The final countdown
Last week the government placed a stick of dynamite under social landlords’ sustainability plans with a shock cut to the feed-in tariff. Nick Duxbury examines the fallout
The clock is ticking and the sector is panicking. In just over four weeks time, hundreds of thousands of social tenants will miss out on millions of pounds of savings on their energy bills that could protect them from slipping into fuel poverty.
Social landlords have until 12 December to install solar photovoltaic panels on their roofs before the feed-in tariff, a government payment to producers of renewable electricity, is hacked back to the point that many schemes will no longer be viable.
Last week, ministers announced plans to halve the FIT from 43.3p/kWh to 21p/kWh four months early because the scheme had become too expensive and was unsustainable. And then came the really bad news: under the plans, multiple installations, including all social housing schemes, are to be classified as ‘aggregated schemes’ and the FIT is to be slashed further to just 16.8p/kWh.
So what effect has the cut to the FIT had on landlords’ solar ambitions and how will it affect their tenants?
A week on from the announcement, and the solar casualties are already racking up. While many social housing schemes are on hold, it is the rent-a-roof deals, in which third party providers install PV for free in return for a portion of the FIT, that have been hit the hardest. Just one has been signed to date, and no more look likely to join it.
Take Leeds Council for example. It had been just days away from signing a rent-a-roof deal to install 5,000 PV systems across its housing stock with Empower Community. The council had expected the scheme to save its tenants around £30 million on their energy bills over the 25-year life of the FIT. This is no longer going ahead.
A spokesperson from the council says: ‘Our executive board had agreed to ring-fence income from the tariff to use for other low carbon projects; it was intended to be a virtuous circle that would benefit tenants. We will now have to write to around 3,000 of our tenants who were expecting to get PV, to inform them that the scheme is on hold indefinitely.’
This is a common story across the sector. The Guinness Partnership has now shelved plans for a 3,000 home rent-a-roof deal with Lovell.
For self-financed schemes, such as Wrexham Council’s £60 million plans for 3,000 homes, and Brighton and Hove Council’s 1,200-home scheme, it is a case of returning to the drawing board to try to salvage a workable solution.
However, for landlords that have self-financed schemes already underway, the problems are more urgent. For 19,000-home Peabody, which had planned to plough £23 million of its own cash into PV, the 5 per cent return it now stands to make from the FIT will not cover the 5.3 per cent cost of capital it must pay to fund the scheme. The London-based association must now halve its programme to around three megawatts of PV and attempt to renegotiate with its contractor.
‘Peabody has invested significant amounts of money developing our solar scheme, for example, in procurement and legal fees,’ says Steve Howlett, chief executive of Peabody. ‘Many other businesses will have done the same. This now looks as if it will have to be written off - a huge and unnecessary waste at a time when we are striving to make austerity savings.’
There is now a frantic rush to install as much PV as possible before midnight on 11 December. In an effort to achieve as much volume as possible, Peabody is switching from its street-by-street focus to one where it looks at tower blocks instead. With just four-and-a-half weeks to go before the FIT is slashed, other landlords are hiring sub-contractors so work can take place seven days a week. Stories are even circulating that contractors are hiring floodlights so they can work through the night.
Birmingham Council, which is installing 1,200 PV systems on its tenants’ roofs is part of this frantic race. Dave Allport, project director at the authority, says he hopes to get three quarters of the PV installed before the deadline and the tariff on these will subsidise the rest. ‘As long as we are clever and hold our nerve then the scheme will be self-financing. However, a lot of authorities are going to lose out terribly on this.’
The real price, landlords warn, could be a human one. Peabody’s programme had been a major part of its strategy to combat fuel poverty by saving its tenants up to £180 a year on their rapidly inflating energy bills - but now thousands will miss out on this saving. And the result could be
tragic; the government commissioned Hills review published last month found that 2,700 people a year die as a result of fuel poverty in England and Wales every year - more than in road traffic accidents.
If last week was about coming to terms with the impact of the news, this week is about the fight back. On Friday Inside Housing launched its Green Light campaign to ensure that social landlords get access to green subsidies like the FIT to enable them to protect their tenants from fuel poverty. Our goals are simple. The first is that social housing schemes are classified as ‘community’ projects rather than ‘aggregated schemes’. The government said it would look at helping community projects ‘fully benefit’ from the FIT. Given that many landlords are charitable organisations, and whole neighbourhoods stand to benefit from landlords using the income from FIT to reinvest in housing, we believe their schemes meet this criteria.
Second, we want social landlords to be granted equal access to the energy company obligation, a fund collected by energy companies from their customers’ fuel bills and then paid out to subsidise energy efficiency works in the government’s forthcoming flagship retrofit scheme, the green deal. The government plans to exclude social landlords from the fuel poverty element of ECO funding - despite the fact social tenants are among the most vulnerable to fuel poverty.
Research from the National Housing Federation warns that 2.5 million social tenants could be unable to heat their homes adequately if these plans go ahead.
Since Friday the Green Light campaign has received overwhelming support from all sectors.
Labour backed the campaign this week with shadow energy secretary Caroline Flint and shadow housing minister Jack Dromey both pledging their support, following the example of Green Party MP Caroline Lucas. Similarly, groups representing millions of social tenants have joined up - as have consortiums and groups representing 1.4 million homes across the UK, alongside private companies ranging from energy giant E.ON, through to Good Energy, Carillion and Lakehouse.
In our first afternoon alone the Green Light petition received 75 signatures - this figure had risen to 182 as Inside Housing went to press on Wednesday.
With your support, we believe we can ensure social landlords operate on a level playing field when delivering the government’s carbon reduction targets and protect their tenants from fuel poverty.
worth of public tenders for social landlords’ photovoltaic schemes
of abortive costs for social housing schemes, according to law firm Trowers & Hamlins
the amount Leeds Council hoped to save its tenants through its PV scheme
rent-a roof project has taken place on 1,400 Westcountry Housing Association roofs