Housing associations criticise cut in Feed in Tariffs, citing loss of development monies, jobs and green investor confidence

Government plans to cut feed-in tariffs in December could severely affect Peabody's solar programme, the housing association has warned.

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The Department of Energy and Climate Change (DECC) announced plans to cut Feed in Tariff payments by more than half. The proposal would see the payments for electricity generated by solar panels fall from 43.3p per kWh to just 21p.

Peabody – which provides homes for 55,000 people in London - had planned to install up to six megawatts of solar panels on its homes across the capital by March 2012, ahead of the previous feed-in tariff reduction date in April 2012. The association warns that the new tariffs might cost jobs and carbon savings and raise concerns about fuel poverty.

As well as reducing carbon emissions by around 2,500 tonnes per year, Peabody says the panels would have generated valuable energy savings for residents at risk of fuel poverty. In addition, Peabody planned to invest surplus income generated by the panels into its homes and services.

But the government's unexpected proposal to cut feed-in tariffs in December 2011 will make Peabody's scheme financially 'unworkable', forcing Peabody to leave thousands of homes without the panels and drastically reducing the benefits of the scheme.

Currently it is likely that Peabody will only be able to install around 50 per cent of the solar panels it had originally planned.

Peabody developed its scheme to ensure a rate of return of 7 per cent, which took into account maintenance and management costs over the 25 year lifespan of the panels. The cost of Peabody's borrowing for the scheme is 5.3 per cent.

Fuel poverty, which occurs when a household spends more than 10 per cent of its income on fuel bills, is increasing at a greater rate in social housing than in the private rented sector, according to recent research by the National Housing Federation.

Peabody claims that by enabling residents to make savings on electricity bills, solar panels formed a key part of its strategy to reduce fuel costs for residents.

Stephen Howlett, Peabody Chief Executive, said: 'We're really concerned about the impact of these changes on our residents' ability to avoid fuel poverty. Fuel poverty kills more people in England and Wales each year than in road traffic accidents.

'And where it doesn't kill, it has a debilitating effect on quality of life and well-being. The social and economic costs of fuel poverty are immense. We need a coordinated approach from government to ensure we can do everything possible to eradicate it.'

The proposed changes would also come at the cost of development expenditure, jobs and all-important investor confidence in the green industry, he said.

'Peabody has invested significant amounts of money developing our solar scheme, for example, in procurement and legal fees. Many other businesses will have done the same. This now looks as if it will have to be written-off – a huge and unnecessary waste at a time when we are striving to make austerity savings.

'Further, if we cut short our scheme, contractor jobs will be lost and Peabody jobs will be lost. We had planned to place young apprentices within our scheme. These too will be lost. Now magnify these effects across the UK.'

He added: 'The greatest cost may be in investor confidence. The green industry has been massively gearing up to deliver these schemes. We need it to be in robust health if we are to embrace and implement sustainable technologies. Suddenly and dramatically changing the rules, pulling the rug out from under investors’ feet, is not the way to build confidence. We are very concerned that investors will be reluctant to get behind other green initiatives.

'We hope the government looks carefully at the objections that have been put forward, and thinks again.'

Reading Borough Council on Friday has issued a similar warning, calling the cuts in tariffs 'scandalous'.

Last week, the National Housing Federation has called for different feed-in tariffs for social housing developments.

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