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 January 25, 2012
Solar court ruling - the end of the beginning?

 It would be nice to report today on a stirring victory for the UK's solar industry that finally provides clarity to the level of incentives available to solar installations, and more importantly sets a clear precedent that the government cannot drive a coach and horses through its own consultation rules and change crucial policies retrospectively.

But sadly, while such a report would be largely accurate, it would also only tell half the story. This sorry saga is not over yet.

The solar sector and the wider green economy are right to celebrate today. They have won an important victory and have hopefully set a precedent on government consultation practices that should benefit the entire business community.

They have also amply demonstrated the huge public support for solar power and provided the starkest demonstration yet that the UK's green economy can only prosper if ministers provide a stable policy environment. The Department of Energy and Climate Change (DECC) will now be forced to think twice before trying to change policies without sufficient notice. Moreover, if sources are to be believed it will respond to the shellacking it has experienced over recent months by soon unveiling reforms to the feed-in tariff scheme that will make the incentive mechanism much more sustainable and predictable.

And yet today's court victory, while welcome, fails to draw the line under the whole sorry saga that both ministers and the solar industry claim to crave.

It took the government less than two hours to torpedo the apparent clarity delivered by the Appeal Court ruling, issuing a statement from Chris Huhne confirming the department would seek an appeal hearing at the Supreme Court.

Given that four judges have now unequivocally ruled the government's attempt to retrospectively cut incentives was unlawful, it is hard to imagine DECC lawyers can come up with a more convincing appeal. But, as numerous solar industry commentators have pointed out, the intricacies of the legal argument are beside the point; the government's primary aim is simply to ensure the precise level of feed-in tariff support remains opaque until as close to the new March 3 cut-off date as possible.

Depending on your point of view, ministers are currently demonstrating their mastery of the pragmatic art of Real Politic or displaying staggering levels of cynicism by launching an appeal that ensures solar firms still cannot with confidence tell customers they will receive the 43p/kWh feed-in tariff rate.

In addition to this continued short term uncertainty, today's court victory does nothing to address the medium and long-term questions hanging over the sector.

The industry is still awaiting news on whether the government will move forward with the other controversial element of its consultation on solar feed-in tariffs - the plan to restrict installations to the most efficient buildings, slashing the available market by 80 per cent in one swoop.

If these standards are imposed (and there is a reasonable case for introducing some form of energy efficiency standard for buildings deploying microgeneration) solar firms will quickly have to work out a way to offer their own energy efficiency upgrades through the Green Deal, or partner with companies that already offer such services. Either way the market will be restricted as one of the main advantages of solar installations, the fact they are easy and quick to install, is eroded.

As importantly, the spending cap imposed on the feed-in tariff scheme continues to loom over any discussion on the future of microgeneration. The scheme has proven remarkably popular and has delivered a sea change in corporate and public support for renewable energy and by extension greener lifestyles. But it is now in danger of becoming a victim of its own success.

Every aspect of the government's chronic mishandling of the initial attempt to cut incentives was driven by concerns that the scheme's entire budget could be blown. According to climate minister Greg Barker, the budget for this year has already been exceeded and the budget for next year could quickly be burned through as well if today's court ruling triggers another rush of deployments.

As a result the department will now be under intense pressure to either cut incentives further (something ministers came very close to doing last autumn) or find a way to either increase the spending cap or pump more money into the scheme. There is a very real danger that today's court victory could prove Pyrrhic, with the government moving to cut incentives again post-April.

The tragedy of all of this is that the solar industry really is on the cusp of a hugely significant breakthrough.

According to modelling currently being undertaken by the industry the rate at which solar panel costs are falling suggests the technology could be competitive with the cheapest renewables within a few short years, and could even be competitive with energy from the grid a few years after that. The government could reach its goal of cutting the level of support for solar to 9p/kWh, equivalent to the level of support offered to wind energy, in a relatively short timeframe. But only if it does not kill the industry off by cutting the level of support too far and too fast.

As we've argued before, it is time for the government to provide the sector with the clarity it deserves. That means confirming the long-term level of incentives for solar energy (and other forms of microgeneration) and ideally raising the spending cap to ensure support is set at a level that allows the industry to continue to grow. If that really cannot be done then ministers need to stop messing the sector around and offer an honest assessment of where solar stands in their list of priorities. If that means providing investors with a clear signal that they do not believe microgeneration - and all the jobs, economic growth, and emissions savings it delivers - can achieve mainstream adoption in the UK, then, sadly, that is what they must do.

As the reaction to today's court ruling demonstrates there is huge public appetite for solar energy in the UK. Households want it, businesses want it, even the CBI wants it, and while there are legitimate concerns about the cost most people recognise that a couple of pounds a year on energy bills (because that is all we are talking about) is a price worth paying for a fast expanding green industry that promises to break the stranglehold of incumbent energy suppliers and could deliver low cost energy within five years.

It is now up to the government to deliver the clarity the industry deserves - and it should start by dropping its latest appeal and releasing details on the next wave of proposed changes to the feed-in tariff scheme.

Sadly, today's court ruling does not mark the end to this long-running saga. But the industry will remain hopeful that it could represent what one of the UK's rather more capable politicians once referred to as the "end of the beginning".