Citigroup are not often listed in the pantheon of environmental campaigning organisations. Even among bankers they have a reputation for being hardnosed. So it was with some interest that I recently came across a report on the solar industry they published earlier this year. It should have received a lot more attention than it did, especially in DECC.Its central point was that subsidies for rooftop solar installations were becoming redundant.
Citi forecast that this technology was on course to becoming cheaper than gas. This would be no surprise coming from Greenpeace or WWF. They would wouldn’t they. But Citigroup make their living by getting such forecasts right and there is a price for getting it wrong. Furthermore, no bank, however heroic, says things investors would consider totally off the wall.
Just the act of publishing such a report tells you something about that strange phenomenon, market sentiment. In other words, real world investors are paying serious attention to solar.Which is more than can be said for DECC which is still befuddled by nuclear illusions. Citigroup point out that residential scale solar has already achieved grid parity in Germany, Spain, Australia and South West America. They forecast it will do so in Japan within three years and South Korea and Britain by around the end of the decade.
This transformational change will accelerate as the big consumer electronic brands get into the solar energy market and eat the lunch of the large utilities with their fossil and nuclear plant. As Citigroup point out they will bring ‘their existing brand strength, customer relationships, route to market, balance sheets, access to cheap capital and purchasing power to the party’. These are not attributes anyone would assign to EDF. DECC are now admitting that there will be no electricity from EDF’s new nuclear reactor before 2024 – well after the date when solar is likely to have achieved grid parity.
Britain’s electricity consumers thus face the prospect of being compelled to pay more than a billion pounds a year to subsidise Hinkley at a time when Dixon’s will be offering them a far better deal on their rooftop. There may be less truth than ideologues would have you believe in the old saw about governments not being able to pick winners. But there is no doubt at all that this government has a knack of picking losers.
June 23rd 2013