Households will earn less revenue for power generation than they were promised under the scheme
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Alex Marsh is a Money writer covering net zero. He was previously a reporter for Newsquest’s local newspapers in London. He can be reached at alex.marsh@telegraph.co.uk or @alexjmarsh1
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Alex Marsh is a Money writer covering net zero. He was previously a reporter for Newsquest’s local newspapers in London. He can be reached at alex.marsh@telegraph.co.uk or @alexjmarsh1
Ed Miliband has rowed back on a Labour green energy scheme after the Government admitted that it had overcompensated solar panel owners.
The Net Zero ministry confirmed on Wednesday that it would change the payments that people who installed solar panels under the Feed-in-Tariffs (FIT) scheme between 2010 and 2019 would receive.
A New Labour-era policy, the scheme’s financial benefits were championed by Mr Miliband, the Energy Secretary, who held the same position under Gordon Brown.
The scheme guaranteed households payments for producing electricity from solar power for between 10 and 25 years uprated by inflation every year, regardless of whether the energy was exported to the grid.
However, the Government has now said that it believes this inflation link has “overcompensated generators and increased the policy costs of the scheme over time”, provoking anger from solar panel owners who have claimed it is “morally wrong” to change how much they earn.
Under the changes to the scheme, from April payments will no longer be uprated by the retail prices index (RPI) measure of inflation, but instead by the consumer prices index (CPI). This means people with solar panels installed under the scheme will see their revenue fall 6.6pc by 2036 compared to if no changes had been made.
This has angered some recipients who invested at the behest of Mr Miliband when the scheme was first rolled out.
In total, 870,000 generators are supported with FIT payments, most of which are installed on homes. The scheme was closed to new members in 2019, but some people who have already signed up are due to receive payments until 2043.
These rising costs – which are paid through a levy on energy bills – have been criticised for adding around £20 to an average dual fuel household electricity bill. The total annual cost of the scheme is currently £1.9bn.
Last year, Conservative MP Nick Timothy described FIT as a “zombie renewables subsidy scheme”. He said: “Far from saving money, renewables subsidies have come with significant long-term costs”.
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Since 2010, RPI has generally outpaced CPI. Linking payments to CPI will cut £600m off the total cost of the scheme over the next 10 years, according to government figures. However, this will reduce the average consumer’s annual electricity bill by just £1.
At the time, the Energy Secretary said that the payments would represent a return that was better than any bank could provide.
“The guarantee of getting an income on top of saving on energy bills will be an incentive to householders and communities wanting to make the move to low carbon living,” he added.
The Conservative government argued that the costs of the subsidies needed to be reined in when the scheme was closed to new members in 2019. By that time, starting payments were significantly less generous, at around 4p per kWh.
Nick Skelley installed two 4kW solar arrays under the scheme – one in 2010 and one in 2012.
The 64-year-old, who runs a renewable installation business based near Plymouth, said that the cost of putting in solar panels at the time usually exceeded £20,000.
He said: “It was a significant investment made by those people irrespective of whether it was environmentally friendly. They would be calculating what the returns would have been as opposed to if they put it into stocks and shares. I think morally it’s wrong that they’ve changed it mid-term.”
Mr Skelley admitted that the initial payments under the scheme were “very generous”.
He said: “Ultimately, that’s not Joe Public’s problem. That was government ministers at the time making perhaps not good decisions. I don’t think it’s fair that the people who did invest in it should suffer.”
When he installed his solar panels under the scheme in 2010, the amount he received for generating electricity was 43p per kilowatt-hour (kWh), but it now stands at around 73p. This means he earns upwards of £3,500 a year, which cancels out his annual energy bill.
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Richard Stone, of the Association of Investment Companies, said: “Changing the scheme, against the legitimate expectations of investors won’t help the government achieve its long-term aim to attract private investment to support its policy goals. Going back on its promises increases perceptions of political risk, which in turn will increase the cost of capital. This is counterproductive and consumers will end up paying in the long term.”
The about turn comes just one week after Mr Miliband announced a new £15bn green energy plan, designed in part to encourage the uptake of solar panels.
The Warm Homes Plan included funding for green upgrades for low-income households and low-interest loans for installing solar panels.
A DESNZ spokesman said:“The suggestion we are rowing back is nonsense. Feed‑in‑Tariffs will still rise with inflation each year – just at a fairer rate for households and businesses. This change avoids all consumers overpaying for their electricity, helping keep bills down and bearing down on costs in the energy system.
“We’re delivering the biggest home upgrade plan in British history to support families to install solar panels, cutting bills and tackling fuel poverty.”
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