Solar Subsidy – Government That Works 58


One of the ways I stop myself getting over-depressed in periods whent I am skint is to make plans for what I will do with money when I have some. At the moment I am looking at mounting solar panels on my roof.

I intend to put up 12 panels producing 3000 kWh per year, at an initial cost of about £7,000. This will produce an income based on the feed-in tariff of about £750, index linked, on official statistics, and probably a little more as Ramsgate is one of the sunniest part of England, and my roof faces perfectly South with a 32 degree pitch. This works well for me as a personal investment – hard to get an index-linked and safe return over 10% nowadays.

This is of course because the feed-in tariff, at over 40p per kw/h is far greater than the current economic cost of generation (the gas turbine power station we have just built in Ghana, for example, produces at a full cost of about 10p per kw/h).

BUT we are going to produce ourselves over half the electricity we use. What is more a whole new industry has been kick-started. In getting quotes I have been besieged by local firms, all based within a few miles from here. That is an awful lot of people employed, paying tax and not claiming benefits. With this artificial stimulation of demand, the price of solar panel installations has plummeted as production savings kick in. In three years the cost per kw/h has halved. I will not be surprised if it halves again. As fossil fuel costs continue to rise, this will become a fully economic way to produce electricity. The kick-starting of that process by the feed-in tariff is a rare example of the government creatively stimulating the economy to promote economic growth and employment.

The government has put countless billions in bailouts and guarantees into propping up rich bankers and protecting them from the consequences of their uselessness at their job. Quantitive easing has given them a further £225 billion. Think of this. That £225 billion has been used to subsidise useless bankers by giving them good money in return for junk assets they had invested in. Not a single penny has found its way to anybody else but a banker, as increased bank lending has not happened.

Quantitive Easing has been described by paid apologists of the 1% as neo-Keynesianism, reflating the economy. Utter bollocks. It is a transfer of wealth to rich bankers, paid for by everybody else as high inflation. But what if the £225 billion created by quantitive easing had really been used in a Keynesian way, for public works?

What if it had been used to insulate everybody’s home, to give everybody solar panels, micro wind turbines, and heat pumps? What employment and growth would have been created then? What if we had built high speed railways and the Severn barrage?

No – they just gave the cash to the fatcat bankers. The solar feed-in tariff is the only measure of government economic stimulation I can think of. The Conservatives wish now to abandon it, on ideological grounds.


58 thoughts on “Solar Subsidy – Government That Works

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  • nuid

    You’re making me so angry. No, I don’t mean you, yourself. I mean what you’re writing about.

  • enki

    Unfortunately, this scheme probably just shifts money from poor households (who don’t have capital to invest in solar panels and will pay increased fuel bills to subsidise the feed in tariff) to middle class households (who do have capital and whose energy costs will be reduced) without making a substantial contribution to reducing carbon emissions.

    http://www.monbiot.com/2010/03/01/a-great-green-rip-off/

  • gyges

    Craig

    You’re participating in the transfer of wealth from poor to rich.

    You should be ashamed of yourself.

    Shame on you.

  • Clare

    The energy companies are offering the same service to the poor by amortizing the capital costs onto their future energy bills. I don’t know whether the effective rate of interest outweighs the return on the feed in tarriff or not. Either way, Craig’s point is still good as extra work is generated by supply and installation although in these cases the profit is taken by the energy co.s rather than independent contractors. It’s still real product and service though and better than QE.

  • Stephen

    Craig

    I daresay you will call me a paid apologist or a neo Keynesian – but QE does not work as you say – nearly all the assets purchased to date have been UK Government gilts together with a small amount of highly rated corporate paper – this is not junk by the normal definition of the term. Go and research it on the B of E website if you don’t believe me.

    The idea of QE is not to make a transfer of wealth to the bankers (that has been achieved by other means i.e propping up the entire banking sector by supporting the banks that would have otehrwise have gone broke) – but to encourage the banks to lend more by making their balance sheets more liquid. If there had been a massive growth in lending (or money supply) without any increase in output – then you might have had an argument that QE had led to inflation – but it hasn’t.

