Official Report: Minutes of Evidence

The Deputy Chairperson (Mr Flanagan): Briefing the Committee today are Michael Doran, Neil O’Brien, Andrew Baird and Trevor Finlay.

Mr Michael Doran (Action Renewables): Is it OK if I go first on my own on behalf of Action Renewables and then let the Northern Ireland Solar Trade Association (NISTA) do its own presentation?

The Deputy Chairperson (Mr Flanagan): No problem. We can have two separate presentations. What about the questions, Michael? Can you all take the questions together?

Mr Doran: Whichever way you want.

The Deputy Chairperson (Mr Flanagan): It is better if we have one session. I apologise that we have kept you late. If you give your presentation first, we will bring the other gentlemen up to do their presentation after, and then you can all field the questions together. Are you comfortable with that?

Mr Doran: That is fine.

The Deputy Chairperson (Mr Flanagan): Grand job, Michael. Go on ahead.

Mr Doran: Thank you very much for the opportunity to speak today. My presentation will not take more than about seven or eight minutes. As you are aware, DETI released a consultation document several months ago on proposed changes to the Northern Ireland renewables obligation. The essence of those changes focused mostly on photovoltaic (PV). There was virtually no change to any of the other support levels. The proposed change was to take PV down from 4 ROCs to 1·6. The purpose of my presentation today is to try to get over to you that we believe that that will be not just detrimental but catastrophic for the industry in Northern Ireland. I want to take about five or six minutes to explain why.

You already have a paper from Action Renewables that highlights what we consider are nine salient points to take into consideration. I am going to focus on five of those today. The first one is the relative position of PV in Northern Ireland compared with the rest of the UK. The second one is what the impact will be on people in Northern Ireland, particularly the fuel poor. The next one is potential job losses and how it would affect the Northern Ireland budget if this were not enacted and it were not brought down from 4 to 1·6. I will take a few minutes to run through those.

First of all, Northern Ireland has an installed capacity of about 26 megawatts. If you add together the total generating capacity of all of the PV panels, we have about 26 megawatts operating in Northern Ireland. That is in comparison with 4,800 megawatts in the whole of the UK, so we account for about 0·5% of the total UK market. We are already at about one fifth of the generation capacity of the rest of the UK pro rata, so it is not as though we have bounded ahead of the market. We are actually way behind the rest of the UK. Reducing from 4 to 1·6 is going to kill it off completely. We think that it will completely stop the market.

There are two aspects to the market. NISTA will probably explain this to you in more detail later. Action Renewables guesses that about half of the market is what is called free solar or free PV, which is where the installation is funded by another company and it does not cost the person who is putting it on the roof anything. Those tend to be the people who do not have the money to fund it themselves. The free PV in the market will stop dead, so the people who are in fuel poverty will be the ones who are affected most by this. Our opinion is that it is only people who have lots of spare cash who will continue to put in PV. It is going to affect the fuel poor more than anybody else.

We anticipate that, if it is reduced from 4 to 1·6, there will be about 500 direct job losses in Northern Ireland. On top of that, there will be job losses among the likes of roofers and electricians in other attendant industries. You have to bear in mind that the funding for the ROCs payments does not come out of the block grant. If it were maintained at the current level of 4 instead of being reduced to 1·6, that would not have an adverse effect on the other ongoing budgetary constraints that you were considering yesterday.

The last thing is a more notional idea about the effect that we think that PV has on raising the awareness of renewables in Northern Ireland. Action Renewables' main objective is to see as much deployment of renewables in Northern Ireland as possible. PV is one of the most visual, and it is the one that most people can buy into most easily. About 8,500 houses already have it. When those people get involved, they are not just saving themselves money by having a PV panel on the roof and generating their own electricity but buying into the notion that they are contributing to solving the problem. That is the end of my presentation.

The Deputy Chairperson (Mr Flanagan): Thanks, Michael. Do Neil, Andrew and Trevor want to come forward now?

Mr Neil O’Brien (Northern Ireland Solar Trade Association): Thank you, Mr Deputy Chairperson and Committee, for the invitation this morning. We are also very grateful to Michael for what was an appropriate synopsis. We have no intention of mirroring that, but there are some points that we would like to make on behalf of NISTA. I will say by way of introduction that NISTA is a young organisation that was formed only in the spring of this year. It represents the interests of the solar industry in Northern Ireland. We have been very fortunate that the industry has been galvanized even in such a short time. Our membership represents in excess of 90% of the industry.

I am the chairman representing the organisation, but my day job is as the chairman of Amber Green Energy, which is one of the leading energy companies in Northern Ireland in this particular microgeneration sphere. On my left is Trevor Finlay, who is well known in the financial services sector. He leads the Galgorm Renewables organisation, which is one of the firms offering the funded or free model of solar panel installation. On my right is Andy Baird, who is recognised as the foremost authority on solar photovoltaic in Northern Ireland if not the UK. He has over a decade of experience in project work in Northern Ireland and England.

We would like to recognise the work done by the Department and members of the ETI Committee in the promotion and supporting of the renewable sector over recent years. You will know a little about the recent growth that we have experienced in Northern Ireland and the success that we have had in building some of the infrastructure for microgeneration, which we believe has yielded over 1,000 direct and indirect jobs in the sector. At the current rate, it is investing over £20 million per year in that infrastructure in Northern Ireland, which is helping to address not only the need for better and cleaner energy sources but fuel poverty and the reduction in CO2.

We are here to discuss with you the impact that the proposed reduction would have on our sector. Michael used the word "catastrophic" to describe that impact, and we agree. By our estimates, if this reduction were to be introduced in April 2015, it would lead to 80% or 90% of our industry evaporating overnight. That would obviously end the job creation that we have enjoyed with the support of yourselves and others. It would also end the accessibility for many thousands of people to become their own microgenerating power station, which itself is a serious potential travesty. We also believe that the preserve that is solar PV would really be only for large organisations and public bodies, because, if there were not the same level of support, they would be the only people who could undertake the capital expenditure required.

Michael has covered the comparative analysis. Our figures show that our industry could double or triple in size in the next two years. We are, as Michael said, approximately 400% behind the comparative benchmark for GB, and we believe absolutely that a reduction in the support levels would not just be very unwise but would create tremendous damage to the Northern Ireland national interest, if I may call it that. Whilst we have 1% of the installed PV generation in the UK, we are of such a microsize that that only represents 0·5% of the power that has been generated from solar sources in the UK.

