End Fit sinks Social housing PV schemes

One of the bright spots in the last 18months has been the number of social housing bodies fitting PV - benefitting the social landload, planet and tenants in fuel poverty...

Tariff cut leaves solar plans on the scrapheap

04/11/2011 | By Nick Duxbury from Inside Housing

The sun set on landlords’ solar ambitions this week as an unexpectedly savage cut to a subsidy payment for solar photovoltaic panels left the majority of social housing PV schemes unviable.

On Monday, the feed-in tariff, which is paid to producers of renewable electricity, was halved from 43.3p to 21p - but in a shock move, the government hacked back the FIT for multiple, or ‘aggregated’, installations of solar photovoltaic panels to just 16.8p.

Solar providers, landlords and consultants said the cut will render the majority of social housing PV schemes unworkable - and warned that social tenants, who pay for the FIT through their energy bills, will not benefit from it.

Public tenders worth an estimated £2.5 billion for social housing PV could fall by the wayside, and, according to law firm Trowers & Hamlins, landlords face a collective bill of around £5 million of ‘abortive costs’.

The cut has been viewed by some as the final nail in the coffin for rent-a-roof deals, whereby PV is installed free of charge in exchange for the FIT. Not a single rent-a-roof deal has been completed as a result of landlords failing to obtain lenders’ consent to install PV. Landlords now face a deadline of 12 December before the cut is instigated.

John Swinney, strategy director at Carillion, said: ‘So many [rent-a-roof] schemes just won’t happen. The sector has hardly put any PV on its roofs - and now it doesn’t make economic sense to try to at 16.8p/kWh. We don’t know if we can do it. We are seeing if we can adjust our offer.’
 
Matt Roberts, head of investment and maintenance at Salford-based Salix homes, part of the government’s green deal trailblazer project, said the cut to the FIT had ‘kyboshed’ plans to form a consortium of up to eight Manchester-based landlords to install PV.

For self-financed schemes, councils and associations around the country are holding crisis meetings to try to make their schemes stack up.

Birmingham Council said it would continue with its plans to install PV across 1,200 social homes, while Brighton and Hove which planned to install PV on 1,200 homes, said the new tariff would make this ‘very difficult’.

Experts are now warning that the move has shattered investor confidence and that this could undermine the prospects of other government carbon reduction schemes, such as the green deal which is reliant on billions of pounds of private sector finance.

Rob Beiley, partner at law firm Trowers & Hamlins, said: ‘Convincing the private sector to finance green deal will be hard - investor confidence is shot.’

Alex Grayson, managing partner of Empower Community which has seen its £175 million social housing PV investment deal derailed, warned of ‘very negative consequences for renewable heat incentive and green deal investments’ as a result of the cut.

Climate change minister Greg Barker said the FIT reduction was necessary because the popularity of the scheme meant it was unsustainable and would cost £980 million a year by 2014/15 without the cuts.

Dumped: how the feed-in tariff has fallen for social landlords

43.3p/kWh
Feed-in tariff rate for social landlords until 12 December 2011
16.8p/kWh
Feed-in tariff rate for social landlords from 12 December 2011
61 per cent
The percentage by which potential feed-in tariff income has fallen