    The inflation we are experiencing now is largley imported – and is no doubt being exarcabated by all the speculative activity being undertaken by hedge funds and price fixing/market manipulation by some multinationals – but it really isn’t due to QE.

    You clearly draw much of your economics from the old Milton Friedman monetarist school – but I think you will find that most monetarist economists were and are in favour of a relaxtion of monetary policy in the current economic climate. Keynes himself also favoured a relaxtion of monetary policy in a recession as well as a loosening of fiscal policy.

    Of course as an old fashioned Keynesian, I don’t think now is the time for a tightening of fiscal policy and it cwertainly shouldn’t have started until the economy was growing. This of course was the expressed view of the LibDems during the electtion – but unfortunately they were led by a charlatan who kept his true views quiet until after the election – perhaps we should blame the members of that Party for not holding its MPs to their electoral commitments?

    I of course share the view that there are many things wrong with present day capitalism – what I don’t share is the nihilism in which many on this website rejoice. The reality is that we need to get markets/capitalism working and regulated properly in everyones’ interests – the barter/central planning models have even greater weaknesses and all else sounds like incoherent gobbledegook. There is plenty of serious thinking around about how capitalism should be regulated managed if anyone cares to look – Ha Chung’s latest book is a pretty accessible starting point.

    Re solar power – I cannot help thinking that putting c20m2 slabs of panels on the roofs of private houses is a pretty inefficient way of going around developing alternative energy.

  • Ed Davies

    Right first time, it’s “kWh”. Subsequent “kw/h”s would be very unusual units and are not what you mean.

    Note, though, that there’s quite a high probability that the FITs rates will drop substantially in the near future. How much of the reductions will apply to installations which have already been commissioned will be interesting to see. Primarily this is because the scheme has been so successful: the prices of PV have dropped a lot and the uptake has meant that most of the money committed has already been taken.

  • craig Post author

    Stephen,

    I don’t see how that works. Assuming you mean British government bonds, as opposed to Greek or Spanish or Italian, what incentive would the bankers have to sell gilts to the Bank of England for cash? Unless they were offered a heavy premium, in which case that is indeed just a way of giving more money to the bankers.

    I disagee that QE is not connected to our increased inflation, or that the current inflation rise is due to rising costs of imports. Mind you, we are about to see an end to the largely Chinese produced continuous fall in prices of basic consumer goods, which has been holding back inflation.

  • evgueni

    “.. every encouragement to labour, every reward bestowed upon industry, beyond the natural price of its product, is a gratuitous gift, a bribe taken out of the consumer and offered in his name to a favourite of power, in exchange for zero, for nothing. To encourage industry, then, is synonymous at bottom with encouraging idleness: it is one of the forms of swindling.” Proudhon, 19th century.
    .
    I would like a demonstration of the benefits to ME of subsidising YOUR energy consumption, Craig.

  • Stephen

    Craig

    The gilts are not necessarily purchased from the banks but also from pension funds etc. who then place the funds into the banking system. The premium didn’t have to be too high to get them to hand over long gilts (yes they are UK gilts) and it also has the benefit of pushing longer term interest rates down. You will also find that the BofE gets a nice turn in its QE operations.

    You may disagree that QE is not connected to increased inflation – but if it is could you please explain the mechanism by which this occurs. You may wish to look at the overall money supply figures first however. You may remember the old Cambridge research (letter to the Times) that gave a better correlation between bubonic plague (with an arbitrary lag) and inflation than Friedman’s theory (based on an 18-24 month lag) – which demonstrated the need for some understanding of how the inflation was caused rather than just saying A happened before B, therefore A caused B.

    I think that you may find that it is Chinese demand that is usually given as the root cause for much of the commodity price inflation that we are suffering – although the speculators and hedge funds may be using this argument to their advantage.

