The United Kingdom is conducting the energy strategy, which aims to involve renewable energy sources into its power generation. Solar, wind and biomass sources are to replace fossil fuels in terms of industry sustainable development and costs reduction. However, recent policy of the government contradicts with this goal.
In late August, the Government of the United Kingdom took a decision to cut feed-in tariffs by 87 per cent. What is more, approximately 30 per cent of available tax relief schemes are to be removed.
Feed-in tariff aims to increase the use of solar panels. This is about households; however, this tariff has been widely used to subsidize commercial rooftop projects and small solar farms.
An average price for solar system is approximately £6,250. In this case, feed-in tariff gives an opportunity for homeowners to save up to £673 annually. It means, that the solar system installed is to be recouped in 10 years or even earlier. As a result, the solar panel will become profitable in 20 years, while supposed profit is estimated at more than £7000.
Since the cut of tax relief is announced, the surge of solar panels installations is expected. The householders are considered to use this tariff benefit, while it is still available.
The same problem appeared in 2011-2012. In some cases, householders paid for the installation, but did not get it, as the supplier companies were overloaded and had no enough time and equipment to complete all the orders. Consequently, it is not excluded, that supplier companies are to face the same challenge in December.
The scheme, which is to be cut in 2016, is of great importance for the national economy. Renewable energy sector requires significant capital injections to be effectively launched and become profitable. That is why this sector should be subsidized by the government in order to attract investors.
What is more, the growth of alternative energy industry allows creating a number of new jobs. Since the tax relief for renewables was launched in 2010, it has contributed to creation of 27,000 jobs.
Nevertheless, significant job losses are expected on condition that energy subsidies are cut. What is more, there is the first victim of this governmental decision. This is about the UK company Mark Group Ltd.
This company has received investments from its partner, the U.S company SunEdison Inc, in order to provide customers with free solar panels installation. The main condition of this contract was that the American company would receive a share in the customers’ savings from government-subsidized energy bills.
As the government of the UK has decided to cut energy subsidies, the Mark Group Ltd was not able to fulfill this condition of the contract executed and was thrown into bankruptcy. As a result, almost 1000 employees lost their jobs. In these circumstances, it is obvious that this situation is to worsen in the nearest future.
Energy minister Andrea Leadsom has explained this contradictory decision of the UK government. She states that tax relief makes a great pressure on the state budget. Leadsom also assures that such measures are of temporary nature. It means that energy subsidies are to be resumed as soon as the government copes with the current overspent.
The energy minister also underlines that the United Kingdom will by no means abandon its strategy of renewables sector growth. The UK has already invested £42 billion in this sector since 2010, so all the efforts should not have been made in vain.
However, Leadsom is facing criticism. The UK solar companies consider, that the decision to cut tax relief was taken for political reasons, while economic efficiency was not taken into account.
In summary, the government of the United Kingdom has announced to cut renewable energy subsidies in 2016. This decision is claimed to be temporary in terms of economic efficiency. However, a wide range of energy companies assures that such measures are to destroy the national sector of renewable energy.
