Solar Panels: Feed-in Inequality?

A few weeks ago I met a friend, Daniel Quiggin, at the Bristol Harbour Festival who was running a DIY solar panels workshop. Mentioning that my parents had recently installed solar panels on the family home in London, I sparked a long discussion about the economics of solar panels, the conclusions of which shocked me – though perhaps they shouldn’t have.

Until last April, government support for photo-voltaic (PV) solar panels – those that produce electricity – came in the form of a grant. This wouldn’t cover the full cost, but would go some way towards it. The scheme was underfunded, demonstrated by its rapid exhaustion long before it was due to end. But the important point here is that the grants were government funded and so raised through (arguably progressive) taxation.

The current form of subsidy for home PV panels is through something called the ‘feed-in tariff’. The idea is this: homeowners treat any installation of PV panels as an investment,the returns on which are guaranteed (within reason) by money paid to the producer (i.e. homeowner) for each unit of electricity produced, even when it is consumed by that same producer. Given electricity produced by PV panels cannot be stored, sometimes it is exported to the national grid (if you’re on holiday, say, or everyone’s out of the house). In this case you’re paid twice: once for generation, and then once for exporting. Over time (depending on the size of your investment) this allows you to claw back the initial outlay (helped by the fact your electricity bill is reduced). After this, you might even start making money.

As it stands, there doesn’t appear much difference between the two – one was a lump sum, the other a monetary drip feed – but they both contribute to covering the cost of investment in solar panels. Undoubtably the feed-in tariff is having an effect; solar panels are increasingly visible in the physical environment. But take a closer look: which buildings are they on? Walking round a poor area, you’ll struggle to find a single panel. Yet in middle class neighbourhoods the fruits of the feed-in tariff are being borne. Herein lies a problem, and one we should have been looking for in the first place: an increase in inequality. Being a common (if not defining) feature of our societal development over the last two or three decades, is it a surprise that a scheme based on financial incentive – and designed by government and the ‘big six’ utilities companies – will exacerbate, not alleviate, the problem?

Its root lies in the refusal of the big six and the government to cough up the cash needed to subsidise solar installation. The feed-in tariff contributions come instead from a surcharge added to consumer bills, pushing up prices by an estimated £8.50 a year (though this can’t be verified). Because of the removal of the grant system, only those with a few spare thousand pounds can afford the up-front costs of the PV panels. This leaves those who can’t (i.e., the poorer households) unable to ever access the feed-in tariff subsidisation of PV installation. Result: poorer households pay for middle and upper class households, and organisations, to install PV – cutting their electricity bills, generating tariff payments and adding value to their properties (to the tune of £1170 per year for a ‘typical domestic’ system). Worse still, each of the big six are now approaching those with large roofs with an attractive proposition: we’ll give you solar panels and the electricity they produce for free for (say) twenty five years. In return, we keep the feed-in tariff payments. Result: poorer – and other – households boost corporate profits, while enabling those with larger roofs to access free electricity. Whilst this second scenario has been curtailed somewhat by recent cuts to tariffs for larger-scale projects, in both cases we see a straightforward transfer of wealth from poorer households upwards, whether it’s to my parents or E.On.

Yet it is not only wealth that is being transferred, but access to energy. Energy prices, as a result of peak oil, are going to keep rising. This is basically indisputable (though often disputed). The greater your access to energy independent of long supply chains and international distribution, the less vulnerable you are to future price rises. So while the increase in financial inequality should concern us, so should the increase in energy inequality. And of course, the two are linked: the more money you have, the more energy you may access.

To boil it down: the feed-in tariff allows richer households and organisations to decrease their energy costs and their vulnerability to future price rises at the expense of poorer households who cannot afford the upfront costs to benefit from it. Additionally, the same utilities companies raising their prices every quarter have opened a new channel by which to extract wealth from consumers. It’s a reverse robin hood tax, and one in the context of national energy poverty so severe that Siberia has lower levels of excess winter deaths than we do.

There are some reasons to be hopeful: groups like the Bristol Energy Cooperative are using the feed-in tariff just like the big six, except instead of reaping the payments for a profit, they immediately re-invest them in further installation. Their targets are usually community groups with suitable roof space, which should benefit the poorer in society. Yet this is indirect, relatively small scale,and still paid for primarily by the poorer consumers – hardly a beacon of progression. Outside of the national grid, Daniel Quiggin’s DIY solar workshops provide low income households with the skills to build their own panels and use the energy generated onsite. This reduces the cost of acquiring solar PV to at least a quarter of that of a “normal” system whilst, importantly, also educating households about energy consumption.

Many argue that at least someone is installing the damn things (however they’re funded), thus pushing prices down and making them affordable for all. This despite the fact PV panels often enable people to maintain or even increase their energy consumption, inconsiderate of a future essentially characterised by the consequences of peak oil and radical shifts in our way of life. Lastly, while an extremely valuable technology, solar panels are not going to prevent the climate change juggernaut.

Whichever way you want to view it, remember this: the best we could come up with to encourage a shift to small-scale and low carbon energy generation is producing a hidden transfer of wealth from poorer to richer. If this is our way of preparing for the future, it rings with the echoes haunting our present.