I close our comments by saying that we recognise DETI's commitment to job creation in Northern Ireland and to the protection of the consumer and entrepreneurship. On the consumer side, the solar panel PV market is one of the very few ways, if not the only way, that the small home owner and the small and mid-sized business owner can access electricity generation. They cannot normally access the hillsides to put up wind turbines or the tidal estuaries to benefit from tidal-wave energy. The solar panel PV is accessible, and the support framework has brought around that situation.

Also — as we heard in the previous session — of all the industries that I can think of that have some of the attributes that you are seeking in relation to enterprise in Northern Ireland, with its creativity, innovation and indigenous aspect, the domestic solar PV industry seems to have all the hallmarks of what the Committee is looking for to achieve the betterment of our society and job and wealth creation. About 50% to 60% of what we do as Northern Ireland companies is value-add in this jurisdiction. Surely, we do not make our own panels, but apart from that, we pretty much do everything else.

The word "catastrophic" has been used, and that would be the word we would use for the industry if we were not to have the level of support that we currently enjoy. It is our proposal that the current support levels be continued for at least a further 12 months and ideally for 18 months, which would give us the opportunity to have an informed and well-balanced projection of the information within the sector. That would allow DETI, this Committee and others to appreciate fully how any proposed reduction in support could come about and yet protect the fledgling and blossoming industry that we are part of. We welcome your questions.

The Deputy Chairperson (Mr Flanagan): Thanks for your presentations. The first point to make is that we have all had representations from people who are employed by and are reliant on the sector for their livelihood. We are very cognisant of the fact that this may well impact on people's ability to earn a living. So, we have to take that into account.

Michael, I want to pick up on your point that the subsidy does not affect the budget because it is paid for from elsewhere. It is paid for from the electricity bills of customers.

Mr Doran: That is correct.

The Deputy Chairperson (Mr Flanagan): What sort of an impact on the unit price of electricity are you talking about if this reduction is made?

Mr Doran: It is approximately 3p per household in the UK.

The Deputy Chairperson (Mr Flanagan): Over what period?

Mr Doran: Per annum.

The Deputy Chairperson (Mr Flanagan): Is that just for solar PV?

Mr Doran: To support what is happening in Northern Ireland. Yes.

The Deputy Chairperson (Mr Flanagan): OK. Can you tell me more about how renewables obligation certificate (ROC) trading agreements work?

Mr Doran: I will try to shorten my answer, because it could go on for quite a long time. ROCs are a tradeable item. When a small generator generates electricity under the current system in Northern Ireland, they are given renewables obligation certificates. The larger generators have an obligation to generate a certain level of electricity from renewable sources. If they do not have the capacity to do that — for instance, some of the generators in Northern Ireland like Ballylumford are not using renewable sources — there is an obligation on them to go to the market to buy the certificates; it is as though they were the generator. So, a small generator who is generating renewable electricity gets a certificate and can trade that to a larger generator who does not have the capability to generate renewable electricity. That larger generator can then take the certificate at the end of the year and trade it in. So, instead of him being fined for not generating renewable electricity, he basically gets a pat on the back for having the certificates to trade in. There is a market in the UK that is driven by the difference between the generating capacity and the obligation. Basically, the Government sit down every year and work out the capacity of the total industry to generate renewable electricity. They then set the target higher than that, and it is the difference between those — it is called headroom target — that creates the value of the certificate. If the obligation were only the same as the capacity in the market to generate, there would be no requirement for the larger generators to go looking for the certificates, but, because they cannot generate enough on their own, they have to look around the market to purchase the certificates.

The Deputy Chairperson (Mr Flanagan): How much are they bought for?

Mr Doran: They are tradeable, so they have a variable value. At the moment, they are typically about £42 per ROC, which is about 4·2p per kilowatt.

The Deputy Chairperson (Mr Flanagan): What would happen if the larger generators started to use renewable energy and there was no requirement on them to purchase ROCs from the smaller generators?

Mr Doran: The entire ROC system would fall apart, so it would not be an effective system. Every year, the UK Government's Department of Energy and Climate Change (DECC) has to sit down and work out what the capacity is in the country to generate, and then it sets the target higher than the capacity. It is that difference that creates a value in the market.

The Deputy Chairperson (Mr Flanagan): On the matter of the current rate of incentivisation and the proposed one, is the current one 16·96p a unit?

Mr Doran: It is about that, yes. It depends on the value of the ROC. If it is 4·2p per kilowatt, it is four times 4·2p, which is about 16·8p or 16·9p.

The Deputy Chairperson (Mr Flanagan): So, it is actually being incentivised to the current cost of the price of electricity to a domestic customer.

Mr Doran: That is correct.

The Deputy Chairperson (Mr Flanagan): In the long term, how does that make financial sense?

Mr Doran: In the long term, it does not. If you do not have an incentive in the market, nobody will change. So, if there were not a renewables obligation system in the UK, all of the existing power producers would continue to use the cheapest form of energy, which would be fossil fuels, and there would be no shift in the market.

The Deputy Chairperson (Mr Flanagan): You are talking about giving people here a subsidy of 17p on every unit of electricity generated for the next 15, 20 or 25 years. How does that make sense?

Mr Doran: It incentivises people to move. Otherwise, with natural behaviour, nobody will change their behavioural pattern. If it is going to cost you £4,000 or £5,000 to put in 3 kW onto your roof and you are only going to get the payback over 15 or 20 years, most people, unless they are relatively well off, will say, "Look, I am just going to sit the way I am. There is no incentive to move". If there is an incentive to move, then, initially, they are driven by the value of that, which encourages them to move. That was my last point in the presentation. When people start to realise that they are generating their own renewable electricity, they start to think about the situation that we are in, which is that we have to move to renewables. So, there is a buy-in to where the system is going.

The Deputy Chairperson (Mr Flanagan): On the difference between less well-off households that would never make that change and households that could afford to do it, apart from the ROC scheme, is any change in other government policies required to encourage less well-off people to invest in these schemes?

Mr Doran: I am not here representing the Housing Executive today, but I should have mentioned that I am led to believe that it will stop all of the PV systems that it is putting on the roof because it will not stack up in its internal auditing. The housing associations will not consider going ahead with PV systems. So, basically, the people who can benefit most from it will not have the opportunity because the funders are not able to substantiate an 18-year or 20-year payback.

