Professional Builders Merchant

There has been much discussion within the industry about the cuts imposed to the subsidies under the government’s Feed-in Tariff, with a reduction from 43p per kWh to just 21p per kWh. Whilst having its most direct impact on manufacturers of solar photovoltaic systems and their installers, it is a significant issue for the merchant market — even if you don’t sell such renewable technology ranges.

The lower tariffs have been brought about in light of evidence that the installed cost of solar PV systems has reduced significantly — somewhat paradoxically, largely as a result of the growing demand caused by initiatives including the FiT, with sales having increased dramatically since its introduction in April 2010.

And with installed costs reputedly now some 35% lower than they were just twelve months previously, most of those directly involved in the market were anticipating a reduction. What has shocked many is the severity of the cut — at more than 50% — and also the timeframe. The changes were revealed on October 31st and come in to play on December 12th, leading to concerns than numerous planned PV installations will now be placed on indefinite hiatus.

Certain companies have reported a massive ‘last minute’ surge in demand to schedule installations ahead of this deadline, and of course there are still numerous benefits to be had once the date has passed — albeit at the reduced tariff rate. Absolute Solar and Wind, for instance, is reminding its customers that they will continue to enjoy around an 8% return on investment in addition to savings on their household energy bills. However, understandably, many from the sector have rallied against the decision, describing it as an ‘own goal’ and as being “completely at odds with the government’s current policy of ‘firing up the engine’ of the British economy.”

Yet beneath the justifiable vested interest heckles, further details of the amendments reveal much wider — and more positive — implications. Other than the falling installation costs, a major reason for the change was a recognition that in order to qualify for the FiT buildings must meet minimum energy efficiency standards — up to Level C of the Energy Performance Certificate (EPC) — and this clearly makes sense. If the fabric of the building is essentially sub-standard, a rush to install PV panels on the roof is simply a fool’s errand.

What is important is that this current ‘destructive news’ doesn’t destroy consumer confidence in the solar market and beyond — especially, as the likes of Ploughcraft’s Chris Hopkins asserts, when there are so many positives to be seen. The falling production and manufacturing costs of solar PV means that installations are becoming more accessible to the homeowner, and if they must now consider a broader approach to energy saving measures it can only lead to improving the overall comfort levels in their homes and cheaper utility bills.

As Viessmann’s MD Graham Russell argues: “If the government wants to make the link between building efficiency and incentives for energy production, we believe it should look at establishing a minimum set of home upgrades which include having a condensing boiler, cavity wall or solid wall insulation and modern heating controls.”

To paraphrase, this presents a great opportunity for (selling) a far broader range of energy efficient home improvements. And with a greater emphasis now being placed on a holistic, whole-house approach to carbon reduction and energy saving — with the Green Deal and the Renewable Heat Incentive schemes still to follow — the market potential for builders’ merchants can only grow.