Energy buyer cautions government over FiTs review

One of the UK’s biggest buyers of energy has stepped into the debate about feed-in-tariffs by warning the government that it must “strike the right balance” and not put money […]

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By Kelvin Ross

One of the UK’s biggest buyers of energy has stepped into the debate about feed-in-tariffs by warning the government that it must “strike the right balance” and not put money “directly into the coffers of big business”.

This week Energy Secretary Chris Huhne launched a comprehensive review of FITs following growing evidence that large scale solar farms could soak up money intended to help homes, communities and small businesses generate their own electricity.

Today, M&C Energy Group, which purchases £6.25bn of energy annually for its clients, warned that the government “would have to be careful”.

M&C energy analyst David Hunter said: “While M&C encourages green sources of energy generation, we are calling for the government to be extremely careful when agreeing tariffs, especially since once agreed, they are guaranteed and index-linked for 25 years.

“The government will have to strike the right balance – be generous enough to encourage homes and small businesses to take part, but not too generous so that it can be results in even higher, uncompetitive energy prices.”

Mr Hunter said that M&C hoped that the £400m allocated to the FITs scheme “delivers on the objective – to help homes and small businesses save on their energy bills, not become a money maker for big business”.

He stressed that the UK should look to its European neighbours before taking any final decision on FiTs. “Feed-in tariffs are new to the UK, but have potentially massive cost consequences long-term. Germany has had them for a decade and has successfully increased the share of power production coming from wind and solar power, however its energy prices are among the highest in the EU and Angela Merkel is now concerned about energy costs and business competitiveness.

“Spain made their ‘feed in’ tariffs so generous for solar that the government have had to renege on the price guarantees.The implied subsidy – paid for indirectly by every customer – is many multiples the wholesale market price. When 19,000 are taking advantage as in the UK, no problem, but as Germany shows, the costs can really add up. Germany expects to have spent €46bn in solar subsidies alone by 2030 – and the cost of feed-in tariffs there are expected to rise by 72% in 2011 alone.”