A fair deal for microgeneration?

The speculation around which measures will survive Osborne’s sword of Damocles continues unabated. At yesterday’s Solar Power Conference, a woeful figure from DECC was on the agenda to explain the government’s position on support for PV. He opened by saying he could not pre-empt the CSR by commenting in any way on the FIT and would not be drawn on the matter. At this point I suspect that many in the audience thought he might as well pack up and leave as he was obviously just going to waffle on without substance for the next half hour, which he did…almost.
He did make the point that, as a principle, DECC did not believe PV could make any relevant contribution to the UK 2020 renewables target, and that cost-effective carbon mitigation was not really the point. It was “all about engaging and empowering individuals to make their own investment decisions in Britain’s energy future” albeit at the expense of their neighbours. (It never ceases to amaze me at how gullible the public are when it comes to getting something for nothing or their avarice when they can expect to get something at someone else’s cost). What this does not explain is why the government would want to support large scale PV farms where the likely investors are big business.
This is further compounded by the cosy relationship between those substantial, credit worthy companies, the banks and the inner circle of career civil servants. Any banker will tell you (and on this point he will not be lying), that banks and other funding institutions require a rate of return on any investment proportional to its perceived risk. One element of risk is the “bankability” of their client. So if they fund a public sector project it is generally perceived as being low risk; similarly though to a lesser extent, big corporations such as the “big six” energy companies. Now the FIT has been explicitly designed to deliver an IRR of around 8%, deliberately too low to make it worthwhile for an individual to borrow the money at usurious bank rates to fund, for example, an economically “rent seeking” PV project. But they are the very people that government policy, as espoused by DECC, is supposed to embrace!
Initially the FIT was denounced by many as a tax on everyone to fund eco-bling toys for the rich, that is, those who have adequate resources to invest in PV without recourse to borrowing; if you have money in the bank, then 8% is a really good deal! As ever in such cases, the government responded by promising some gobbledegook PAYS (Pay As You Save) scheme which would enable us all to obtain loans securitised against FIT, RHI or whatever and social housing providers started jumping into bed with big business to deliver PV to their tenants. PAYS is generally considered a dead duck by those in the know, so that leaves the following worthy causes in line to profit from the FIT stealth tax:
• Public sector bodies with mandatory renewable or carbon targets which would otherwise need to funded by direct taxation
• Corporate investors
• Banks
Now you might conclude from all this that if the axe has to fall somewhere it should be on the large scale PV projects which achieve neither value for money energy policy goals, nor engage the consumer. Indeed, for a government which proclaims “fairness” as an axiom of their entire existence, that should be the case, but…
Another speaker at the conference made the case for maintaining investor confidence not only in renewables but in the forthcoming revolution in our energy infrastructure. The numbers were convincing. If, as Ernst and Young have estimated, the UK needs to invest around £200 billion in new generation and networks by 2025, then if the investors have even the slightest wobble of confidence in the ongoing gravy train, their perception of “risk” increases and they may consequently demand higher interest rates. Even another 1% would result in an extra burden of £2 billion annually, balanced against the current cost of the FIT estimated at a mere £50 million annually. So Osborne cannot ditch the cartel subsidy on big PV without “damaging investor confidence” and costing us all even more money!
If that isn’t blackmail I don’t know what is!

Micro CHP keeps FIT

So finally Osborne is about to confirm our worst nightmares and tell us just who will keep their funding and who will go to the wall. I am reliably informed (just how reliably remains to be seen on Wednesday) that the rumoured abandonment of the infamous FIT (Feed In Tariff) will not happen; not entirely surprising given the overwhelming lobbying effort of the piggies with their snouts in the trough of eco-obscenity...

The very notion that a government could review and possibly abandon a measure just six months into its precarious three year lifespan caused major ructions in the energy and investment industries alike. How could we ever hope to expect investment in any energy technology if the promises of a government were to be so lightly cast aside? Well, quite apart from the fact that we would be unutterably naive to believe anything any politician said from one day to the next, surely it is the prerogative of a democratically elected government (more or less) to modify/reverse the policies/promises of a previous administration. Why should they not decide to abandon the outrageously unfair, unjust, inequitable, pointless FIT?

Well, primarily because, in the midst of countless cost cutting exercises imposed by HM Treasury, the FIT, master of all stealth taxes, does not actually cost the Exchequer a single penny! It is an almost perfect construct, robbing us all (including the poor) to pay for the eco-bling excesses of the chattering rich, and making the energy companies (the de facto tax collectors) the bad guys! Energy bills go up (not taxes) to subsidise the most cost ineffective technologies in the vain hope that this might ultimately contribute to our 2020 targets. I am very reliably informed that £5 notes burn rather well and as a zero carbon fuel source...

But then Cameron made his silly announcement that he was going to lead the greenest government ever with about the same level of understanding of the issues as the last lot, so God help us! Government and energy policy by sound bite continues.