--- Adds detail about government nuclear plans ---
The sun may not set just yet on Britain’s beleaguered solar industry, but government cuts could shrink it, experts said.
Solar power companies were rocked after ministers outlined proposals in July to cut subsidies to the sector.
The Department of Energy & Climate Change wants to rein in what it claimed was an expected overspend on subsidies.
It said the plans would help to prevent higher household bills.
But the proposals have sent shock waves through the industry, sparking fears that funding will be removed before companies can support themselves.
Earlier this month, solar panel installer Mark Group went into administration with the potential loss of more than 900 jobs.
Industry bodies and green campaigners have warned that the changes could put 20,000 jobs at risk.
Industry chiefs told a discussion at the Solar Energy UK conference in Birmingham last week that consolidation was the most likely outcome of the shake-up.
One industry executive said the number of players was likely to drop as smaller or weaker firms go out of business or team up with rivals.
“Whenever an industry goes through what we’re about to go through, you get rationalisation and consolidation,” industry web site Solar Power Portal quoted Lightsource boss Nick Boyle as saying.
Cold turkey
South America and UK-focused solar operator Rame Energy (LON:RAME) has told Proactive Investors that the subsidy review did not mean solar energy would disappear in the UK.
But Rame’s finance chief Kevin McNair urged the government to take a measured approach to any changes to allow the industry to adjust.
“If you want to wean people off subsidies, do that, but don’t make them go cold turkey,” he said.
The government expects the annual bill for green subsidies, funded by bill-payers, to hit £9.1bn by 2021, topping a £7.6bn cap set by the Treasury.
A scheme for large solar farms was closed in April and now ministers want to cut financial support to smaller schemes.
The Renewables Obligation (RO), which supports rooftop and solar farm projects between one megawatt and five megawatts, will be closed from April 1 next year while guarantees of a certain level of subsidy throughout the life of a project will be withdrawn.
They also plan to change feed-in tariffs under which home owners with solar panels get payments for feeding energy back into the grid.
The industry has warned that the government is failing to take account of the relative cheapness of solar power compared to gas or nuclear.
On Tuesday, campaigners and commentators criticised an expected move to give China a 33.5% stake in Hinkley Point C nuclear power station.
They said UK consumers would pay a guaranteed £92.50 per megawatt hour for 35 years to repay the money invested by the Chinese and the project’s lead company EDF.
David Elmes of Warwick Business School said: "That price is double what we pay today and higher than similar contracts for other low carbon energy such as onshore wind.
"The new Government’s argument that cutting subsidies for solar and wind today so as “to keep bills as low as possible for hard-working families and businesses” is hard to square up with signing deals that commit those same families and businesses to high prices for decades into the future."
A Greenpeace spokeswoman said the deal would add an estimated £33 a year to the average UK household bill for over three decades.
"It appears that there is one rule for renewables and one rule for nuclear," she said. "“The government must stop pretending these cuts are necessary to save families money. It’s a political choice, not an economic necessity."
The Solar Trade Association’s head of external affairs, Leonie Greene, said support for solar under the RO costs just £6 a year on each household bill and solar makes up only 6% of the RO budget.
“Solar farms are close to competitiveness with new gas generation and they account for a very small proportion of expenditure on the RO,” Greene said.
“We’re hearing a lot of big figures from government, but they should know it is just a few quid more on energy bills to deliver nothing less than a solar power revolution in the UK. We’re very close, but we’re not there yet.”
Solar company Good Energy (LON:GOOD) claimed that the cost of supporting wind and solar energy last year was less than half that cited by the government to justify its cuts.
The company has just produced a report showing that wind and solar brought down the wholesale cost of electricity by £1.55bn in 2014.
That meant an overall net cost for supporting the two renewable sources last year was £1.1bn, 58% less than the cost reflected in the capped budget set for green subsidies, known as the Levy Control Framework.
Good Energy chief executive Juliet Davenport said: "This analysis puts the bill-payer at the centre of the debate around renewable energy subsidies. Let's give them the full picture and not just half of it.
“What is not taken into account is the fact that renewable energy, such as wind and solar, has actually been bringing the cost of energy down for consumers.”