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UK Solar Market Tumbling?

Looking through the news for information on solar power this week provides a bleak outlook – the Guardian newspaper broke a story yesterday declaring the the number of installations of solar panels on people's homes have fallen by “almost 90% in the weeks since the government halved the subsidy available”.

However, these headlines can be a bit misleading! Whilst a 90% fall sounds very dramatic, that is comparing literally the busiest ever time in the UK market to the period immediately following the decrease in the tariff, as shown in this graph:

Source: Department of Energy and Climate Change

Our office deals with enquiries for solar installations on a national basis so we have a good day-to-day feel about how busy the UK solar market really is. As shown in the above graph that was used in the Guardian article, certainly we have experienced a similar pattern in terms of our number of quotes requested through our website.

The claims of a 90% decrease though are misleading. There was a huge drop in the numbers of quotes straight after the deadline had passed, but the figures have since recovered. Our call centre reached an all-time low at fewer than 100 verified enquiries which we passed to companies the week of April the first. Demand since then gradually built up over a fortnight, and we're now dealing with closer to 300 verified enquiries a fortnight of people wanting to get several quotes for solar panels.

The reason why demand has recovered is that, in-line with the government's reasoning for introducing the lower FIT rate, solar installers in the UK ave managed to offer significantly lower prices for supplying and fitting a system – we're hearing quotes of approximately £8,000 for a 4kw system, which would have likely cost £15,000 or more in 2010. Despite the lower rate, the percentage returns are still therefore very attractive and for those who take the time to have a survey of their property, for the majority of people solar panels tend to be a no-brainer in terms of an investment. In fact, the lower prices arguably mean it's even more attractive now than ever – the main thing putting people off the installation process was the sheer capital requirement. Now that this is much, much, lower, attracting investors in these systems should arguably be even easier. The issue is now instead that the uncertainty due to the way the government tried to fast-track the drop in rates is probably the biggest factor causing people to spend their money elsewhere. Would you want to spend &8,000 on something which could suddenly drop in value, even if the government states otherwise at first?

How does the future look? We are still worried about the solar market. Our concerns over the Feed in Tariff have altered our business strategy dramatically; we are currently expanding into France through trying out several industries there, in order to diversify. If the market had remained as strong has pre-the announcements that the tariff would fall, then we would have continued spending a greater fraction of our budget on marketing for a solar websites and getting people to sign up for our service. Due to the changes, we've noticed that generally the conversion rates of our websites (the percentage of people who visit the website and leave their details for us to contact them) has fallen too, making advertising more expensive because a greater fraction of people are searching for information rather than to request a quote because they're uncertain as to the situation.

We hope that the market will continue, not only for the sake of ourselves, but for the sake of other business in one of few industries which has really boomed during difficult economic times. Construction as a whole has really decreased following the 2008 credit crisis, and the recession. Now, I'm in contact every day writing articles for home improvement or building websites saying that their sales are starting to recover. Even this steel buildings manufacturing company reports that they are now investing in their marketing again and realising life will go on, and the US has had an even worse time than the UK with greater unemployment rates following their economic crisis. The UK solar market is fragile, and demand will only be found if solar can produce electricity at the same or lower cost of mainstream power, or if the government can continue to subsidise it. In the short run, the UK probably will see many solar companies going bust – we hope that the changes to the tariff at the next review are less severe – but in the long run, thanks to investment across the world from other governments, the technology looks set to continue decreasing in price towards grid parity.