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Knock On Effects of the FIT Falling

As an industry, there are massive concerns that sales of solar panels will tumble. We have a network of solar panel installers across the UK, and have already had quite a few companies ringing us this morning saying that they no-longer want to purchase details of people interested in quotes. This is because all of these companies have large warehouses filled with expensive solar panels that they have already paid for, but which they will, if the FIT falls as in this leaked document, not be able to sell for anywhere near the current market cost of a system. This will cause massive losses to companies across the UK in the short run, and may push many of them out of business due to cash flow issues which typically plague small businesses in particular.

In the long run, what will happen to the industry? Having spoken to a few companies today, they are confident that massive price reductions from their foreign suppliers will allow them to continue trading. However, it seems inevitable that margins both here and abroad will have to take a very large hit in order for any volume of trading to occur in the solar market. With the proposed changes to the FIT, if the price of solar panels didn’t change, then the payback period would increase from approximately 10 years to 18 years, with the percentage returns on the investment falling.

What will this mean to consumers? It’ll depend on the supply side. If solar panel producers cut their costs dramatically, and solar companies are forced to reduce their margins, then the cost of solar panels will fall whilst the earnings will also fall. This means that solar power will actually be made more accessible to lower income households. However, it is unlikely that the panels will decrease by so much as to counteract the drop in earnings – instead, the panels will decrease in price, but the earnings will decrease by more, hence solar panels will become cheaper, and the payback periods will slightly decrease. Therefore, they will be more accessible to poorer households, but a less profitable investment and therefore total solar panel installations will fall, and a lot of people will lose their jobs, with very little notice.

As energy prices continue to rise, we're confident that there will remain some demand for solar, but in the short run, there will be mayhem caused by these changes in the industry. If the government would announce these changes with months of notice and much greater certainty, then large changes would have much smaller effects - anything that is an investment needs certainty.