Chris Huhne will lead a review into the use of feed-in-tariffs (FITs) in the UK in a bid to end subsidies going to large scale solar farms rather than small scale users.
The Secretary of State for Climate Change acknowledged the successful take-up of photovoltaic panel in Britain so far since the FIT scheme began last year.
Since then 21,000 installations have been registered, with the majority of these apparently having domestic applications.
However Huhne highlighted his concerns that the subsidies were making their way into the pockets of big businesses rather than to small scale users.
“I have become increasingly concerned about the prospect of large scale solar PV projects under FITs, which was not fully anticipated in the original scheme and could, if left unchecked, take a disproportionate amount of available funding or even break the cap on total funding,” said Huhne.
“Several large solar installations have already received planning permission. Industry projections indicate there could be many more in the planning system.”
Huhne thinks a procedural review may be necessary to address a number of problems.
“In light of this uncertainty and the risk that such schemes could push FITs uptake off trajectory and may make the Spending Review savings difficult, I have decided to end the potential for damaging speculation and bring forward the review of the Scheme to look at ways of correcting these early teething problems.”
“I recognise that industry needs a long term plan for investment in which it can have full confidence,” he continued.
“Today I am announcing a comprehensive evidence based review in to the FITs scheme and, to provide further certainty to the renewables industry, I can confirm that we also hope to publish next month measures to support renewable heat within the envelope agreed at Spending Review."
The review of FITs will be completed by the end of the year, with tariffs remaining unchanged until April 2012, unless there is specific need for greater urgency.
Some say Huhne may be rather hasty in tinkering with FITs, including Ash Sharma, Research Director at IMS Research.
Talking to TechEye, Sharma says: “While it may mean that installation demand is pulled forward, with many businesses seeking to invest before any changes are implemented, in the long term it may damage both the commercial and residential markets rather than provide any benefits.”
“The government are perhaps concerned that the market may take off to quickly, alongside of course wanting to save money, but this may be too early in the UK market’s growth. In fact the British market was only around one percent the size of the German one last year, having only had a subsidy programme for eight months.”
Furthermore, the UK is likely to fall even further behind other EU countries.
“We are way behind Germany of course, but we are also falling a long way behind many other countries such as Italy, France, Belgium, Greece and more.”
“This could in fact have a negative effect on the economy rather than helping it, with jobs for installations and distributors going if there is no demand for panels due to unattractive prices.”
“For example if the big businesses are not attracted to countries large scale solar plants then that will have a knock on effect on many others area, such as making component prices more expensive for residential users, which of course consequently means that there is less demand to have panels installed.”
Many thanks to Roddy Boyd for sending me over e-galleys of his new book on the implosion of AIG, Fatal Risk. (If you want me to read a book — I’m looking at you, publishers — then sending it over in electronic form makes it much more likely I’ll do so. I would never have read Zero-Sum Game, for instance, Erika Olson’s insider account of the CME-CBOT merger, had she not sent it to my Kindle. But she did, and I did, and I’m happy I got to read it.)
Boyd’s book is as in-depth as any autopsy of AIG will ever be and it does presume a reasonably sophisticated grasp of finance on the part of the reader. That’s smart, on Boyd’s part: he knows who his audience is for this book.
Boyd’s definitely done his homework here: he seems to have talked to almost everybody who matters, with the possible exception of Martin Sullivan, the hapless AIG CEO who ends up bearing the lion’s share of the blame for what ultimately went wrong. Sullivan’s predecessor, Hank Greenberg, is deeply flawed, of course, in part because he insisted on singlehandedly and personally being the key risk-control mechanism for an enormous company which no one man could possibly oversee in detail and in part because the company he so assiduously built managed to fail so devastatingly the minute he left. (On top of that, of course, there’s the question of his various prosecutions; Boyd is sympathetic to Greenberg on that front and very harsh on Eliot Spitzer.)
Boyd’s case that the AIG implosion would never have happened had Greenberg stayed on as CEO can never be proven one way or the other. My suspicion is that AIG was so big and Greenberg was stretched so thin, that ultimately AIG was certain to fail in any case. But the incompetence of Greenberg’s lieutenants is quite astonishing: Boyd writes at one point that neither Stasia Kelly, the general counsel, nor CFO Steven Bensinger, nor CEO Martin Sullivan had ever even heard of the “credit support annex” which proved fatal to company, by forcing AIG to put up billions of dollars in collateral when the CDOs it insured fell in value. And at a later point, Sullivan is astonished by numbers which had been carefully explained to him the previous day by the notorious Joe Cassano.
Cassano is certainly a very large part of the reason why AIG failed — his headlong rush into mortgages was a move which was explicitly ruled out by both of his predecessors at AIGFP, for good reasons, and he took full advantage of the fact that his boss, Martin Sullivan, lacked any ability to understand what he was doing or to rein in his excesses.
But in reality it was Win Neuger, with his idiotic and devastating securities-lending transactions, who probably did more harm to AIG than any other individual. Matt Taibbi told the Neuger story in his own inimitable style in Griftopia, but Boyd provides chapter and verse for anybody who really wants to understand the details.
When AIG failed along with various monoline insurers, the lesson that many of us drew was that no company should ever use its triple-A rating as a business model. If your triple-A is necessary for you to continue to make money, then you shouldn’t really have a triple-A in the first place: it’s a rating which should be reserved only for companies which don’t need it.
What happened at AIG, along with the other monolines, is pretty simple: they started taking their triple-A for granted, like it was some kind of fact of nature rather than a hard-won award which could be removed at any minute. Whatever else you might say about Hank Greenberg, he always jealously guarded his triple-A. But when he went, so did that culture.
There are no corporates any more, which rely on their triple-A rating for profits: even Berkshire Hathaway has been downgraded. That’s good. But there are still sovereigns. The UK strikes me as a little Greenbergian: it’s making deep fiscal cuts now, in an attempt to ensure its triple-A is never taken away. The U.S., by contrast, is more reckless, a bit like AIG after Greenberg left — it’s going after growth, first and foremost, rather than concentrating on its debt ratios. That might well be the right decision to make — especially if the U.S. could live with its bonds carrying a little bit of credit risk. But it’s a decision which should very much be made consciously and I don’t think that anybody has really done that.
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