Why Cutting Solar Subsidies Will Speed Up the Clean Energy Revolution

30/08/2015 20:51 | Updated 30 August 2016

The UK government has just announced that people will get close to 90% less money than before for installing solar panels on their homes.

Greenpeace and Friends of the Earth are in despair. But for a maturing UK solar power industry, the proposed cuts are a blessing in disguise - and, if implemented, will end up meaning more and cheaper solar panels across the UK.

Just look at Germany. There, solar subsidies have been cut significantly over the last few years, but the solar industry kept on growing. The reason is that the cuts have led to greater competition and standardisation between German solar companies. This has meant a sharp fall in prices and many more solar panels being installed all over the country. The Germans keep on putting them on the roofs of their homes, offices and factories.

The same thing can happen in the UK. Even though the Germans are quite a bit more advanced than us when it comes to clean energy, the British solar market should be able to stand on its own two feet. Around 700,000 UK households have installed solar panels since 2010 and received generous tax-free payments from the government. That is still a way off the total of 26 million households in the UK, but not a bad start.

A big reason why many have still not installed solar panels, however, is not the size of the government pay-out. It's the idea that solar panels are still a bit of a "fringe" energy source. It's not really something for each and every one of us to put on our houses - even though eco-celebrities like Orlando Bloom have tried starting a trend with his solar panel-covered London home.

But cutting subsidies can do something about this. By forcing the industry to cut prices further, faster (because they can) and become more mainstream, we could end up with people from all walks of life embracing solar panels in UK in the years to come. Instead of being sold to those with a special interest, solar panel companies can follow the UK supermarkets of the sixties and seventies to pile 'em high and sell 'em cheap.

In countries like Australia and India - with as young solar markets as the UK - investors like us have continued to pour money into solar power even after similar subsidy cuts as in the UK. This shows that the German case is not an anomaly: solar companies across the world are able to cut costs and adapt to a subsidy-free reality. Since 2008, the global cost of installing solar panels has actually fallen by as much as 80 per cent, and contractors have made big strides in operating more cheaply and efficiently.

Naturally, other countries with even less developed clean energy will still need solar subsidies for some time. (The extent of these, however, pale compared to the £3.45trillion(!) spent every year globally on fossil fuel subsidies.) But a solar industry in the UK that thrives with decreased government support will be yet one more demonstration to other countries that clean energy is profitable without subsidies. And that can only be a good thing, given that the competition - oil, gas and coal - isn't.

The important thing is that the primary virtue of solar panels is not the pay-out the government gives you for installing them; it's the fact that they're cleaner and more efficient than other sources of power. They do actually pay for themselves.

Despite the panic some feel when solar subsidies disappear this quickly, solar power is in no way going to disappear as an energy source. Quite the contrary, in fact: the on-going clean energy revolution is only going to accelerate - 40 gigawatt of solar power was installed across the world last year, compared to just seven gigawatt five years earlier.

Five years from now it will be a lot more. So don't be surprised if one day in the near future you wake up to find a solar panel on your roof.