Mr Dunne: You are welcome. We value your contribution to the debate. You mentioned that the cost to consumers is about 3·7p per annum. Is there a risk of that increasing if we continue to move on the PV infrastructure?

Mr Doran: No. Incrementally, it might go up from 2·9p to 3p, but it is minimal. It is a very small amount.

Mr Dunne: The Cambridge Economic Policy Associates (CEPA) report says that there is a risk because, as you continue the PV installations, there will be an increase to the average consumer. Therefore, it may have a negative effect.

Mr Doran: No. There will be an increase, but it might go from 2·9p to 3p. As Neil talked about, we appreciate that the current incentivisation cannot continue forever more, but bringing it in at April next year will make the market dead in its tracks. They will be talking later. An issue at the moment is that most people perceive that the market is going to come to an end in April, so there is now a mad rush to get as many in before April as possible. If the industry fails in Northern Ireland, the installers will cease to operate, and if there are subsequent operation and maintenance issues, there will be no installers left. We appreciate that, over time, the incentives have to come down, but not from 4p to 1·6p in April next year.

Mr Dunne: Moving on to the cost of panels, it is our understanding that, since 2010, the panels have dropped significantly in cost. Is that the case?

Mr Doran: I will bat that back to NISTA. They have more knowledge of the market than I do.

Mr O’Brien: You are very kind. Thank you, Mr Dunne. The price of panels has indeed fallen. The industry here really only got going in 2012. When we first received the CEPA report in July this year and looked at the figures, it became very apparent to us that using the dataset from 2010 as opposed to 2012 was exaggerating the decrease in the cost of the technical side of solar installation. There has been a very welcome steadying up and falling of the prices of the kit. That has stabilised for the last number of months. The backdrop, however, that CEPA did not drill into was that, whilst the price of the kit has been falling steadily from 2010 to 2012 and from 2012 to now as we have been growing the industry, the price of everything else has been rising.

Given the installation teams and the technicians required to install the panels, there was a dearth of work for roofers and electricians over that period. We have seen a doubling in some of their rates over the period because the workers have gone to Scotland or the South of Ireland to build homes and other things. They are now experiencing growth in their opportunities here, but that, in turn, has led to increasing costs. That backdrop has not been caught by CEPA.

The industry right now is experiencing a time of marginal depreciation in the price of panels and a marginal gain in outputs but increasing costs in the price of installing, supporting, training and educating the market and getting around our customer base. Those are starkly not evident in the CEPA report. In fact, our organisation will go so far as to say that the dataset is flawed, and we have presented that through various papers to DETI and others.

Mr Dunne: Are most of the panels sourced abroad?

Mr O’Brien: Yes, they are.

Mr Dunne: From China, I take it.

Mr O’Brien: There is a very healthy mix of panels from central Europe and from the Far East. Much of the content of the panels is made in those economies, but there is a great deal of assembly and value added in Europe and locally. If we were to talk in broad-brush figures, it could be as low as 20% in some circumstances and as high as 50%, and then the value added is here.

Mr Dunne: Finally, surely there are great weaknesses in the infrastructure in getting supplies into the system. That is one of the problems that the Department is trying to address. If we continue at our current rate, there will be more issues in relation to the upgrade of the infrastructure.

How will that be addressed if we do not —

Mr O’Brien: We —

Mr Dunne: — manage it in some form?

Mr O’Brien: Sorry to interrupt, but perhaps Andy is the best person to answer that.

Mr Andrew Baird (Planet Solar NI Ltd): It is a very good point. If you look internationally, you see that solar and grid integration is a major issue, but I have to exercise some caution in how we quantify that in the Northern Ireland situation. One of the unique features of all the solar that has been deployed over Northern Ireland in the last decade, and that is the sort of time frame that we are talking about to build the initial foundation, is that it is delivering clean electricity directly at the point of use. So, I have to err on the side of some suspicious caution with regard to the impact that solar is having on the grid. The reality is that we have a largely centralised generation base and this one-push-to-many grid. It is 20th century architecture. In many respects, because of the inherent 15% to 20% distribution in transmission losses that exist in the old grid, solar has the benefit of balancing a lot of that. So, the small amount of energy that is not used in the dwelling or property travels very locally, essentially next door, down through the same cables. So, we need to be very cautious about overstating the costs of accommodating solar, not least in the next two to three years. The whole storage architecture is going to come online. So, if we think of storage today, like solar five years ago, there was a certain amount of it going on but it was prohibitively expensive. That is changing dramatically. We have 4,000 domestic solar storage systems installed and integrated with the grid in Germany. They all drive down the price. A lot of the concern will simply evaporate within the next two to three years, as those early adopters of solar further innovate with what they have already invested in to minimise export and store the electricity that their systems are producing.

Mr Dunne: Who pays for all that?

Mr Baird: In Germany, there is a €2,000 capital grant available, but they are the early adopters. My gut feeling is that, with the right level of support to enable the industry to mature over the next couple of years, it will potentially simply become a capital purchase by the customer without any obvious need for subsidy support.

Mr O’Brien: Can I boldly interject? With regard to the creativity and the innovation around this sector, we, as an organisation that represents the sector, believe that, within four to five years, some of the issues will have evaporated. The Deputy Chairman brought up the price earlier. It was 16·9p, but, on 1 October, it fell to 16·3p. We anticipate that, over the next four, five or six years, it will decrease even further. With electricity prices potentially increasing, opportunities for storage increasing and the better use of the energy that is created, there will be natural efficiencies and a narrowing of that support gap or surplus.

The reason why we are proposing no change on the support levels for 12 to 18 months is that we, as the industry, would love a debate as to how we would fund the capital, either through capital allowances or small grants and even things like rates reductions on buildings that are more efficient: the full plethora of things that would claw back some of the capital that is required and make it a much more innovative way of funding what is modest capex for the homeowner. It is obviously larger for the business person. That is why we are seeking these proposals to reduce the ROC to be put off to allow that debate to happen.

Mr Frew: I have certain sympathy for you in the industry. I am a spark by trade, so I know what great value this has been to the industry in the last couple of years. I know a lot of electricians who have gone into this side of the industry. However, the industry has come under increasing criticism in the last while for its door-to-door techniques and the information given to householders regarding the leasing of their roofs. How do you counter that criticism?

