As British Solar Industry Loses Subsidies, Big U.S. Backer Pulls Back
|
Version 0 of 1. LONDON — For most of this year, SunEdison, an American company, had been pressing ahead as one of the most ambitious players in Britain’s solar energy boomlet. It even went so far as to begin installing rooftop solar panels on British homes at no cost, in return for a share of the savings the homeowners made on their government-subsidized electricity bills. But then came the decision in August by the Conservative government of Prime Minister David Cameron, to the dismay of environmentalists, to cut those subsidies by as much as 87 percent. Part of the rationale was that solar power — now used by about 700,000 British households — had enough momentum on its own. The cuts will not affect solar installations already in place. But new solar-power systems will not be eligible for the subsidies. Perhaps the bigger reason for the policy change was that the solar subsidies, paid for in part by higher rates for conventionally generated electricity, had become politically unpopular among Mr. Cameron’s Conservative backers. The lesson, according to some analysts: Don’t bet your company on a subsidized market. This week, SunEdison, based near St. Louis, said it would soon end the free installation program. And it parted ways with a company, the Mark Group, that it had acquired, only a month before the government announcement, to install the rooftop panels. The Mark Group’s management bought it back, laid off its 939 employees and filed for the British equivalent of bankruptcy. “It is frustrating for everyone that the government has decided to effectively stop support for solar,” said Bill Rumble, the Mark Group’s chief commercial officer. SunEdison’s chief executive, Ahmad Chatila, told investors during a call on Wednesday that the company would “de-emphasize or exit” certain countries including Britain, while focusing on the United States, Latin America, India and China. The company said in statement that “we are extremely disappointed that the draconian policy proposals made by the government” will “essentially eliminate the solar” market in Britain. Whether that bleak prediction bears out, it is too early to say. Nearly three-quarters of a million homes are now powered by solar panels in Britain, compared with nearly zero five years ago. Solar energy still accounts for only about 4 percent of power generation in Britain. But last year, the country led the European Union in new solar installations, despite its reputation for cloud and drizzle. “There has been a huge takeup,” said James Basden, head of utilities at the Oliver Wyman consulting firm in London. There is no doubt that SunEdison’s free installation plan proved popular. Since it began in March, the company said it had found about 1,000 takers. Among them were Julia and Chris Over, a retired couple living in a farm village called Dinedor in western England. Like many Britons, the two were attracted to solar energy as a means of saving money while reducing carbon emissions. But they were wary of the required investment of about 6,000 pounds, or about $9,200. “It was something that was always in the back of my mind, but I wouldn’t have spent the money,” Mr. Over said. Mr. Over said he was happy with the results, estimating that they are saving 20 percent to 25 percent on what had been a £1,500 annual energy bill. The Overs and SunEdison have been sharing payments, called feed-in tariffs, that were introduced in 2010 to encourage the generation of low-carbon electricity on a small scale. Through these tariffs, subsidized by the government, homeowners can be paid around 12 pence per kilowatt-hour for the electricity their systems generate, whether or not it is fed back to the power grid. That can reduce the average household energy bill by as much as £700 a year, according to analyst estimates. Industry experts say there is no doubt that the subsidies, on which the government has been spending about £1.3 billion a year, have helped encourage the solar boomlet. But it is time for the nascent industry to start surviving on its own, in the government’s view. The cuts in solar subsidies, expected to take effect in January, are part of a broad trimming back of renewable-energy programs that began under a new energy and climate change minister, Amber Rudd, after Mr. Cameron’s Conservative Party won a parliamentary majority in May elections. “Any kind of renewable model that relies on subsidies that rely on the whims of politicians is at risk,” says Deepa Venkateswaran, a utility industry analyst at Bernstein Research in London. She faults Britain for abrupt changes in policy, saying that Germany, which has also seen solar power catch on, has made more gradual reductions in government incentives. “Britain has gone from one of the most generous schemes to the other extreme,” she said. But Ms. Rudd, the energy minister, defended the government’s moves last month. “As costs continue to fall,” she said in a statement, “it becomes easier for parts of the renewables industry to survive without subsidies.” SunEdison says that it will continue selling its free-installation plan until the end of the year and it will “continue to look after” existing customers like the Overs, who have signed up for 20 years. And the Overs, even if the feed-in tariffs do eventually evaporate, will still benefit from whatever electricity comes in via the solar panels they did not have to pay for. Mr. Over said that Sun-Edison’s change of tack and the bankruptcy of the Mark Group, which installed his panels, was “a bit worrying,” but that he assumed the company would need to stand by its commitments. In the worst case, he said, “we are only back to square one.” Mr. Basden of the Oliver Wyman consulting firm said any forecasts of gloom for the industry were probably overdone. “I don’t think it’s the end of solar in the U.K. by any means,” he said, arguing that falling costs of solar technology would continue to make it attractive. “Subsidies make an industry fat,” he said. “Removing subsidies is going to mean there is going to have to be a lot more innovation.” |