‘Apocalyptic’. That is how one major PV provider described the news of the government’s cut to the feed-in tariff.
Everyone had expected bad news for weeks. In fact, as I wrote last week, a careful campaign of expectation management through what appeared to be strategic leaks from the government meant that the halving of the FIT from 43.3p/kWh to 21p/kWh was not a major surprise to anyone.
What was a massive shock was the government’s decision to hit social landlords harder than any other sector and slash the FIT to just 16.8p/kWh for multiple installation ‘aggregated’ PV schemes.
This was a worse than worse case scenario for most landlords. The move has effectively shattered the solar dreams of the social housing sector – and with it, any prospect passing on the benefits of reduced bills to their tenants, many of whom are low-income vulnerable people, and all of whom have paid for the scheme through their energy bills to date.
As I have blogged in past weeks, this is an increasingly familiar story: owner occupiers reaping the rewards of green schemes ahead of poorer non-home owners.
The government is planning to exclude social landlords from accessing the fuel poverty pot of the Energy Company Obligation – or ECO – funding which is paid for by energy companies through consumer’s bills to subsidise retrofit works in the forthcoming green deal.
The National Housing Federation has warned that this could have a devastating impact on landlords’ ability to deliver energy savings through the green deal for their tenants.
In both cases the end result is the same: an increased risk of the most vulnerable people sliding into fuel poverty and their landlords having no funding to help them out.
That’s why Inside Housing has launched its new campaign - Green Light. The campaign has two simple aims.
The first is to ensure landlords get equal access to ECO funding – all we ask is that social landlords are on an equal playing field to other sectors. Already, as we report this week – and following my analysis of Chris Huhne’s rhetoric last week – there appears to be a softening on the government’s position on this, so a win is achievable.
Second, that social housing schemes are classified as ‘community projects’ rather than aggregated schemes.
The only ray of light so far, as tipped in last week’s blog, is that the government is considering helping PV schemes that can be demonstrated to have a community, rather than commercial purpose.
It said on Monday it would consider helping ‘genuine community projects to be able to benefit from the FIT’.
This is vague – but it is the best we can expect to win. Once again, we are not calling for special treatment; we simply don’t think it is fair that the most vulnerable and poor are hit the hardest.
If you agree then we want to you sign up to our campaign.
In only a day and half we already won the backing of figures like Green Party MP Caroline Lucas alongside energy giants E.ON, the UK Green Building Council, Sustainable Homes, Chartered Institute of Housing, National Housing Federation, Northern Housing Consortium, PRP Architects, a host of contractors and solar providers such as Carillion, and landlords including Peabody and Affinity Sutton.
We need cross sector support to fight for the right to protect the fuel poor and get the support the sector needs to deliver the government’s carbon reduction targets. Please sign up.
So now the fall out of the FITs cut. As we report this week, rent-a-roof schemes, in which third party PV providers offer free PV in exchange for a portion of the FIT, have been stopped in their tracks.
None have taken place so far because of ongoing wrangles with lenders over the impact the deals could have on the value of bank’s security.
But progress was being made on this front. The first deals were coming to the fore – indeed there is one deal on the brink of completion that could end up being a testament to what could have been; a solitary product of millions of pounds and months of resources that now look to have been wasted.
Trowers & Hamlins warn landlords face an expected £5 million of wasted ‘abortive costs’. That spend equates to a lot of retrofit measures – or homes for that matter.
For self-funded schemes, now is the time to return to the drawing board and hope that the returns needed to pay for the cost of capital still add up.
For many it won’t.
The government is now claiming that it warned to expect a return of 5 per cent and that should still be obtainable under the new tariff.
However, already landlords such as Peabody - which had plans to invest a massive £23 million of its own cash into PV - say otherwise.
Having done their maths, it says that based on government guidance, it anticipated a return of 7 per cent against a 5.3 per cent cost of debt. A 5 per cent return will not let its scheme wash its face so this means a major rethink.
There are other unintended repercussions of the FIT cut.
One point that should really concern the government is that a growing number of experts are warning that the sudden policy change has rocked investor confidence to the point that now the green deal, which is heavily reliant on private sector finance, is at risk.
I will be speaking to banks, institutions and private equity investors over the coming weeks to find out what the true cost of this week’s ‘apocalyptic’ FITs cut for landlords will be.