In the wake of intense industry lobbying the government has decided to cut its feed-in-tariff subsidy for solar energy by 64% instead of the originally proposed 87%.
The new tariff for domestic-scale solar is set at 4.39p/kwh, down from 12p today. It had proposed to cut it to 1.63p/kWh.
Deployment caps will be set to limit new spending on the scheme to £100m up to the end of March 2019.
Energy secretary Amber Rudd said: “My priority is to ensure energy bills for hardworking families and businesses are kept as low as possible whilst ensuring there is a sensible level of support for low carbon technologies that represent value for money.
“We have to get the balance right and I am clear that subsidies should be temporary, not part of a permanent business model. When the cost of technologies come down, so should the consumer-funded support.
Industry lobbyists said it was a partial victory, at best.
Electrical Contractors’ Association (ECA) director of business services Paul Reeve commented: “The fact that many are relieved at a 64% reduction is an indication of what we've managed to avoid. Solar simply needs five more years to head towards a no subsidy future, and the government’s announcement may just allow it to get there.
"However, there is more to the government plans than a headline domestic rate of 4.39p/kWh, there is also a cap on the tariff of £100m up to 2018. This could effectively ration solar PV deployment going forward, so the industry really does need to move towards a no subsidy, grid parity model as soon as possible.”
Mr Reeve concluded: "For solar PV, the cavalry, when it comes, will be in the form of greatly increased electrical storage capability that will allow solar to make a second breakthrough".
Civil Engineering Contractors Association chief executive Alasdair Reisner was happier, saying: “We are pleased that government has listened the concerns of the UK construction industry and has made changes to ensure renewable energy remains a part of the energy mix.
“CECA has long argued that the UK Government must commit to a long-term energy strategy based on a diverse energy mix which does not deter badly needed investment to enable a safe and secure energy supply for economic and social growth.
“It is now imperative that government and industry work together to create a clear vision for small-scale renewable energy projects. Key to this is a visible long term pipeline of work to enable the construction industry to deliver innovative projects on time and on budget.”
Paul Barwell, CEO of the Solar Trade Association, has said the lobbying campaign is not over. “Government has partially listened. It’s not what we needed, but it’s better than the original proposals, and we will continue to push for a better deal for what will inevitably be a more consolidated industry with fewer companies.”
He continued: “However, in a world that has just committed to strengthened climate action in Paris and which sees solar as the future, the UK government needs to get behind the British solar industry. Allocating only around 1% of its clean power budget to new solar is too little, particularly when solar is now so cost-effective. Poor ambition for solar risks missing out on not only our renewable energy targets in the UK, but on the world’s greatest economic opportunity too.”
“The industry will certainly try its hardest but we will be pressing government to do much more to boost solar power.”
The new tariffs will come into force from 8th February 2016 and the deadline for projects to receive the current higher tariffs is now 15 January 2016.
Mr Barwell said: “The new tariff levels are challenging, but solar power will still remain a great investment for forward-thinking home owners who want to protect themselves from volatile energy prices and do their bit to reduce global carbon emissions.
“Our initial analysis shows solar is still worth considering if you consider the wider benefits such as the increased value to your home. Homeowners can also benefit by changing the way they use their generated electricity through higher day-time usage or via storage which is now a rapidly developing market.”