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British Goverment’s Subsidy Cut

published: 2011-04-29 11:10

Since British government announced subsidy cut for on-grid solar projects, domestic industry leaders have expressed their negative sentiment toward such legislative decision. Many urged the government to reevaluate the fairness and thoroughness of the subsidy cut.

The subsidy for on-grid solar projects was implemented last year benefiting a number of solar project developers. However, the British government decided to cut the subsidy due to the concerns about misuse of acquired funds on small projects. The British government believes the cut is necessary to curb companies intending to obtain cash from qualified bigger projects and use it for smaller projects like rooftop projects.

The regulation will be in effect on August 1st, 2011, which means most large solar farm projects will be affected since the duration of development usually takes 12-18 months. Many governments have decided to cut subsidy for solar industry gradually since 2010 to relieve the financial burden. Yet, the industry is undergoing a reformation phase where both technology and production efficiency are advancing to bring down the costs.

Vishal Shah, a solar industry analyst at Barclay, predicts that as the manufacturing cost decreases, the industry holds a positive perspective on the market growth momentum. The most paramount issue is grid parity. He foresees the global demand will slightly decrease to 17 GW. European countries are currently close enough to grid parity. In the near future, electricity generated from solar energy will be cheaper than generated from other means such as burning diesel fuel.

In addition, American solar market will be the growing at the fastest pace due to its better subsidy policy than that of Germany. Qualified investors in America are eligible for as much as 30% tax refund as well as subsidy benefits.

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