The Solar Trade Association is currently at pains to persuade consumers that solar power remains “a very good investment” despite recent helter-skelter changes to the Feed-in Tariff. Perhaps “persuade” is the wrong word – “help people realise” might be more appropriate, because the returns really are good – the numbers speak for themselves – and solar really is one of the best consumer investments around at the moment.
Emma Hughes summed up the recent solar sales slump with the concise phrase “missed the boat”. Getting the 43p boat was like entering a raffle and winning a round-the-world cruise on a glorious ocean-liner. Getting the 21p boat – or indeed the 16p boat – is like entering the same raffle and getting a round-the-world cruise on a slightly less glamorous ship. But it’s still a bloody good prize, one you’d be mad to turn away from just because you didn’t win the First Prize.
But I’m mainly focusing here on the future. The past six months has been unsustainable, but exciting. We’ve seen exhilarating booms and cataclysmic busts. Should DECC’s package of reforms to the FIT work – and industry is generally confident that it will – then these spikes and troughs will give way to much steadier, and ultimately healthier, sales trends.
The costs of solar are likely to continue trending downward in the near future. This will increase sales and hence decrease the FIT, hence decreasing sales. The upward pressure of lower costs will be checked by the downward pressure of lower tariffs. The ultimate win would be for the FIT to reduce to zero on the day solar’s costs fall to the point where it reaches grid parity – i.e. when it is cheaper without subsidy than buying energy from a supplier. When this day comes, will we still think of solar as a “good investment”?
Well, yes and no. Yes in the sense of an economically sensible decision, but no longer in the sense of a “nice little earner”. What I foresee is solar turning back into a material product – panels for your roof – rather than an investment product. And I wonder what this conceptual alchemy – this shift in framing – will do to sales?
Energy Minister Greg Barker expects solar to really take off when it reaches this point. In thinking about whether his predictions are sound, I’d like to draw on Professor Michael Sandel and Malcolm Gladwell.
Professor Sandel’s latest book The Moral Limits of Markets (which I haven’t read, but I did see him present from it in St Paul’s Cathedral recently) points to examples from various cultures where financial incentives end up acting as a deterrent, rather than a catalyst, to desired behaviours. In many and various contexts, the common good is a more effective incentive than naked self interest.
Because of the Feed-in Tariff, the motivations for installing solar have shifted from the common good to naked self interest. We may herald this as a success, the incorporation of a necessary social policy – low carbon energy – into the dominant cultural paradigm – that being capitalism/neoliberalism/the age of the individual etc.
But there are many in the environmental movement who feel that it is simply impracticable, not to mention undesirable, to solve every environmental problem by making the solutions into opportunities for profit. These people tend to think that a world in which we are good for the sake of being good, rather than because we are paid to be good, is a more desirable world.
When solar reaches grid parity, will we still take to our calculators, and start promoting it on the basis of energy bill savings? Maybe – but won’t we still have that same “missed the boat” problem? If it’s difficult selling now on 8% ROI because you could’ve got 10% two months ago, how difficult is it going to be when you only get savings, not direct profit?
Perhaps we will instead rediscover the enormous social benefits of solar – in particular its ability to displace global warming-causing fossil-fired power generation, and its ability to decentralise energy production, resulting in greater resilience to shocks of whatever kind, and greater energy independence for homes and businesses.
Of course, these are not clouds in a crystal ball that will form themselves – they depend on decisions that installers, consumers and trade bodies make in the mean time, and those decisions depend on, and influence, the way the dominant culture goes. Which is where Malcolm Gladwell comes into it.
In his book The Tipping Point, he describes how paying people to do a good thing can have good short term results, but when that payment incentive is removed, those same people may end up doing less of the good thing than they did before. Perhaps the FIT will get us to grid parity, but it may also signal the death of solar as well. If you’re not going to pay me to put panels on my roof, why should I?
This is just a thought piece, taking a step back to consider some of the different ways of thinking about, framing, and selling solar power. It doesn’t have all the answers (or even any!), but it asks questions which I think traders, environmentalists and energy policymakers will need to be asking as we get closer to grid parity. Will this landmark be a magical tipping point, or the ultimate stagnation? It’s up to us.
Finally, a quick conceptual question on the FIT to inspire debate. What confuses me about the FIT is that it both encourages the capitalist mindset by making self-interest the dominant motive, but it also breaks the golden rule of neoliberal orthodoxy by intervening in the market, fixing the price to achieve the desired outcome. Surely “tariff” is a dirty word in the WTO? So my question is: is the Feed-in Tariff an example of the further intrusion of markets, economic orthodoxy, and self-interest into our social lives, or an intrusion of overbearing Government, price fixing and nanny-statism into our free markets?
And ultimately, can we solve the climate problem by internalising the externality in our economic mindset, or do we have to externalise the internality of our sense of duty to the common good?