You can't miss Britain's solar energy boom. Solar panels generating electricity adorn tens of thousands of British homes, providing clean green energy. But the uncomfortable truth is that, with overgenerous subsidies failing to keep pace with plummeting costs, this boom has been built on unsustainable foundations. That is why we are proposing timely measures to reform the feed-in tariff (FIT) scheme and ensure this vital green industry has a long-term future.
It's easy to see why solar is so attractive: it's simple, accessible, reliable and fits discreetly into homes and communities. It's a vital component of our decentralised local energy revolution. But however convinced we may be of the long-term potential of solar, we have to face up to the economic reality that every other sector of the economy is challenged by. The green economy does not exist in a bubble.
The huge subsidised returns for people investing in solar photovoltaic panels – funded from everybody's energy bills – have now broken double figures and cannot continue. The good news is that the costs of the technology have plunged – by at least 30% – since the scheme started in April 2010. A home installation can now cost around £9,000 or less. A similar installation would have set you back an extra £4,000 less than two years ago.
With installed capacity nearly three times that projected by the last government when it launched the scheme 18 months ago, it all means that solar is burning through its budget at an unsustainable rate. The generous pot of £867m secured for the feed-in tariff scheme by the coalition last year will be completely devoured if we don't act now.
I still believe passionately that feed-in tariffs are essential. But there is a delicate balancing act to perform to avoid the boom and bust already experienced in countries such as Italy, Spain and France, fuelled by over-generous subsidy.
The challenge we face is to use that public investment to obtain the widest possible deployment. I don't want a tariff that gives bumper returns to a lucky few but a tariff that incentivises sensible deployment, in the right place, on the right buildings in the greatest numbers.
The coalition's proposals are about making the FIT scheme more intelligent, more nimble and responsive to market development and, crucially, better value for money for our hard-pressed consumers. We'll also fix one of the biggest failures of the scheme, namely its failure to require basic energy efficiency measures to be put in place before subsidies are claimed to generate renewable electricity. Our proposals will mean only energy efficient buildings will get the full PV subsidy from April next year.
This new requirement will encourage the industry to make the most of their skills and expertise and work much more closely with the rapidly expanding energy efficiency market.
By taking timely and responsible action to protect the long-term future of the FIT budget, rather than putting our head in the sand, we will forge a sustainable future for the UK's solar industry.
Used wisely the tariff scheme offers the potential for millions of consumers to generate more of their own green electricity and break the grip of the over-dominant energy companies. I want to fix the feed-in tariff scheme, enhance it and put the whole microegeneration industry on a credible path to a bright and exciting future.