  • mary

    Those who really need it won’t get it.
    .
    21 October 2011 Last updated at 16:53

    Social tenants to miss £120 solar savings
    By Simon Gompertz
    Personal finance correspondent, BBC News
    .
    Workmen installing solar panels on to the roofs of homes in Delabole near Bodmin (photo)
    .
    Related Stories
    Solar panels for council houses
    UK solar panel subsidies slashed
    Renewable heating scheme unveiled
    .
    A pioneering project to provide 22,000 tenants of social housing schemes with solar panels generating free electricity is in jeopardy.
    .
    Fears the government will cut subsidies for solar installations has led to financial support being put on hold.
    .
    The project had been planned by Empower Community, a social enterprise.
    .
    Empower says families would have saved an average of £120 from their electricity bills by using free solar power during daylight hours.
    .
    Empower’s project was supported by eight local authorities and housing associations, along with charities and a major pension fund.
    .
    http://www.bbc.co.uk/news/business-15402997

  • ingo

    Good idea for those who can afford it, like you say. £ 7000 is still a tidy sum. My advice is shop around and do not forget that continental firms have already done this sort of work for decades, they might be cheaper. I
    In Norfolk we can see the semi public contratcors and housing association benefit most. Saffron is installing solar panels on most of the roofs it now owns, tennants get cheaper bills allright, but Saffron is getting the feed in tarif, it owns the roof, not the tennats.

    Some schemes purport to ‘rent’ your roof and they want it for 25 years in return for cheaper bills. This has the complicated extra that, should one want to sell, the new tennat would have to agree to the contract and use of his roof which is owned by the company who leased it for the time agreed.

    The level of feed in tarifs are subject to respective Governments, but EU FIT regs., you know, by the hated Brussels controllers, blah blah, bent bananas blah blah, has been enshrined in EUI legislation and agreed by industry, so it cannot be removed alltogether.

    If the Government thinks it can give lucrative FITs to the Crown estate wind turbines reaching beyond territorial waters into the North Sea, whilst giving puny returns to householders, then they are mistaken. There is one FIT for all and if it decreases with decreasing demand and whole sale prices then that is acceptable.
    Energy prices are going up, despite the flatlining economies, higher demand during winter should also mean higher FITs, if FITs are not related to market pricing and are kept low arbitrarily, then the Government is stalling its own green energy drive and CO2 reduction targets, such equation would be just another robbery.

  • Stephen

    Craig

    I don’t disagree with your view that the Govt is being soft with the banks/financial sector – its just that it is in areas other than QE.

    Banks also have a legitimate function in recycling savings into investment, rather than the more casino like activities of recent years, if you stop or don’t encourage the legitimate function happening when there is a recession then I’m afraid it will be ordinary people not the bankers who will suffer the most.

  • Richard

    Unfortunately, the subsidies for wind and solar are, an environmental red-herring, and simply increase the cost of energy for everyone. We have 10% of people in fuel poverty, and this won’t stop rising till we stop *wasting* money on feel-good eco projects.

    What we should do is:
    1. Stop ALL the subsidies for inefficient power production.
    2. Build new nuclear plants. These are still the safest form of energy out there. This is worth saying twice: Nuclear isn’t the “least worst” option; it’s the absolute best one.
    3. Move the tax system so that VAT becomes a CO2 tax instead. Same total tax-take, but charged on CO2 emissions (including imported ones).
    4. Invest some more money in R&D to produce practical renewable power, rather than politically-viable power. The current generation of renewables aren’t good enough – we shouldn’t be deploying them.

  • JimmyGiro

    I agree with Richard; and I would add, a better use for solar power generation is to deploy giant ‘solar farms’ in places that can best utilize them, such as the Sahara desert, which is fit for bugger-all else really.
    .
    The North Africans can earn by working these giant installations, plus rent charges, and Europe can buy the surplus electricity, transported via high-tension power lines through Sicily-Italy, and through Morocco-Spain.
    .
    But repeating Richard, Nuclear is the best option; artificially expensive due to bureaucratic hyper-administrative health and safety demands, so potentially much cheaper if the political will was there.