Mr Trevor Finlay (Galgorm Renewables): I am a free solar developer. We have installed probably 750-plus systems across Northern Ireland. In total, we estimate that around 2,500 systems have been installed on a free-of-charge basis to consumers and businesses who recognise the value of having solar panels installed on their premises. We have one customer out of those 750 who is not happy. We have a very high level of customer support. We have had difficulties with some of the banks not consenting to having panels on the roofs of mortgaged properties. That is something that we, as an industry, continue to try to deal with directly with the financial institutions that take that stance. However, many other financial institutions take the opposite stance and wholly embrace the idea of the homeowner being able to have a renewable energy generator on the roof.

With regard to the specifics of door-to-door salesmen, the various companies that offer the free option have widely canvassed the general population through trade shows, seminars in hotels and that sort of thing. There is also, however, an element of door-to-door salesmanship going on. However, we are very conscious that we are dealing with consumers. We follow the consumer code very closely, and where there have been complaints, they have been addressed properly and in line with best practice. All our paperwork and documentation meets the standard set by the Council of Mortgage Lenders. We give everyone a cooling-off period. Even after they have signed the paperwork, they have seven to 10 days — sometimes more than that — within which they can cool off and cancel the arrangement. The people who have probably been raising the issues with regard to this are in a very small minority who, maybe in hindsight, having had their panels installed, wish that they had not.

Mr Frew: It seems that there are two modes or methods of installation. The first, which is commonly used here, is free PV. The second is where the householder or business can pay for the installation up front and get the ROC themselves. Where does the ROC go with the free PV method?

Mr Finlay: As free solar developers, we take a lease over a property's roof for 20 years, and we undertake to install, maintain, operate and ensure that the apparatus is kept in good working order for a 20-year period. In return, the developers will process the ROCs and take advantage of those ROCs for that 20-year period. The building owner will get the advantage of all the free electricity that those panels generate.

Mr Frew: If you are householder, and you and your wife work, and your kids are out during the day at school, the 4 kilowatt peak will not really be of any use to you, yet you would have also lost the ROC.

Mr Finlay: All those aspects of the free solar option are explained to householders through conversations. It is quite true that, in that situation, the free option would not be sensible for that household. However, for every householder like that, there are many people maybe approaching retirement and spending more time at home using daytime electricity, and 4 kilowatts of solar PV could be saving up to £350 a year, depending on their daytime usage. That is the sort of hard-cash level of support that a free solar customer is able to take advantage of, and that figure is not to be sniffed at.

Mr Frew: If the free PV side of things is lorded up as some sort of fix for people in fuel poverty, why is it the case, or why does it seem to be the case, that the door-to-door salesmen have targeted private housing developments and not what you would class as Housing Executive areas or housing association areas?

Mr Finlay: The free solar option is not just for those who are in fuel poverty. It is an option for those who wish to take advantage of renewable electricity on their roof, but who, for one reason or another, do not want to pay for that up front.

Mr Frew: From what I hear, both inside and outside the industry and in government circles, there is a growing resentment about free PV and the methods they use to sell, as well as the fact that the householder does not benefit from the ROC. That may well be one of the reasons why government may be keen to look at the ROC. How do you counter that?

Mr Finlay: If we compare ourselves with the rest of the UK, we see that we are so far behind that it is hard to quantify. Free solar PV has been a huge success in GB. We are only dipping our toe in the water with the quantity of systems that have been delivered to date. It gives people choice, and that is the important thing. It gives people choice over whether they put their hand in their pocket and pay £5,000 or £6,000 for a system. It is not just people in fuel poverty who cannot afford £5,000 or £6,000; it is many types of people who may decide that they want to do their bit for CO2 emissions reduction and, if you are offering it to them free of charge, that is the best option for them.

There are lots of people who are retired and have private homes, and there are lots of people in housing estates and private developments. We are really only getting to the point now where housing associations, Housing Executive properties and those people who are in real fuel poverty are getting the opportunity to take advantage of solar PV. I fear that, if these proposals are adopted on 1 April, none of that will happen. The economic argument for the recent tender from the Department of Education to put solar PV on the roofs of schools will evaporate on 1 April. There was £10 million allocated by the Department of Education to put renewables into our education properties, but that case evaporates if this reduction in ROCs is adopted on 1 April.

Mr Frew: You say that the free PV is hugely successful, but it is hugely successful for the businesses that have the ROCs, not the householder. That is why government looks at these things less favourably.

Mr Finlay: As a businessman and as someone who is trying to bring investment to Northern Ireland, I suggest that there is plenty of competition for that investment. That investment was not coming to Northern Ireland until the rules changed in England a couple of years ago when some of the capital was freed up. That capital will go elsewhere. We have brought £20 million of investments to Northern Ireland and put it into free PV systems. I can double that next year and double it again the year after if things remain as is. That money will go elsewhere; it will go to build solar farms in India if we do not take it. There is capital available that we can bring into the sector. It does not matter whether you are Phoenix Natural Gas putting pipes in the ground, there is private capital needed to build infrastructure here in Northern Ireland, and solar PV is one little area that we can do a good job in if we are given the opportunity and get the support of government.

Mr Frew: I put it to you that the ROCs at the minute from free PV could well be going to finance solar panels in India.

Mr Finlay: Sorry, I missed your point.

Mr Frew: You say that the best way of ensuring that a ROC stays in Northern Ireland is to give it to the householder.

Mr Finlay: If that householder has got the ability to pay for those panels, absolutely.

Mr Frew: But if solar panels will pay for themselves within a number of years, surely that is a business proposition for anyone to measure up and go to the bank with? It is far better that those householders go to the bank with a business proposition like that rather than for the lease of a roof.

Mr Finlay: Let me put it in a different way. There are 50 to 60 men, some of whom are represented behind me here, who depend on the capital that we bring to the sector for their livelihood. Not everyone can afford these things. To be honest, people will put their money into an ISA before they will put it into solar panels if the 1·6 ROC recommendation is adopted. If we are going to create employment in this country and we are going to support trades like electricians, roofers and those sorts of things, the capital that we are able to attract and bring to Northern Ireland from big pots of money in London and elsewhere is dependent on the relevant incentives. There would not be a wind turbine blowing in this country if it was not private capital. There would not be an anaerobic digester turning in this country if there was not private capital behind those things. People are looking for a return on their money. If we reduce that return to something derisory, the money will go elsewhere.

Mr Frew: Of all the companies in Northern Ireland that operate and install these, how many use the free PV system? How many would exist without the free PV system?

