is not the case.

Sebastian Weetabix said...

One can think it nonsense but still accept paid employment in it!

Electro-Kevin said...

Expect more of this sort of thing.

In times of hardship leftism fails.

Correction: Leftism CAUSES hardship. Political Correctness begat the Credit Crunch (Clinton - sub-prime)

Mark Wadsworth said...

Anon 4.55, you can disagree all you like, but the simple fact is that for businesses, the extra tax on solar panels was roughly equal to the FiT subsidy.

Common sense tells us that it would have been simpler and better to not have FiT subsidies in the first place but not have a super-tax on them either, then they stand and fall on their own merits.

EK, political correctness did not cause the credit crunch, the house price bubble (which the banks stoked) did. From where I'm standing, this whole mania that land rents should not only be collected privately but be subsidised by the taxpayer generally is the most heinous political correctness.

It's just a Daily Mail kind of political correctness which is just as much a load of self defeating crap (there's only so much land, and if we all compete to own as much as possible it is a negative sum game) as main stream political correctness.

Anonymous said...


Do you happen to know if the business rates thing applies to subsidy farmers ? Only there's a few out here in the countryside that have planted fields of these damn subsidy collectors...

Anonymous said...

Talking of subsidies what about the huge subsidies that the railway companies get, the cst of rail travel has gone through the roof and so has bus travel, we do not really seem to have moved on all in all.