  • mark_golding

    Stephen,
    .
    I agree with Craig, QE is bollocks in our times, yes it appeared to work in the 1930’s great depression, but consumer demand was different, the government then like Bush encouraged spend, spent spent – Hey here’s $500 – take it – Ah! pay it back at a few dollars a week – that’s OK we can trust you – here’s a card.
    .
    Like Craig has told us Chinese imports of cheap basic consumer goods is drying up, wages are stagnant, benefits are being slashed, pensions are frozen and joe public is very cautious and looking for ways to reduce outgoings; so, we have less money to spend – hey many people are struggling to pay their energy and water bills – and even Sky is witnessing a decline in entertainment packages; restaurants are closing, replaced by take-away treats on pay-days and high days and allotments now have long waiting lists. Today the staples of fuel, food and manufactured goods are mainly imports and are rapidly rising in price. This reduces demand for consumer goods and services which then negatively impacts the economy- QE’d low interest or not.
    .
    All this is really common sense – the politicians have been screwed and they will now screw us and laugh because three political parties are really one – sorted!

  • ingo

    Whilst it is easy to agree with CSP plants in the Mahgreb as envisaged by DESERTEC, the idea of being wiped around the mush with a wet fish, twice and once again agree with more of the same connventional nuclear fusion, only choosen to create plutionium and arm rogue states with nuclear arms, is alien to me.

    I have some time for Thorium reactors but I’m afraid that I do not entertain being dependent on french nuclear power and Russian Oligarch controlled gas.
    Fact is that some 30.000 pensioners are freezing to death each winter due to high prices and dependencies on ripp off merchants, whilst the proponents of poetic notion for one’s unspoiled views of the landscape, our Engeland of rolling hills, are walking all over their dead bodies. This is not acceptable anymore.

  • craig Post author

    Mary –

    Ingo is right. The Empower housing association scheme and similar schemes are a scam. The tenant gets about 10% of the benefit, from slightly reduced electricity bills. 90% of the benefit – the feed-in tariff, goes to Empower, a bit of it shared with the Housing Association to help it keep up its colossal executive slaries, company cars, free executive housing etc.

    Interesting this is “housing associations, local authorities and pension funds”. There is a Blair spinoff vehicle called Empower which gets, or tries to, aid funded payment for very expensive temporary energy solutions in Africa. Completely New Labour, headed by “Lord” Cohen if memory serves. If “Empower community” is linked to that New Labour cream-off-public-money Blair croney vehicle, the Housing Association link makes perfect sense and I can guess which kind of local authorities and pension funds are involved.

  • anno

    Again 100% spot on, Craig. Don’t do it again, please. I’ll have nothing to complain about. The government has borrowed lots of money to fund this scheme, so it isn’t entirely clean. What they should have done is what Gordon Brown would have done if the Banks
    hadn’t forced a change, give grants for all houses’ outside walls to be insulated in the UK. That would have kept the entire construction industry, electricians, deocrators, decorators, joiners etc busy for 3 decades. Not enough brainpower in government to do the obvious, necessary thing. Ever, I’m afraid.

  • craig Post author

    If, for example, Ingo were God’s only son, and had never ever mentioned the fact to other commenters on the blog, I should consider that remiss of him. Oops wrong thread. Enjoyable theology on last one.

  • evgueni

    Energy consumption for my 3-bed semi is ~18kWh/annum (combined gas & electricity). 3kWh is but a 6th of that total, woo-hoo. Worth £7k?
    .
    Here’s another fly in the ointment – I cannot guarantee I will stay in my house for 5 years, yet alone 25 years. Can anyone?
    .
    I smell ideology. Has greenflation been mentioned already? 🙂
    .
    The above notwithstanding, I anticipate a “revolution” of sorts when the means becomes available to individuals not only of generating energy economically, but also of storing it. Safe, low-cost, high energy and power density Li-Ion batteries are currently the best contender, e.g. those based on lithium sulphur chemistry (Oxis Energy, Sion Power). Once this is in place, the energy monopoly will have real and unstoppable competition. Or am I being too optimistic?

