Tinkering with solar panel subsidy risks making bad policy worse

The fallout from Chris Huhne’s sudden review of the government’s system of subsidies for small-scale renewable energy gathers momentum. Solar firms, who built business cases on the system of subsidies, are threatening judicial review over the Energy Secretary’s change of direction. So why did the government raise concerns about the policy? Apparently, because it has been too successful.

The scheme encourages householders, communities and businesses to cover their roofs in solar panels and erect wind turbines by offering them a generous subsidy for the electricity they produce. It was introduced by the Labour government with three aims: to cut carbon emissions; to help reduce the costs of the technologies; and in the hope that once solar panels are commonplace, green-eyed neighbours will rush to install their own roof-top power stations. Peer pressure is the driver the low carbon revolution.