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Business electricity: solar subsidies to be slashed

Energy secretary Amber Rudd is set to cut solar power subsidies again. With renewable energy increasingly important in the UK, how will this affect businesses?

Despite the UK’s temperate climate, solar power has rapidly become popular. Government figures from 2014 show almost 650,000 solar installations generating a potential over 5,000MW installed (although the totals will have since increased). The UK installed more solar panels than any other European country last year.

Much of this is due to Government subsidies: initial payments of 43p per kWh – around nine times the wholesale rate – encouraging both small and large scale investments.

While this funding initially made sense due to the expense of solar panels, these costs fell as manufacturing became more sophisticated (much coming from China), making take-up greater than expected.

An era of austerity saw greater attention paid to renewables spending, especially given a lack of proper energy storage. The Government has cut subsidies by more than 70% and the UK Department for Energy and Climate Change (DECC) continues its attempts to cut spending, especially after it was revealed in July to be facing a £1.5 billion overspend by 2020/21.

From solar panels to business gas

The new Tory Government has prioritised gas and warned that renewable energy – singling out wind turbines – will no longer see the same level of support. Rudd, who recently pushed forward with new licences for shale gas ‘fracking’ explorations, has now talked of putting the brakes on the development of UK solar energy.

According to the Sunday Times, the feed-in tariff (FiT) for solar electricity, which is the main source of remuneration, could be cut by as much as 50%. This in addition to the proposed closing of the Renewables Obligation (RO) scheme for new solar projects from April 2016. A consultation on the FiT is expected to present its results in early September.

A coalition of 100 organisations recently wrote to Prime Minister David Cameron calling on him to support small-scale renewables. The signatories expressed surprise and concern at “a succession of recent announcements – from sudden changes to the renewable energy market, to scrapping the Zero Carbon Homes initiative and the absence of energy efficiency schemes – which undermine Britain’s position in the run-up to the climate talks in Paris.”

Business electric rates

Renewable energy has made up an increasing amount of electricity for business. The subsidies have often made for an attractive combination of environmental responsibility and cheap electricity for business.

The planned change in rules could see growth in solar energy begin to give way to gas generation. Yet, in the short term, business electricity suppliers could be looking to secure customers for their solar generated power. UK small to medium sized businesses could actually be in a stronger position, at least in the short term.

To get an idea of what deals – including renewables-based business electricity tariffs – are on offer, we can offer a comprehensive comparison and switch in just 20 minutes. Just fill in our simple form (also at the top right of this page) or give us a call on 0330 0100 251 now.

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