Labour 'killing Britain's renewables industry'

Ministers are strangling the very industry they will need to help them meet ambitious targets for renewable energy and build new ecotowns across the country, The Independent on Sunday can reveal.

The number of households installing solar panels and other clean energy systems has slumped by up to three-quarters in England and Wales because grants to make them more affordable have been slashed and rationed. Last week the energy minister Malcolm Wicks rejected widespread pleas to increase them, leading the industry to warn that it was being driven to the wall.

His unexpected rebuff flies in the face of ambitious government targets for increasing the use of renewable energy. It is committed to providing 15 per cent of Britain's needs from it by 2020, a fivefold increase in just 12 years. It has announced that all new homes must be zero carbon by 2016, and last week unveiled plans to build 10 carbon-neutral ecotowns by 2020.

The Department of Business, Enterprise and Regulatory Reform's refusal to increase grants contrasts with the Scottish government which last month trebled its funding to help families, businesses and communities to install clean energy. Last night the former environment minister Michael Meacher called its approach "unspeakable" and said that it was "unremittingly hostile to renewable energy".

He said the department was wedded to the nuclear industry and other big traditional suppliers of energy and was "going to wipe out the alternatives, while the rest of Europe was going in the other direction".

Germany, for example, has installed hundreds of times more household renewable systems than Britain. And the UK's only manufacturer of photovoltaic solar electric panels, Sharp, says that less than a week of its year-round production is installed in this country, with the rest going elsewhere in Europe.

The grants programme was an instant success when it began just under two years ago. It offered up to £7,500 to install photovoltaic panels, with total payments soaring to nearly £1.4m in November 2006, more than four times expectations.

But instead of building on this success, ministers embarked on measures to choke it off. First, it rationed its payouts to just £500,000 a month, causing this entire allocation to be used up within just two hours of being open for applications in February last year.

They then slashed the maximum amount paid for photovoltaic panels by two-thirds and for wind turbines by a half, which succeeded in drastically damping down demand. For the past year payments have been running at £200,000 a month, so far beneath original expectations that the programme was heading for a £10m underspend by the time it was due to end next year.

The industry pressed ministers to restore the original grants, but instead they announced on Monday that they would merely extend them at their present low levels for another year.

Philip Wolfe, executive director of the Renewable Energy Association, which represents the industry, said last night: "If the Government's whole approach to household renewables is to eke out this pitiful programme to 2010, there will be no industry left to meet its targets for zero-carbon homes."

Mike Byrne, managing director of Solar Fusion in Dorset, says its photovoltaic installations have slumped by 60 per cent since ministers started to restrict the programme. And Jim Kenney, director of Hertfordshire-based Chelsfield Solar adds that the department's "incessant tinkering" with the grants "has caused 75 per cent reduction in the amount of domestic solar panels being installed".

The industry is braced for another serious setback if Boris Johnson replaces Ken Livingstone next month, since the London Mayor's plans to install renewables in the capital has been one of the few things keeping it going.

It has now largely given up hope that the Government will introduce effective grants and is pressing for a new system that would pay householders for any excess electricity generated from renewable sources they fed into the grid. MPs of all parties are supporting an amendment to the Energy Bill to enable this, the foundation of Germany's success.

The department said that the extension of the programme "gives business longer-term certainty and is an excellent opportunity to encourage uptake in micro-generation technologies".