Mr Finlay: They would all exist to an extent, but it would be half of what is happening.

Mr O’Brien: If I may interject for a moment — please forgive me if I have broken protocol — to assist the questioning. It has real integrity, which we respect and appreciate. As an industry, three or four very significant players in Northern Ireland are offering the funded model. I stress that NISTA is a broad church. There are over 100 installers in Northern Ireland, and only a small proportion are able to offer what is a very welcome choice in the marketplace to fund panels. Some are very pro that choice; others are not, but it is welcome nevertheless because it has been making an impact.

I will soften slightly the delivery from Trevor. As part of the education process that goes from the installer to the homeowner, we encourage people to look at their energy use. We say to them, "Run your dishwasher, your tumble dryer and various things during the middle of the day and therefore make the maximum impact on your bill reduction". Some people who have the free solar installs are experiencing over 50% of a reduction in their energy bills. It is very substantive. With a little more education and awareness, they could certainly make use of much of the energy that they are producing whilst they are out of the home.

Some would argue that the benefit of the free solar model is that it has helped to reduce the capital prices across the board. It has introduced more competition. It has sharpened the pencils of the installers that are not offering. Certainly, as one of the leading companies that has not been offering free solar, AmberGreen has had to sharpen its pencil and offer even enhanced value equations for thousands of customers in Northern Ireland. That has been very welcome competition, albeit, as I said, that NISTA is a very broad church. We certainly respect the questions. I counsel from NISTA that it is perhaps a softer impact than those in the media or others would present. Whilst there have been some high-profile instances where people feel that they have not had the positive experience in the selling process, there have been may thousands who have.

Mr Frew: I have sympathy for you with regards to a large drop in ROC, but does that merely suggest that it has been over-financed to date?

Mr Baird: No. The CEPA report really focuses on this issue. I take issue with CEPA because rehashed data was used to influence the proposed cut to feed-in tariffs in England, Scotland and Wales. The cut ultimately ended up in the Supreme Court, and it was found to be illegal. Now, the Department of Energy and Climate Change (DECC) is facing a £142 million compensation claim from the industry. So, I am very uncomfortable with some of the core data.

On the date the cuts come in, I will have served a decade of trying to build solar energy infrastructure in Northern Ireland. For most of those years, we were scratching around in the dirt because the economics did not make sense. In 2010, we missed a fundamental regional opportunity for our economy when we failed to implement the feed-in tariffs. The reality is that the growth we have seen in 2012-14, without taking advantage of those dramatic cost reductions that were primarily achieved between 2010 and 2012, surely indicates that DETI has got it absolutely right. You have now created the scenario whereby homeowners, businesses and farmers, including, as has always been the case, an element of the public sector, are now investing in solar. So, no, it is not over-financed. You actually have a very finely balanced economic equation spot on. That is why I am very confused as to why this is happening. It almost seems as though — I am speaking with a decade of experience in solar — you can only ever be too successful, because if you start delivering growth, and we are talking about pence per household per year to develop 500 jobs and £20 million investment in the regional economy per annum, surely that is something to congratulate the industry for and then work with us to find out how we can build on that success. Genuinely, this should just be the beginning, not the end.

Mr Frew: Although it may not sound like it, gentlemen, I am quite sympathetic to your arguments. Thank you very much for your presentation today.

Mr Anderson: Thank you, gentlemen, for your presentation. My colleague Mr Dunne already touched on the cost of solar panels. I think someone mentioned that the panels can either come from China, Europe or somewhere local. What is the standard of workmanship on those panels and how do you get an average price when you cost them?

Mr Baird: It is a mature technology. It has not changed dramatically for 50 years. Certainly, in the last five to 10 years, there has been massive growth in China, partly because of a low-cost base and partly because they are brilliant at copying what others have developed, and I applaud them for that. I have never been comfortable with the idea that you have the option of cheap Chinese junk or great European stuff. It just does not wash in terms of where the industry is. The interesting thing is that, whether it is the US, across Europe or across the Far East, most of the equipment is built on the same production lines. It is a pretty standard, end-to-end process, notwithstanding —

Mr Anderson: The guarantee of those panels — they have not really been tested. We do not really know.

Mr Baird: We do.

Mr Anderson: Do we?

Mr Baird: Three or four weeks ago was the twentieth anniversary of the first grid-connected solar PV system. There was a specific field test of every module in that array. The average efficiency was 95% after 20 years. There was an inverter change in the mid period, but, after 20 years, it is still going strong at 95%.

Mr Anderson: Was that a local or a European one?

Mr Baird: It is a Sharp module. Sharp used to produce in Wrexham, but —

Mr Doran: Can I chip in as well? There is also a quality assurance scheme operated within the UK called MCS, which is the Microgeneration Certification Scheme. It operates over all the renewable technologies in two separate streams. One is the quality of the unit itself in each of the technologies and the other is the quality of the installer. Action Renewables is an accrediting body within Northern Ireland for the installers. Neil mentioned that there are about 100 installers in Northern Ireland. We do accreditation for about 50 of those. That is to ensure that the quality of the installation is up to standard. If the panels themselves have not been passed, they cannot be installed, so there is a quality assurance scheme that overlooks all of those.

Mr Finlay: Most panels come with a 25-year manufacturer's warranty, so they are probably one of the most benign and long-term warranted products.

Mr Anderson: I am sometimes sceptical about warranties, especially when you talk about 25 years, because you have to look at whether the company that is giving that guarantee will even be there 25 years down the line. That is another issue.

What is the guarantee for the panels for someone who is paying £5,000 or £6,000 to install them or for someone who is renting out the roof? The person who buys the solar panels has the sole responsibility with the guarantee. Who is responsible if the roof is rented?

Mr Finlay: The development companies that are putting on free solar, like ourselves, hold the guarantee as the owners of the panels until the end of the lease period, when all of those rights are passed to the householder.

Mr Anderson: That could be 20 years. Is it your responsibility?

Mr Finlay: It is our responsibility.

Mr Anderson: Has there been any history of how reliable the panels are?

Mr Baird: Solar is the most rigorously fail-tested renewable technology in the UK. Starting in 2003 with Tony Blair's major demonstration programme, we had some benefit of that here with Lisneal College in the north-west and Fivemiletown in the south-east. We then had the low-carbon building programme, where all of those installations were monitored, and they had to achieve certain benchmarks on performance. As an industry, we are incredibly bullish, because we have been audited and audited and audited. It is one of the most reliable low-maintenance renewable technologies there is, which is why you are seeing this huge growth. Home owners are starting to realise that they can start to generate their electricity without planned maintenance, and it is a very simple technology to design, install and own.

