This week, with almost no comment in the British press, an industry was killed off. This wasn’t just any industry, but one that has recently created 17,000 jobs, and is tipped to be one of the world’s fastest-growing: Solar Photovoltaic (PV) power generation.
In April 2010, the UK belatedly adopted the idea of FITs (Feed-In Tariffs), a form of subsidy that was already widespread in Germany and other countries. FITs are a cost-effective subsidy that guarantee a fixed amount for energy generated from renewable sources. The introduction of FITs allowed entrepreneurs to create business plans for the creation of Solar PV businesses; they then approached green energy investors to raise the capital required to build solar farms (typically in Cornwall and elsewhere in South-West England). Initial investments were injected by angel investors – typically individuals investing relatively small amounts of their own cash.
Yet suddenly, the UK Government has announced a review of FITs for Solar PV. The effect on the industry has been instant; investment in Solar PV has been frozen, companies have laid off staff, and investments made to date are rendered potentially worthless. Land already allocated for solar farms now sits idle. Not only solar is affected: the result of the announcement is to create uncertainty for all green energy investment: why take the risk of following the Solar industry into the same hole?
The action is moronic at many levels:
- There is no risk for government in FITs – all risk is taken by private entrepreneurs and investors.
- Germany and China have already stolen a march in the green energy sector. This may be the UK’s last chance to lead in a sector that’s growing at a huge rate.
- Without investment in green energy now, we expose ourselves to ever higher oil prices, and make ourselves more reliant on Russia as a gas provider.
- The loss of 17,000 private-sector jobs comes at the worst possible time, when unemployment is already rising due to government cuts.
Whether the review announcement was simply done through incompetence, or whether the power of the fossil fuel industry was involved remains to be seen. Regardless, I name government ministers Chris Huhne and Greg Barker as Morons Of The Week.