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Ain't no sunshine when it's gone: What will be left of solar following FiT cuts?

The government’s proposed cuts to feed-in tariffs have dealt a hammer blow, with firms going under and thousands of jobs lost. So what will the sector look like once the dust settles?

“It’s going to be devastating – there’s just going to be a shadow of the industry left.”

Construction News is speaking to John Forster, chairman of both roofing specialist Forster Group and STA Scotland, the Solar Trade Association’s Scottish arm, about the impact of the government’s proposed cuts to feed-in tariffs.

Mr Forster’s business is in a fortunate position compared with many solar specialists, as Forster Energy is just one of a broader range of business units within a larger group company.

But even a firm with diverse interests like Forster is contemplating job cuts, with 43 people involved in its solar arm, either directly employed by it or at group level.

“If nothing changes, we will have no option but to let go a significant number of those purely employed in the solar business,” he says.

“As [the cut] looms closer and closer, we are starting to have discussions at board level about the impact on the wider business, because it can only be significant.”

FiT cut is the deepest

Mr Forster’s story is far from unique, with the STA estimating that 27,880 of the 34,850 UK solar jobs are at risk if the cuts to FiT go through as proposed (see graph below).

The proposal will see the feed-in tariff cut by 87 per cent, which on top of the axing of the Energy Companies Obligation from 2017 and the end of funding for the Green Deal, has meant the outlook is bleak for many renewables specialists.

The government consultation on the cuts closed on 22 October, with the industry now waiting to hear the response - although business leaders are not holding out a huge amount of hope for a positive outcome.

“It doesn’t feel like a terribly believable consultation – it feels like a diktat from a new government that has clear ideological views on what they want to do,” Mr Forster says.

“It doesn’t feel like a terribly believable consultation – it feels like a diktat from a new government that has clear ideological views on what they want to do”

John Forster, Forster Group

“But we’ve been told time and time again by the Department of Energy and Climate Change and [energy secretary] Amber Rudd that this is a genuine consultation, that they’re listening.

“If they don’t [listen] I think the entire country should be disappointed, not just the solar industry.”

Solarcentury head of public affairs Seb Berry says that the government’s actions are a “calculated political assault” against the solar sector and other renewables.

“It’s also now very clear that there is one subsidy rule for expensive new nuclear and another for cheaper renewables,” he says.

“The 35,000 people working in the UK solar sector really deserve far better from a government that claims to be on the side of British business but then tells us it’s given zero thought to the jobs impact of its own FiT proposals.”

“Hardly any” domestic work

In practical terms, the FiT cuts would have a devastating impact on smaller solar firms, especially those focusing on domestic retrofit.

One Warwickshire-based electrical contractor, Alderminster Group, is emblematic of the challenge that smaller companies are facing.

The firm’s core business is electrical contracting, with the company opening a solar business during the downturn as part of a diversification strategy when M&E work dried up.

Now, with FiT under threat, the firm has to change tack again.

“I know there are job cuts because I get so many more agencies now emailing constantly with people looking for jobs – and they’re fantastic candidates”

Maria Clack, Alderminster Group

The company has focused on domestic PV installation up to now, but is targeting commercial installations instead.

“We’re really disappointed because we were doing a really good job, but the incentive of the FiT was what got most domestic customers buying,” director Maria Clack says.

“I’ve got a three-year business growth plan. I was, and still am, planning to get the turnover up to the £1m-£1.5m bracket in the next couple of years - but I’m now redoing my business plan.”

Ms Clack says that she expects Alderminster to do “hardly any” domestic PV installation next year, and says she knows of other local solar installers nearby who have “dropped out” of the market as a result of the changes.

“I know there are job cuts because I get so many more agencies now emailing constantly with people looking for jobs - and they’re fantastic candidates,” she adds.

Boom and bust

In the wider solar sector, though, demand is currently booming as customers try to get schemes built before the subsidy is cut.

“This crazy rush to install before the cuts take place is just taking the prospective business from the first half of next year and making it disappear, because we’ll have done it all by the end of December,” Mr Forster explains.

“Whatever their interests, [installers] will find themselves with nothing to do in the first half of next year.”

A central part of the government’s proposals would see new FiT spending capped at £75m-£100m through to 31 March 2019 - but the increased deployment that is now taking place could mean that cap is hit very quickly.

“If everyone’s as busy as we are now, we’ll easily hit these caps by Christmas, because there’s such a gigantic spike in installations for this time of year,” says Matthew Brailsford, managing director of £3m-turnover Custom Solar.

“This crazy rush to install before the cuts take place is just taking the prospective business from the first half of next year and making it disappear”

John Forster, Forster Group

Alongside the FiT cuts, the Treasury has quietly announced another damaging blow to the industry, by removing the tax breaks in place for community energy projects.

The cuts to FiT and ECO had already hit this sector, which is less mature than the general installation market, but the removal of tax relief through the Enterprise Investment Scheme, the Social Enterprise Investment Scheme and Social Investment Tax Relief has come as a hammer blow.

Mongoose Energy is one firm that helps community energy groups with project development, financial structuring and fundraising.

In total, Mongoose has a pipeline of £100m-worth of fundraising planned or ongoing that it estimates will be impacted by the removal of tax relief.

Mr Bode estimates that Mongoose’s schemes represent approximately 30 per cent of the UK community energy market, and that 40-70 per cent of its fundraisers will not materialise - meaning that a big chunk of installation work is set to disappear on top of the damage done by FiT cuts.

Dark times ahead

The future for UK solar, at least in the domestic and community energy sectors, is gloomy in the short term.

The proposed changes are making it very difficult to plan ahead - but as Mr Brailsford notes, for seasoned solar installers this is not necessarily anything new.

“I’ve been in this for seven years now, a relatively long time in solar, and we’ve never had five minutes of steady ground,” he says.

“I think we’ll find a way around it, but not knowing what January looks like at the start of November is worrying as a business owner to say the least.”

The choice is a stark one for the small installers in particular - diversify your business by moving into commercial PV installation, or give up on solar altogether and close.

Those reliant on domestic or community energy projects will struggle, with the commercial sector and its energy-hungry clients the only grounds for hope at the moment.

“Is there light at the end of the tunnel?” Mr Forster asks.

“Yes, there is - but clearly it’s very, very limited.”

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