Mr Anderson: Coming back to where they are manufactured, if I were going to purchase and install one of those solar panels, would I put in a Chinese solar panel, or would I go for a local one? What is the costing? I am trying to hone this down. It is like buying anything; is there a cheaper model? However, the cheaper one is not always the most reliable one.

Mr Baird: There are variations in the way that a panel performs, but a panel is simply a component in the system. You have what I call a module — your panel generating DC — that is cabled into an inverter, so the gauge — the length of the cable — needs to be considered. There is a huge range of choice for inverters, primarily from the US, Germany and China.

Mr Anderson: Without the panel, there is no energy.

Mr Baird: No, but it is a system. Therefore, to single out the module as a key determining factor in the performance of a system overlooks a whole range of other variables.

Mr O’Brien: If I may boldly interject, Mr Anderson, you asked about the quality and the costing of the panel and what the difference might be. There could be a 20% or 30% —

Mr Anderson: It is like everything else. If you go to buy something, you look for the best price for the best quality. I am trying to find out the reliability of those panels up to now, which would encourage me to go for a particular panel.

Mr O’Brien: Significant league table data has been published over the years on the various manufactures, where manufacturing components are drawn from and the output of the panels over x period of time. They have various charter marks that are well known inside the industry and to anyone who is MCS registered. I suppose the biggest factor in keeping the industry entirely honest is the fact that, if something cannot be signed off, it will never get its subsidy — its transfer income.

The type of panels that are being used, certainly by those that are the funded scenarios, have to make sure that they will have an income for 20-plus years; therefore, they are motivated by the right thing, which is whether they will get a return over 20 years and whether the equipment will be guaranteed and they will not have the expense of re-scaffolding a house to take panels down and put them back up. All of the motivations inside the sector tend to rely on the very best quality, the very best output and the longevity. The German output — the central European output — has really been proven over 20 and 30 years, because that is how long they have been testing and manufacturing panels. However, any of the Chinese products that have been brought into Northern Ireland by the installers that we represent have been benchmarked against those league tables for the quality of manufacture and longevity. Really and truly, it has been one of the most enjoyable things in the industry not to have to go back and replace panels. I cannot remember an instance when we had to do that unless some damage had been caused. Certainly, panel failure, thankfully, is a non-entity. That is because there has been rigorous testing and great standards across the industry.

Mr Anderson: Mr McKinney just wants to come in for a question.

Mr McKinney: I have just one point on that, if you do not mind. I apologise for jumping in and out of the meeting. I have just had to take a number of calls and will have to leave again soon. Thanks, Sydney, for letting me in.

The decision or proposal and subsequent consultation has been predicated, I understand, on the fact that these prices are lower. Are the prices lower for panels? Is there merit in the Government's argument that they are lower and that therefore there is a need to reduce the ROC?

Mr O’Brien: It is important that we have integrity in all of the things that we have presented to the Committee this morning. There is certainly merit in the level of support being continually looked at and measured. We welcome that being done annually. Certainly, in GB, it is analysed quarterly. What we as the industry seek is the level of fairness that there has been in the past couple of years; plenty of well-documented transfer of systems, procedures and standards from GB to Northern Ireland over the size of install, how we install it, how we connect, etc.

If we were to compare the ROC support level in Northern Ireland currently and extrapolated that to GB, the ROC level would be around 3·3 — not 4, not 1·6, but circa 3·3 or 3·4. Therefore, as you asked the question, is there merit in looking at this? Absolutely. Is there merit in the industry's saying that, "Well, we would like to be treated fairly, and if we are going to be benchmarked by a London-based consultancy, could we make that fair, please?" If their argument in the consultation had been around 3·3 or 3·5, there would not have been the level of angst and consequences that we are projecting for the industry come April. You are correct: there is merit in saying that prices tighten and that we therefore need to ensure that this is fair. Fairness is what this organisations wants.

Mr Doran: Can I also chip in? Yes: prices have come down over the past two or three years. I do not anticipate that they will come down any further. Before they did come down, there were no panels being installed in Northern Ireland. They are only being installed at the moment because there is a level of support. We could argue from now until 4.00 pm about what the level of support should be. We are saying that 1·6 is catastrophic.

Mr McKinney: Thank you and thanks for letting me in, Sydney.

Mr Anderson: That is OK. I am finished. Thanks very much.

The Deputy Chairperson (Mr Flanagan): Thanks for chairing the meeting, Sydney. Fair play to you.

Mr Agnew: Thank you, gentlemen, for the information so far. I often say that the strength and the weakness of renewables in general is diversity. That applies equally to PV. In the papers that you have provided, you outlined that Action Renewables said that there would be 500 job losses in the industry and NISTA said that there would be 750 or 1,000 direct and indirect job losses. If you were a single employer sitting here now telling us that Government were about to make a decision that would cost that many jobs, there would be outcry. It would be on the front pages of newspapers in Northern Ireland. Because you are talking about 100 businesses, it almost seems too small. What is the scale of job losses? I think that I have heard you talk about maybe as much as 90% of the industry going. What is that based on? I am aware that you have commissioned economic assessments here. What kind of evidential underpinning have you based that on?

Mr Finlay: If you just take the free part of the industry at the moment, that money has already evaporated from 1 April. In the past 18 months, my own company has brought £10 million or so. A few other companies have brought something similar. So, there is £20 million in the best part of a year. That will not be renewed. I know that the teams of people whom we have employed to deliver those projects will not have a job come 1 April if the proposals as they remain are enacted. That is just the free bit. I think that I speak for the other free guys in saying that the sector will just disappear. Take the investment, and the jobs will go with it. We are preparing for that, and we need some clarity very quickly on what the reality will be come 1 April.

Mr O’Brien: The proposals came from DETI for consultation in July this year. In early August, the NISTA organisation came together to provide our responses to that. One of the first things that we did was ask all of the major players to quantify what they would do in the circumstances. As we went around the room on that one, it became very clear that there were 50 here, 70 there and 90 on the other. We asked one of the leading economists, Professor Michael Smyth, to take a good look during the month of August at exactly what the impact would be. We did not want to take too much time because the responses had to be in for the end of September. Therefore, we kept it broad, but we kept it quite truthful, at between 500 and 1,000. We all know the size of organisations and the people whom we employ, both through indirect opportunities and processes and directly. We also know the experience of other players in GB who had a very similar projection as us, but they had a real falling off the cliff in 2011, and we know what happened there overnight. As we ran our numbers, it was very apparent that somewhere between 500 and 1,000 would go.

