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UK Energy Subsidy Cuts Claim First Victim

UK Energy Subsidy Cuts Claim First Victim

 The decision by Britain’s Conservative government to cut subsidies supporting renewable energy has thrown at least one British company into bankruptcy, forcing it to lay off its 939 employees.

Since March, the U.S. company SunEdison Inc. had been paying the Mark Group Ltd. of Britain to install solar panels on customers’ roofs for free in exchange for a share in the customers’ savings from government-subsidized energy bills.

In August, however, Prime Minister David Cameron’s Conservative government said it was reducing these subsidies by up to 87 percent. At the time, it noted that about 700,000 British homes had solar power and that the solar power industry didn’t need any further help from London. That means an end to the free solar panels.

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SunEdison of Maryland Heights, Mo., bought Mark Group in July with the aim of shifting its operations from building insulation to solar panels. But once it became clear that the installation program would end, Mark Group’s management bought the company back on Oct. 7.

A company spokesman said in an email that the company made the “regrettable decision to put the business into administration” – Britain’s equivalent of what is known in the United States as Chapter 11 bankruptcy. “This decision has not been taken lightly,” the email said, “but the ongoing losses of the business meant it was our only option.”

SunEdison said in a statement that it is “extremely disappointed that the draconian policy proposals made by the government” will “essentially eliminate the solar” market in Britain. That may be an exaggeration, but SunEdison CEO Ahmad Chatila said it certainly will severely limit or end his company’s operations there.

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Chatila told investors that the company would “de-emphasize or exit” the UK and several other countries, and shift its focus to operations in China, India, Latin America and the United States.

There is little question that the subsidies were persuasive for electricity customers, of whom virtually none were using solar power as recently as five years ago. In fact, SunEdison says that thanks to the subsidies, it had installed about 1,000 free solar panels at customers’ homes. Not only did the recipients get the panels for free, but saw savings of up to 25 percent on their energy bills.

One customer, Chris Over of Dinedor in western England, told The New York Times that he never would have spent the $9,200 to buy and install a solar panel on the roof of his house, but he eagerly accepted SunEdison’s offer because it was cost-free. “It was something that was always in the back of my mind, but I wouldn’t have spent the money,” he said.

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No one should expect a change in the policy on subsidies as long as the Conservatives run Britain’s government. On Oct. 5, addressing the party’s conference in Manchester, Energy Secretary Amber Rudd reaffirmed the Tories’ support for the cuts, saying there was “no magic money tree” to support such spending.

Rudd said solar energy in particular has done so well in recent years that it can “stand on its own two feet.”

“I support cutting subsidies,” Rudd said, “not because I am an anti-green Conservative, but because I am a proud green Conservative on the side of the consumer. We must be tough on subsidies. Only then can we deliver the change we need.”

By Andy Tully of Oilprice.com

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