Solar PV In The UK  

The shift to clean energy can occasionally make for some bizarre political spectacles, with George Monbiot's latest column in The Guardian being a spectacular example (in this case a socialist making the economic rationalist argument against solar PV in the UK) - Are we really going to let ourselves be duped into this solar panel rip-off?.

Those who hate environmentalism have spent years looking for the definitive example of a great green rip-off. Finally it arrives, and nobody notices. The government is about to shift £8.6bn from the poor to the middle classes. It expects a loss on this scheme of £8.2bn, or 95%. Yet the media is silent. The opposition urges only that the scam should be expanded.

On 1 April the government introduces its feed-in tariffs. These oblige electricity companies to pay people for the power they produce at home. The money will come from their customers in the form of higher bills. It would make sense, if we didn't know that the technologies the scheme will reward are comically inefficient.

The people who sell solar photovoltaic (PV) panels and micro wind turbines in the UK insist they represent a good investment. The arguments I have had with them have been long and bitter. But the debate has now been brought to an end with the publication of the government's table of tariffs: the rewards people will receive for installing different kinds of generators. The government wants everyone to get the same rate of return. So while the electricity you might generate from large wind turbines and hydro plants will earn you 4.5p per kilowatt hour, mini wind turbines get 34p, and solar panels 41p. In other words, the government acknowledges that micro wind and solar PV in the UK are between seven and nine times less cost-effective than the alternatives.

It expects this scheme to save 7m tonnes of carbon dioxide by 2020. Assuming – generously – that the rate of installation keeps accelerating, this suggests a saving of about 20m tonnes of CO2 by 2030. The estimated price by then is £8.6bn. This means it will cost about £430 to save one tonne of CO2.

Last year the consultancy company McKinsey published a table of cost comparisons. It found that you could save a tonne of CO2 for £3 by investing in geothermal energy, or for £8 by building a nuclear power plant. Insulating commercial buildings costs nothing; in fact it saves £60 for every tonne of CO2 you reduce; replacing incandescent lightbulbs with LEDs saves £80 per tonne. The government predicts that the tradeable value of the carbon saved by its £8.6bn scheme will be £420m. That's some return on investment.

The reason for these astonishing costs is that the government expects most people who use this scheme to install solar panels. Solar PV is a great technology – if you live in southern California. But the further from the equator you travel, the less sense it makes. It's not just that the amount of power PV panels produce at this latitude is risible, they also produce it at the wrong time. In hot countries, where air conditioning guzzles electricity, peak demand coincides with peak solar radiation. In the UK, peak demand takes place between 5pm and 7pm on winter evenings. Do I need to spell out the implications?

We have plenty of ambient energy, but it's not to be found on people's roofs. The only renewables policy that makes sense is to build big installations where the energy is – which means high ground, estuaries or the open sea – and deliver it by wire to where people live. But the government's scheme sloshes money into places where resources are poor and economies of scale impossible.

First, Monbiot gets the workability of solar wrong. He says: "The amount of power PV panels produce at this latitude is risible, [and] they also produce it at the wrong time." Those who buy panels, therefore, will own a mere "fashion accessory". The companies who manufacture solar PV in the UK have shown that putting solar panels on all available building surfaces would generate more electricity in a year, under typical cloudy British skies, than the entire electricity consumption of our energy-profligate nation. Some fashion accessory.

Of course, just a fraction of that area of buildings would suffice because we would want to mix and match renewable technologies – large and small, onshore and offshore – so matching loads and compensating for the fact that solar generates by day and not by night.

Second, Monbiot says the government's scheme targets money where economies of scale are "impossible" – an incorrect assumption because solar electricity costs will inevitably fall to the point, within just a few years, where they are cheaper than any form of fossil fuel and nuclear electricity. Systemic economies of scale in solar manufacturing and installation techniques are causing rapid reductions in solar PV costs globally, just as Ofgem and others worry so loudly about the inevitable rise of traditional electricity costs.

Third, Monbiot gets the precedent for the British government's solar "cash-back" scheme – the German feed-in tariff – upside down. He says the "German government decided to reduce sharply the tariff it pays for solar PV, on the grounds that it is a waste of money".

But all feed-in tariffs are supposed to decline, and indeed reduce to zero within some years – that is the whole point. They are not like the market-building schemes for the nuclear technologies that Monbiot advocates, where subsidies – open and hidden – are needed for decades. Most Germans are rightly proud of their feed-in tariff regime. They have, after all, created over 50,000 jobs in solar PV alone.

Fourth, Monbiot has it wrong about who pays the cash back. "The government is about to shift £8.6bn from the poor to the middle classes," he says. But the number is not the cost to "the poor". It's not even the cost to all electricity consumers over the next two decades. The cumulative cost to all consumers – including all non-domestic industrial, public sector, and commercial users and covering all technologies in the scheme – is £6.7bn, and is spread over 20 years.

The average household levy in 2013, when tariff rates are all up for review, is likely to be less than £3. This is far less than the average saving from the government's various domestic energy efficiency measures over the same period. So there is no net subsidy. The levy is not "regressive" at all.