The rush has started to install solar panels before 12 December after the Government announced that the Feed In Tariffs (FiTs) were too generous and would be cut in half.

The Government’s decision to cut the Feed In Tariff (FiT) for solar panels from 43.30 per kWh to 21p will mean homeowners will see the income from their source of renewable energy cut from around £1,100 to just £500 a year.

The Feed In Tariff cuts will affect all installations completed after the 12 December while those installed before that date will continue receiving the more generous subsidies.

It’s not just homeowners who will see their income cut. There are many businesses which have been making money by renting out homeowners’ roofs. They’ve been installing solar panels for free but making money from the Feed In Tariff payments. They will now see their income fall and get just 80% of the homeowner’s rate.

There are warnings that the changes will bankrupt hundreds of solar businesses with the loss of around 25,000 jobs. Not only that but it’s argued that the number of homeowners and companies signing up to have solar panels will fall drastically because it could take 25 years for them to earn back their investments.

Companies hoping to install solar panels to help reduce their business electricity prices may decide to delay the installation because it will no longer be worth the expense.

The chief executive of the Renewable Energy Association, Gaynor Hartnell, said “The installation rate is likely to fall drastically, and many of the 25,000 newly employed in this industry may end up joining the dole queue”.

A director at PricewaterhouseCoopers (PWC), David Guttmann, said “Many smaller operators are likely to struggle and go under. This will be a tough time for the industry, but it may be that this makes it more sustainable and competitive in the longer term”.

Meanwhile energy minister Greg Barker said “My priority is to put the solar industry on a firm footing so that it can remain a successful and prosperous part of the green economy, and so that it doesn’t fall victim to boom and bust”.

He added “The plummeting costs of solar mean we’ve got no option but to act so that we stay within budget and not threaten the whole viability of the FITs scheme. Although I fully realise that adjusting to the new lower tariffs will be a big challenge for many firms, it won’t come as a surprise to many in the solar industry who’ve themselves acknowledged the big fall in costs and the big increase in their rate of return over the past year”.

The cost of solar panels has reduced significantly and costs are expected to continue to fall in the future until the time when subsidies won’t be necessary. Part of the problem is that the number of solar installations has increased faster than expected and this has resulted in pressure being placed on subsidies.

Proposals to make changes to the Feed In Tariffs are open to consultation until 23 December but business groups and charities are considering seeking a judicial review of the proposals.