Introduction

Following its election to power in May 2015, the British Conservative Government announced a Spending Review in which it set outs its vision for restructuring the UK economy, with the specific purpose of reducing the public deficit (Muinzer, 2015). A key announcement made in the Spending Review, and currently out for public consultation, is the proposal to make significant cuts to the solar power subsidy scheme which has been in operation for the past five years (Clark, 2015). Debate rages between detractors and supporters of the proposals of the possible economic and environmental impact of the changes. The purpose of this report is to discuss and evaluate the outcomes of the policy changes, should they be enacted from January 2016. The paper proceeds as follows. In order to understand the likely impact of the changes, it is necessary to appreciate the political, environmental and economic context in which the solar power subsidies were first initiated; thus, the opening section of the report provides an overview of, and background to the current policy framework, and a more detailed discussion of the proposed changes. Next, the economic impact of the changes is discussed, followed by an evaluation of the environmental changes. A brief conclusion summarises the paper’s key points.

An overview of the current and proposed policy framework

Support for solar power generation in the UK is comprised of two key subsidy packages – the Renewables Obligation (RO) scheme and the Feed in Tariff (FiT) scheme (Kay, 2015). The Renewable Obligations scheme is a broad package of support which places a duty on the country’s licensed electricity suppliers to source a certain proportion of their electricity from renewable sources including biomass, hydroelectric, wind power, tidal power and solar power (photovoltaic cells, also known as solar PV) (Wood and Dow, 2011). The obligation was initially set at 3 per cent, rising to 15.4 per cent in 2015. The current total subsidy that is available to RO generators is estimated at some £500 million per year up to 2037 (Knowles, 2013).

The Feed in Tariff scheme is in essence a small-scale version of the RO (Kay, 2015). It was launched in 2010 and was aimed at providing subsidies for installations of solar power generation of under 50 kilowatts (kW) at the household and firm level (Cherrington, Goodship, Longfield and Kirwan, 2013). Under the terms of the scheme, firms and householders are rewarded with a payment for every kilowatt hour (kWh) of renewable power that they generate for use on their own premises, and additional payment for unused power that can be exported back to the grid and redistributed for use elsewhere (Allan, Eromenko, Gilmartin, Kockar andMcGregor, 2015). Although, like the RO, the FiT can be used to support the generation of power from a myriad of renewable sources, solar power is the technology that dominates the scheme. According to Kay (2015, p. 38), “Solar PV accounts for 98.8% of the installations under FiT since 2010 and 84.5% of capacity”.

Generally, both schemes have been highly successful, which,