2 issues that could change the trajectory of the UK’s solar PV industry

by Solar Selections on February 25, 2013

EU VAT and import tariffs solar panels

The UK’s solar panel industry has entered what is widely believed to be a state of relative stability after over a year of turmoil during which generous government feed-in tariff subsidies were slashed erratically following significant drops in the cost of installing a solar system. Now looming on the horizon, however, are twin threats that could potentially derail this unsteady equilibrium. One is a legal challenge from the European Commission (EC) that could result in the UK government being forced to up VAT rates on solar panels from their current 5% to 20%. The other is the threat of a reversal in the trend of falling solar prices should the EC impose tariffs on cheap, imported solar modules from China.

A false sense of stability for the UK’s solar industry?

The fact that the solar panel market in most countries is driven by government support in some form or another is no secret, but support levels are dropping in most places as the cost of the technology approaches unsubsidised affordability. The UK is no exception. Feed-in tariff rates have been adjusted to reflect the fact that system prices are coming down, although few would say that the implementation went smoothly during the first part of the program’s existence, which was characterised by sudden, premature cuts and court challenges.

Solar installation companies have finally begun to breathe easy now that feed-in tariff rates are reduced quarterly and gradually, and system installation prices–currently sitting at around £1.31/watt in the UK–are such that returns on investment are comparable to what they were back in the feed-in tariff’s peak days. The attractiveness of solar panels as an investment for households and businesses means happy solar system owners, as well as a healthy solar panel industry.

EU ProSun’s anti-dumping claim against Chinese panel makers

The fall in solar system prices has occurred in large part due to China’s agressive support for its domestic photovoltaics (PV) manufacturing industry, which has expanded dramatically in the past few years and flooded the global market with low-cost panels. This has forced other panel and cell manufacturers–notably many high-profile German and US companies–to drop their prices or be forced out of the market. 2011-2012 were years of rampant consolidation within the industry, with over 2 dozen companies entering insolvency proceedings or going bankrupt. Many of the biggest players still managing to stay in the game have balances in the red.

It is for this reason that the EC is considering imposing import tariffs on solar cells and solar panels manufactured in China. EU ProSun, an action group of European solar system component manufacturers, has lodged an anti-dumping complaint against China, claiming that state-sponsored support for solar panel manufacturing there is one of the main reasons for the hardships that many EU solar panel makers are facing. EU ProSun has reportedly called for tariffs of up to 120% on Chinese panels.

In response to the Prosun complaint, an EU-based anti-anti-dumping group called the Alliance for Affordable Solar Energy (AFASE) was formed and has had a report commissioned to asses the potential impact of the proposed import tariffs on the EU’s solar industry. The report concluded that the measures could have a significantly negative effect on the EU’s solar industry. In a worst-case scenario, import tariffs could drive up panel prices across the EU and lead to a potential 80% reduction in the size of the market. ProSun has countered that tariffs imposed last year in the USA against Chinese panels had no such effect there, and is unlikely to have one in the EU either.

The UK, which unlike Germany has very little in the way of a solar panel manufacturing base of its own, would be one of the EU nations hardest hit by any anti-dumping penalties put into place for Chinese panels. There are fears that the adjustment to any new EU tariffs could particularly upset the UK solar industry’s fragile stability.

Potential VAT hike for solar panels and other ‘energy saving methods’

A change to the way that solar panels are taxed could, similar to import tariffs, drive up the price of installing a system in the UK. As it stands, solar panel installations are deemed to fall under the umbrella of ‘energy saving methods’, are only therefore subject to 5% VAT under UK law. However, the European Commission is challenging the legality of this reduced VAT rate, saying that it is against EU law. If the EU Court of Justice decides in the EC’s favour, UK customers could end up paying 15% more (UK VAT is 20% as per VATLive) to have a system installed.

Source: Solar Power Portal

Thinking about going solar? Now is a great time to invest in a system. Contact Solar Selections for free, impartial advice about what’s on offer from installers in your part of the UK. 

sales@solarselections.co.uk

Phone: 020 7205 2267 

© 2013 Solar Selections

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