Just posted this Guardian story on the review of solar feed-in tariffs, for which I did a fairly extensive interview with energy minister Greg Barker.
Space was short for the Guardian story, so in case anyone is interested here are a few more quotes from Barker that I didn’t have space to include.
On the STA solar report and the FITs cuts:
There’s a lot of very good analysis in the report, pointing to the long-term potential of solar in the UK. It’s really important that the industry doesn’t confuse the fact that the coalition had to take action on the FITS, which was being swamped by demand, and which would have spent the allocated £860m from the Spending Review very quickly … with a long-term commitment to solar and decentralised energy.
While I wouldn’t necessarily concur with all the specific recommendations of the report, there is one clear message that I do agree with: that solar has far more potential than has previously thought to be the case. We need to be creative in finding other ways, apart from the FITs, to encourage the development of this technology, which is going through a period in terms of cost competitiveness.
On DECC and solar:
Historically, DECC has underestimated the contribution that solar can make. Solar is now going through an extraordinary stage of development. Policymakers need to keep up-to-date with the rapid rate of technological development and price fall. I’m determined that we as a department will do that.
On what he’s going to do about DECC’s attitude to solar:
Basically I’m bringing together a range of my officials – whether that’s from the FITS team, the ROCS review, economists, electricity market reform, and so on –and make sure we’re all looking at solar together in the most up to date way, and challengeing some of these out of date assumptions. The reason we’ve had the FITs problem is that we’ve had a price crash, and we need to see that not as a problem but as an opportuity.
On Labour’s models for the FITs:
There was a model that assumed a certain level of cost; we basically were able to take that model and fund it in its entirity in the Spending Review, with the exception that we said we want to reduce the costs in the model by 10% in the final year, which was 2014. Unfortunately, the model [from the previous government] was absolutely flawed … it assumed zero large-scale schemes until 2013. In actual fact the industry has taken off like a rocket, and the growth in large-scale schemes coming was massive … skewing the budget. The tariff review is about ensuring that the spending is within the budget.
(Labour’s models for the FITs were indeed a bit of a mess, I’ve heard from a few sources, but it’s not really fair of Baker to blame them for the cuts, which were caused not by the dodgy models but by the Tories’ imposition of a spending cap based on those models. When I checked with Labour shadow energy minister he confirmed the amount in their models was never intended to be a cap: “No cap existed before … it was an indicative amount, subject to review across Whitehall depending on take-up.”)
On future FITs rates for smaller systems:
Yes, rates will come down as part of the comprehensive review … The key thing is not how much you’re paying. The end game is how many new installations you’re able to roll out. By spending less on individual installations, I’m confident we’ll end up with more solar installed than Labour’s model suggests, as costs have come down so much … [There’s a threshold under which that no longer works, but] there’s a sweet-spot where you’re using only as much subsidy as you need.
We’re clearly focusing on the domestic and community scale project. I’d like to be able to be more generous with the large scale projects, but I’ve got this £860m from the spending review … so the focus on the current scheme needs to be small scale, to get the maximum number installed.
On “additional pathways” for larger solar systems:
We now need to think more creatively about how we can engage larger-scale commercial scale solar as a more important part of the energy mix … What’s happened is that the industry has this huge potential that they’ve been trying to squeeze into the £860m [FITs budget], which is not commersurate with that potential. What we’ve got to do is to find additional pathways – and that means changing the way solar is perceived in the department. It’s always been seen as a small-scale source of energy, not a large-scale, muscular, robust source. We’re at a tipping point now. The industry needs to realise that. The department needs to realise that. Ministers need to realise that. Solar is fast approaching the point that it’s competitive. We’re at a tipping point and I’m determined that we take solar seriously from now on.
On whether solar is more meaningfully compared with wholesale rather than retail prices:
There is clearly a point in what [the STA] say. Solar is different from other technologies and that needs to be recognised. We need a more soiphiscated level of analysis to recognise that. But even if you install a huge amount of solar, you’re still going to want access to the grid.
(In other words, what he’s saying is that in his view the STA are kind of right to say that, because solar provides electricity directly to buildings, the relevant cost comparator is the retail electricity price; and yet he doesn’t think that quite stands up because solar infrastructure still makes use of the grid when all the power isn’t being used locally, and therefore it’s not fair to assign all the costs of running the grid to non-solar energy.)
On whether solar also reduces energy consumption:
I’ve seen anecdotal evidence that solar offers energy efficiency improvments. Which is why we want to offer this as part of the Green Deal … We’ll be looking at how we tie-in renewables and efficient buildings.
On whether the CCC is wrong to say that the UK should not focus on solar for now, and wait for the price to come down overseas:
There is a strong logic in what the CCC says: that it’s a fast moving situation and the price is coming down, so why leap in now if it’s going to be cheaper next year? But there’s been a lack of real, robust analysis about prices, so before we reach any absolute conclusions we need better real-time information about where we. The info I’m seeing suggests that we may be further down the curve [of solar prices] than the CCC and others realise.
On when grid parity will come:
I don’t know. Some are saying 2014, some 2016, some 2020 … But we’re going to try and bottom this out.