Business leaders warn Treasury to leave feed-in tariffs alone

The heads of more than 60 renewable energy companies have warned the government that premature cuts to the feed-in tariff scheme would "cause investors to flee" the microgeneration sector.

Former Renewable Energy Association chief Philip Wolfe, Juliet Davenport of Good Energy and Dr Paul Golby, chief executive of E.ON UK, were among the signatories of the open letter addressed to the Treasury and energy and climate change secretary Chris Huhne.

The letter calls on the government to put an end to recent speculation that feed-in tariffs might fall foul of the ongoing Comprehensive Spending Review by confirming that they will continue at their current level.
Chris Huhne came under pressure only last month to stand up to any Treasury cuts to the scheme after a report concluded that scaling back the tariff would destabilize the UK's microgeneration industry by damaging investor confidence.

The letter echoes the report's findings, warning that early changes to the scheme, which is not scheduled to be reviewed until 2013, would represent an " unprecedented and confidence-shattering intervention."
Alterations would "destroy the value of recent investments", put the sector's "ability to attract future investment in mortal peril" and "seriously jeopardize" the UK's prospects of hitting its mandatory 2020 renewable energy and climate change targets.

"Premature adjustments to the tariff would have a profoundly damaging effect on long-term investor confidence in the clean tech and renewable energy sectors, and may cause investors to flee altogether, thereby stifling any future investment," it read.

And it closed by warning: "In short, investors simply would no longer trust government not to make subsequent, unpredictable interventions."

Dave Sowden, chief executive of the Micropower Council, which organised the letter, called on the government to protect jobs by clarifying its stance on the issue now, rather than waiting until the results of the review are published later this month.

"Customers are already responding to this speculation by canceling orders in case the feed-in-tariff gets scrapped. Thousands of jobs and hundreds of millions of pounds of investment are now hanging by a thread," he said. "It is therefore vital that the government squash this speculation without delay by confirming it will honour the current feed-in-tariffs."

His comments were echoed by Paul Foote, director of the Conservative Environment Network, who warned that any move to cut feed-in tariffs would seriously harm the government's credibility.
"Cutting the feed-in tariff poses extreme risks to the government's commitment to carbon targets, to investor confidence, and to David Cameron's reputation on the environment," he said. "If there isn't an ambitious scheme for feed-in tariffs and a renewable heat incentive, it is game over for our domestic and European targets to reduce carbon. We simply will not meet them."

However, government clarification on the future of the scheme is unlikely to come before the review is published later this month. A spokesman for the Treasury told BusinessGreen.com: "We don't comment on speculation and will not be drawn into running analysis on the spending review."

The government is facing growing fears that the spending review will hit environmental policy particularly hard. The latest letter comes just days after businesses and MPs signed a statement demanding that the Green Investment Bank be provided with £4-6bn over the next four years to boost low-carbon investment and jobs.
However, the latest move in the campaign to protect the feed-in tariffs was overshadowed somewhat by reports that Huhne yesterday went into the government's "star chamber" where the programme of departmental cuts is being finalised, suggesting that the all-important decision on the future of the scheme may have already been taken.

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