As of late last year, the Department of Energy and Climate Change reduced subsidies for both solar and hydropower developers. The DECC claimed the reductions were “to deal with the projected over-allocation of renewable energy subsidies.” Regardless of their reasoning, many are unhappy with the government’s decision. Among those unsettled by the government’s actions are the estimated 18,700 people who may lose jobs due to subsidy reductions.

Why are subsidies important?

Subsidies are important because they pay hydro and solar power produces a fee for the surplus energy they send to the overall electrical grid. This money can then be used to stimulate the economy, build up existing renewable energy sites, and provide maintenance to old equipment.

What subsidy was affected?

The subsidy most affected by the reduction is the Feed-In-Tariff, or FIT. This was a larger subsidy that allocated a lot of money to power providers in the UK. The cuts made were severe and will cause problems for many thousand of people.

What is a Feed-In Tariff?

A Feed-In-Tariff is a system that pays back renewable electric providers based on a per kilowatt scale. The system rewards those who provide the larger electric grids with extra power. The tariff benefits anyone that owns and operates a solar, hydro, or wind powered machine. In other words, anyone who owns property, can install, and maintain these types of renewable energy systems can benefit from the Feed-In-Tariff.

Implications

The implications from the Department of Energy and Climate Change reduced subsidies will be substantial. Thousands of people are in risk of losing their jobs or additional income. Fortunately, the DECC made a 65% cut instead of the originally proposed 87% cut. Regardless of the reevaluated reduction, there will still be enormous repercussions for the renewable energy producers.

Payouts dove from £12.03 per kilowatt to £4.39 per kilowatt. The Secretary of State for Energy and Climate Change defended the cuts by saying, “My priority is to ensure energy bills for hardworking families and businesses are kept as low as possible whilst ensuring there is a sensible level of support for low carbon technologies that represent value for money.”