Ed Miliband’s controversial scheme to encourage homeowners to install solar panels and wind turbines is set to cost families an extra £1billion in higher bills, bringing more misery for cash-strapped consumers.
Subsidies for solar panels rose 14-fold last year as individuals and businesses piled into the scheme, criticised as being a licence to print money.
The payments, funded by a levy on electricity bills, jumped from £9.2million in 2010/11 to £128.3million in 2011/12, according to figures compiled by energy regulator Ofgem.
‘Generous’: Households with solar panels are paid for returning energy to the grid
But over the same time the average efficiency of schemes fell by more than 40 per cent – because of a lack of sunshine.
Subsidies for domestic wind turbines trebled over the same period, rising from £2.3 million to almost £7 million.
Households are paid for the electricity they return to the National Grid but the payments are far above market rates, requiring heavy subsidies.
In total the budget for so-called ‘feed-in tariffs’ rose from £14.4 million to £150.7 million – an increase of 944 per cent in only 12 months.
The soaring cost means the scheme is now forecast to go more than £1billion over budget by 2015, bringing more misery for cash-strapped consumers.
The scheme, introduced by Mr Miliband when he was climate change secretary in Gordon Brown’s government, was meant to encourage the development of technology which could help provide a source of renewable energy.
But critics have warned that it is absurdly generous.
This was later reduced to 21p and then scaled back again to 16p last year because of concern among ministers about the burgeoning cost of the scheme.
But an attempt to cut the payment to 10p was thrown out by the High Court following a legal challenge by Friends of the Earth. Tory MP Dominic Raab said the scheme was another example of Labour profligacy.
He added: ‘Ed Miliband’s flagship green subsidies have proved a ludicrously expensive way of backing inefficient technology.
‘If he can do that for energy policy, just think what damage he would wreak on the economy. The solar subsidies inherited from Labour have been nothing short of a giant waste of time and money.
‘It’s crazy for politicians to try to pick scientific and commercial winners. It just ends up hiking energy bills paid by hard-pressed households and business, without making us more energy efficient.’
A source at the Department of Energy and Climate Change last night said a new regime had been put in place to review the solar subsidies every three months to check they were not too high.
The source acknowledged that thousands of people had made windfall profits but blamed it on the legacy from the last Labour government.
They added: ‘The scheme we inherited meant that when the costs of solar technology plummeted we could not get the tariffs down as quickly as we needed to.
‘That has now changed and the scheme is producing valuable renewable energy.’ The source insisted that officials were looking to adjust other subsidy schemes to try to minimise the impact on electricity bills.
A spokesman for the Department of Energy and Climate Change said renewables ‘make a valuable contribution to our energy mix’.
He added: ‘But the increase in cost last year highlights why we were right to rein in the feed-in tariff scheme to make sure that the subsidy available reduces in tandem with rapidly falling technology costs.
‘Last year was not a very sunny year, meaning performance of solar panels was lower, but this didn’t in itself lead to any unnecessary subsidy as payment is only paid for electricity generated.
‘The original budget for the scheme has been exceeded but we agreed within Government that on the basis of the reforms we’ve made, including tight value-for-money controls, the scheme can continue to support these important clean energy technologies.’