Also, so that you understand the nature of the organisations and companies, many of them have pedigree that is longer than two or three years, but most do not. Over the last two or three years, as we have been successfully growing the businesses and generating a surplus, we have been paying our corporation tax, our employees and our suppliers, but any surplus that has been there has, by and large, been invested in growing the market and educating the consumer. The buildings, the vans, the technical training, the advertising and everything that we have been doing to educate and grow the market has come from surplus. That surplus has been generated by the very good support levels that we have experienced in the sector, so thank you for that. However, we have been reinvesting that. Many of the organisations are not in a hugely cash-positive position because they have been growing their business, and, as we know, that first two or three years of the business cycle is probably the hardest. We are now two or three years old, and we have been investing our profits and have grown our businesses based on the growth of the market. At the very juncture when we are achieving some level of maturity and also export to GB and Southern Ireland, we now are faced with the annihilation of the income and the support.

That, perhaps, provides the backdrop to the job losses and why those companies would not be in the position to knuckle down for 12 or 18 months and continue with the employment levels, the infrastructure etc. We are not 10 or 20 years old, so, unlike other energy industries, we would not weather the storm, even if we felt that there were increases on the horizon inside six, 12 or 18 months.

Mr Agnew: You might have heard when the Minister was in front of us that some of my colleagues mentioned getting jobs to regions outside Belfast. You mentioned that there are 100 employers. Geographically, how are those spread?

Mr Doran: They are spread all over Northern Ireland. We do MCS accreditations for approximately 50 of the companies, and, while, obviously, most of them are based in the Belfast/Lisburn area, they are in Derry, Limavady, Enniskillen, Omagh, Strabane, Armagh and Newry. They are all over.

Mr Agnew: Another thing that the Committee has looked at in particular is research and development. Renewables is a very innovative industry. How much research and development of new products is taking place in Northern Ireland?

Mr Baird: There is a lot of research and innovation around off-the-shelf technology. Having made the investment into solar, you are looking at Bluetooth remote control of appliances and some of the storage technology that I mentioned.

Historically, Creative Composites in Crumlin has made and, to this day, still manufactures glass-reinforced plastic (GRP) tiles that sit on thousands of social housing roofs across the UK and especially in Northern Ireland. There is a lot of innovation.

Unfortunately, one of the things that constrain us as an industry is that, while we do, in the mid-term, depend on government subsidy, we have this ongoing distraction, where we are not able to innovate and do all of those interesting things simply because we are entering that next spike in demand that is driven by a proposed cut. Before that, there were various grant-funding programmes. In February this year, we had NIE reduce the amount of solar allowed on a roof. To have this constant spike and drop is probably the key issue in limiting innovation.

Mr Agnew: An innovation that the Committee heard about recently and was keen on exploring more is the idea of microgrids. To be honest, I sometimes characterise that part of the problem that solar has is that NIE considers it just a pain.

Mr Doran: Yep.

Mr Agnew: Were NIE here, I am sure that it would say, "No, no, not at all". However, it is a problem for NIE; it is providing it with a lot of work. NIE does not work like a commercial business, and a lot of work is not necessarily a good thing. How important is the solar industry to the development of microgrids?

Mr Doran: It is one part of it. Several projects are already looking at microgrids in Northern Ireland. Coleraine Council has been involved in one, and Lecale is looking at another in work that is being done by B9, through David Surplus. So, at the moment, Northern Ireland is quite active in developing innovation in microgrids and attached energy storage. I understand that another proposal is going in at the moment for Coleraine. It is considering a larger proposal to develop a microgrid in that area, and PV is part of it. It is not the biggest part of it, but it is part of it. If you take that out of the mix, you will weaken the overall proposal.

Mr Agnew: Sure. You will be well aware, and it is no secret, that I have always sought to promote the renewables industry. I always make the argument that it is not going to be subsidised forever. I often have to make the argument for renewables versus nuclear, a mature technology that we are still subsidising to the hilt. We need to see a trajectory of decreasing subsidy for renewables, including the PV industry. First, do you accept that? Michael, you have certainly referred to that.

Secondly, I do not think that going from 4 ROCs to 1·6 ROCs is a reasonable step down, and I think that it would be acceptable to use the term "catastrophic" about that. Can the industry meet the Department part way to say that we are moving towards becoming a self-sustaining industry? We are moving towards — to use a new term that I have learnt — grid parity. Is the conversation happening that we can move but move slower, and is that accepted by the industry?

Mr O’Brien: As an industry, we understand that there needs to be movement. So, the answer to that is yes. Are we engaged with the Department and others in innovative ways to bridge the gaps? The answer is not yet, but we would love to be engaged in doing that over a period of one or two years and no longer. That is because, within that time, we, as increasingly more mature players with thousands of customers, have market intelligence that allows us to present various strategies that would narrow that gap of support. We touched on a few of those earlier. There are many ways in which individual homeowners could bridge that gap over 10 or 20 years, and our industry would embrace that work. And certainly there are those amongst us — most notably, Andy — who would push very strongly inside our organisation to achieve by 2020 the nirvana that we are looking for, which is no subsidy whatsoever. Others are reflecting on that, but it certainly is a debate worth having. We would love to be stuck in the middle of that.

Mr Agnew: When we next have the Department in front of us we should make these arguments. I accept that there is a debate to be had as to whether you can do that by 2020, but if you can say that there is a trajectory whereby the Department can step out, in terms of giving support, and the industry can continue on its own, it leaves only the route to get there to be discussed. That would show a maturity in the industry and an industry that is not overly reliant on subsidy and not looking for it. Ultimately, the industry is saying that it needs to be kick-started, but, if the Department can do that, the industry can create the jobs, the clean, green energy and, ultimately, create employment in Northern Ireland. As well as energy security, one of the roles of this Committee is to look at creating employment. I go back to what I said before. If the representatives of JTI Gallaher were sitting here, before their jobs announcement, and had told us what was coming and said that there was something very simple and low-cost that we could do to stop the job losses, everyone on this Committee would have said, "Let's do it". That is the kind of attitude that we need for the future of this industry.