  • mary

    I wish you had not told us about Blair and Africa! His megalomania is rampant. I had no knowledge of this outfit he started but I knew about his ‘Faith Foundation’ stuff. Does anyone know about Kate Gross who he has just made the AGI CEO?
    .
    http://www.africagovernance.org/africa/index/
    .
    I cannot see a link there to ’empower’ on that site although I found one elsewhere where Cherie is helping the women of Lebanon to achieve empowerment. She was there last week launching it. What a truly dreadful pair they are.
    .
    The solar power company etc Empower Community Association LLP mentioned in that BBC article is registered to a private house (called Chequers!) in Dunmow, Essex and to the name Alex Grayson, Managing Partner. ?? http://empowercommunity.co.uk/

  • mary

    As you read this, you will feel a cold anger.
    27 October 2011
    .
    Margaret Thatcher claims £535,000 for ex-PM duties
    Margaret Thatcher was the longest serving prime minister of the 20th Century
    .
    Former Prime Minister Margaret Thatcher has claimed £535,000 of taxpayers’ money over the last five years, government records have shown.
    .
    Baroness Thatcher, 86, who makes rare public appearances and suffers poor health, was paid from the public duties cost allowance available to ex-PMs.
    .
    Others to benefit have been her successor John Major, paid £490,000 in the last five years, and Tony Blair.
    .
    In 2008-9, Mr Blair claimed £169,076 – more than his Downing Street salary.
    .
    Since leaving office, Mr Blair, who ran the country for a decade from 1997, has claimed just under £273,000.
    .
    The system was set up by John Major in 1991, after one year in office, to reward former prime ministers for work including answering letters and attending public events.
    .
    In the past five years, the three former number 10 incumbents have cost the taxpayer in total more than £1.7m in public duty allowances.
    .
    The figures were revealed by Cabinet Office minister Francis Maude following a written Parliamentary question from Tory MP Philip Hollobone.
    .
    Mr Maude said: “The public duties cost allowance is kept under review.”
    .
    In 2005, doctors advised Lady Thatcher, who served three consecutive terms in office, that she should not make public speeches in the wake of some minor strokes.
    .
    But she still attends some public functions, including an address by the Pope during his state visit to the UK last year.
    .
    In September, she attended a party to mark former Defence Secretary Liam Fox’s 50th birthday at his London apartment.

    .
    http://www.bbc.co.uk/news/uk-politics-15486792

  • writerman

    Good luck with the solar project Craig. I’m considering doing the same thing, though mostly to stop my two daughters telling me to put my money where my mouth is… they can be so… cruel!

    Why don’t we use our resources more sensibly and efficiently? It’s because the ‘transfer of wealth’ this would lead to is an anathema to the 1%, they want it All!

    It’s tragic. So much, could so easily be done, by so many, to reverse the ghastly course the ‘Titanic’ is on, it’s rendezvous with the iceberg of environmental disaster, and all with existing technology. But what we lack is the political will and leaders is sadly lacking. Isn’t this the worst Parliament ever? Who are they supposed to represent exactly? It’s certainly not the 99% of the population, rather the 1%.

  • Komodo

    Hate to say this, but if you’ve got seven big ones to decorate your roof with, you ain’t skint…but good luck to you. However, I can’t shake the idea that the expected lifetime energy production from a solar array is generally overestimated by the manufacturers, and that there is no guarantee that the feed-in tariff you agreed to will be applicable five years down the line, let alone twenty. (Look what happened to company pensions). It’s a loss-leader. Sorry to be so negative, but I am more skint than you are….

  • Matt

    Craig,
    it’s a nice idea, putting government funds to practical use with insulation etc., rather than bailing out/lining the pockets of the corporatocracy. Unfortunately, it probably wouldn’t work…they tried something similar (government funds for roofing insulation) here in Australia and it was so badly handled that people died (from improper installation of the insulation by inadequately trained workers).

  • Fork it

    I understand that the technology to create ‘free energy’ has existed on this planet for a long time and that despite efforts to deliberately keep the human race in a state of dependancy on the oil cartels etc, a guy in Australia has come up with a small generator that creates energy. It has been looked at by a number of independant scientist who although at first refused to believe it, have verified that the generator creates five times more energy than it uses. It uses magnets to create perpetual movement from which energy is derived. More information on this story is on youtube FREE ENERGY GENERATOR AUSTRALIA. Another example involves a guy in the states who found a way to make his car run on water instead of petrol! See WATER RUNNING CAR GETS 100 MILES TO THE OUNCE on youtube. Self sufficiancy for the masses frightens the 1%.

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