Mr O’Brien: Let me say just one thing to you. Of those hundreds of people, many are microbusinesses. They are doing it for themselves, for the most part, in their own sphere. They are epitomising all the virtues of entrepreneurship. Some of them will not be here in 10 years' time; others will have staff and factories of hundreds, if not thousands. They will be exporting product all over the world and using the very best of what happens in Queen's University and the University of Ulster. There will be another Wrightbus or two or three or four in the renewable sector. We really could not urge the Committee any more strenuously to believe us. As we listened this morning to the Minister before the Committee, many of us were saying that this is about jobs. We really cannot urge you any more earnestly. Our huge ask is this: support us in making sure that these proposals are either put off by 12 or 18 months, which will allow us to gather ourselves, or join with us in understanding a piece of work, which we will contribute to and for which we will bear responsibility, to show the Committee and DETI just where the solar PV industry in Northern Ireland can go.

The Deputy Chairperson (Mr Flanagan): You say you would gather yourselves; if we delay this decision by a year or 18 months, what would it mean?

Mr O’Brien: It would mean that, over that time, we may be able to come up with solutions which, if scrutinised by the renewables team in DETI, may be sufficiently innovative to see a reduction in the direct transfer of payment of support and subsidy — perhaps it would not be akin to 1·6 ROCs, but certainly it would be lower than it is now — and ensure that there is an easy transfer, weaning the industry off subsidy to a certain percentage, be it 10%, 20% or 30%, and redoubling our efforts to ensure that there are no job losses and we become even leaner, meaner and greener in how we deliver the growth in the sector that we know is there. There will be a doubling or tripling of this sector in the next two to three years if we do not miss the opportunity now.

Mr Kinahan: I am sorry to have missed the beginning. I did not hear the Minister either, because I was attending an education event. I was fascinated when listening to all that. We did not seem to be getting to the nub of the problem, which is job losses next year, until Steven's question was asked. Should we not try to have two or three options or alternative routes? One would be the worst-case scenario: what is the minimum that we can get away with to keep some jobs in place, maintain survival and reserve a decision until next year; and the best case would be what the Chair has just come up with. However, we need to do it soon, and, therefore, we need your input on that. My concern is that, by the time the Committee has written to DETI and got it all happening, we will be six months further on, and we will not actually have done anything. Is there a way of having a quick set of options that come through, that we can then work to and push the Minister for?

Mr O’Brien: If I can be very bold, the membership and the size of our businesses are such that we can turn on a sixpence —

Mr Kinahan: Good

Mr O’Brien: — compared, with the greatest respect, to the arms of government and organisations that have the responsibility of actually running the country. So, to be fair, we respectfully throw the question back at you and ask how fast DETI and the renewables energy team can respond. We can respond very quickly and in as positive away as we can. However, the industry itself is engaged in its own planning for three, six and 12 months. We have relationships with suppliers and our own contractual arrangements for staff, premises, vehicles and training. So our backdrop is one that we can move very quickly, but we have commitments, and it is no good for us to be operating, as we are right now, under the cloud that there may not be an industry. Also, we have the business folk, consumers and homeowners asking, "When can I get my install, because I want to come in?". That is a double whammy for us.

Mr Kinahan: We very much take that on board. We need to push this.

The Deputy Chairperson (Mr Flanagan): In your written briefing and earlier on, you mentioned that the Housing Executive sees no future for its schemes if this proposed change takes place. Have you been in contact directly with the Housing Executive on that issue?

Mr Doran: Yes, I have.

The Deputy Chairperson (Mr Flanagan): What exactly has it said?

Mr Doran: It anticipates that there will not be any further PV going on. It cannot justify it within its own regime and green book assessment.

The Deputy Chairperson (Mr Flanagan): OK. Have you anything else to add before we close the session?

Mr Doran: Not me.

Mr Dunne: We all appreciate your contribution. It is right that we acknowledge the contribution that you make to the local economy and job creation and the sustainability of jobs. We will all lobby hard to try to make sure that the change is not drastic, but, in the round, what reduction could you live with?

Mr O’Brien: During the first series of meetings that we had as an industry, in early August, we told ourselves, "Let's not be a part of the problem but part of the solution". So what is the solution? To answer your question, Mr Dunne, our number was 3·5 ROCs in the near-term. Certainly, the number began with a three, not with a one.

The Deputy Chairperson (Mr Flanagan): I had intended to ask members to look at the table on page 29 of the pack, which shows the responses. Your biggest concern is the drop from 4 ROCs to 1·6 ROCs in the very small stuff. However, in terms of the proposed changes between 50 kW and 250 kW, are you content for that change from 2 ROCs to 1·6 ROCs?

Mr O’Brien: Our membership has not been involved in anything larger than 50 kW. I think that we could count on one hand the number of installs larger than that. The industry is a tad agnostic on that because it has not been engaged in it in Northern Ireland. That is a fair reflection of where we are at. We are not in the mindset of lobbying or trying to agree to cuts, but it would have a negligible impact on where we are right now.

Mr Doran: There is something that I should have said earlier on: we are not a part of NISTA. Obviously, we like to see it acting on behalf of the industry. We are not acting on behalf of the industry. Action Renewables has been involved in two feasibility studies for PV farms. Those were between 2MW and 5MW, so they are not on the scale of what we have been talking about this morning. Both of those were feasible at 2 ROCs until both of them were charged for grid connection, and then they both just fell over. So, at the moment — this is just my opinion, and they may completely disagree with what I am about to say — it does not matter whether it is 2 ROCs or 1·6 ROCs when the cost of the grid connection is more than the cost of your 2MW PV farm. It does not make any difference.

The Deputy Chairperson (Mr Flanagan): OK. You can agree to differ on that, if you want. Thank you very much for your briefing. It has been very useful, and we will reflect on it. Are you content to respond in writing to any further questions that we may have a later stage?

Mr O’Brien: Of course.

The Deputy Chairperson (Mr Flanagan): Are members content to write to the Housing Executive for more details on that scheme and to seek its views on the future viability of the scheme beyond March?

The Deputy Chairperson (Mr Flanagan): Are members content to consider this matter further, following the Department's response on the outcome of the consultation, which is due to be considered by the Committee on 2 December?

Mr Doran: Clerk and Deputy Chair, thank you very much.

The Deputy Chairperson (Mr Flanagan): Thank you.