DTI Website profile for Alistair Darling:
DTI Website profile for Lord Peter Truscott:
Genersys expose flaws in Phase 2 Low Carbon Buildings Program
Below is a copy of Robert Kyriakides' reply to Lord Truscott. This and Lord Truscott's letter are available for download.
Dear Lord Truscott
Thank you very much for replying to my letter in detail. I have carefully studied your reply but feel that I should respond further to clarify my concerns. Also since writing to Mr Darling I have continued my investigations and I can now bring matters to your attention that was not known by me then.
I agree that the upfront cost of the installation process is a barrier to widespread uptake of solar thermal products which need to be carefully and properly installed. We have known this for many years and accordingly have (1) trained many installation companies in the best installation methodology drawing on the experiences of our German and Slovakian associated businesses and (2) embarked upon a process of improving the design of our thermal solar systems so that some parts of the installation can be "industrialised" and other parts "deskilled".
The product price is largely fixed by the cost of materials. I think that the solar thermal industry have informed the DTI that the lack of certainty about grants and subsidies creates a "stop-start" cycle which makes it difficult to predict future volumes, rather than there is a general lack of certainty.
I am not aware of any consultation with the solar thermal industry about what can be done to break the "stop-start" cycle and of course there was no consultation about a framework scheme. If I were consulted on it I would have made out the same case as I explained in my earlier correspondence - a Framework Scheme will damage many smaller businesses while not delivering the savings in costs; although it may appear to deliver certainty about volumes the larger European manufacturers -including our associated businesses - have difficulty in keeping up with European demand because demand is unpredictable; a UK solar thermal framework scheme in which solar thermal may get £7million worth of business of which probably less than a third will constitute the cost of the solar collectors will not make demand any more predictable, but rather provide the framework companies with guaranteed turnover regardless of product merit, cost, value for money, expertise, marketing reach and reputation.
In these circumstances it would have been wise to consult about the scheme before it was implemented. I note your point that Phase 2 was not intended to be part of a rationalisation process; I was informed by two trade associations that this was the message that their representatives had received from DTI officials. Of course, it is not part of the DTI's role to rationalise an industry; its prime role, as I understand from its website is
"to create the conditions for business success and help the UK respond to the
challenge of globalisation,"
Unfortunately the way in which the Framework has been established will cause some business failures because many qualified Clear-Skies businesses, having spent a great deal in qualifying and developing their businesses are excluded from the largest injection of public funds in their industry.
I agree that the Department has a legal requirement to publish a notice of this nature in the European Journal. Of course it would be foolish to simply rely on this publication to bring the information to the attention of a small and diverse industry like the solar thermal industry because the Government has a duty to get best value for money and they will only do so through a competitive process.
Most solar thermal businesses belong to the Solar Trade Association. I believe that there are about 100 members. None of these members were informed by their association of the existence of the tender because the operations manager forgot to send out notice of the tender to its membership. Notwithstanding this the businesses run by the Chairman of the STA and the Vice Chairman of the STA found out about the tender and bid for it. I understand that one other company, Solar Twin, found out about the tender from the MicroPower Council of which it is a member but it is unusual for a solar thermal business to belong to the MicroPower Council. I think that the 53 expressions of interest is a poor response to such an important tender and it is clear that there were very few expressions of interest from the solar thermal industry.
Now, an important principle is that not only must justice be done, but that it must be seen to be done. In the circumstances we have an important Government tender, which was not publicised by the Solar Trade Association to its members apparently due to a mistake but which nevertheless reaches the eyes of the Chairman and Vice Chairman of the Council of that trade association who do not ensure that the tender is publicised but bid for it and win it.
Regardless of whether there has or has not been any wrong doing (that question is irrelevant) these circumstances create a strong impression in the minds of those unconnected that the process was not conducted fairly. By this I do not say that the DTI did not conduct the process fairly but that in the circumstances here the process was not conducted fairly.
As you are aware, the Government publishes a procurement code of good practice, I refer to section 2,15 of the Code
"public sector procurement activity to be seen to be conducted with integrity, probity and fairness"
Without laying any blame on the DTI, this procurement activity cannot be seen as having been conducted with integrity probity and fairness, It is likely to be seen as unfair, regardless of whether there was any wrong doing. Government procurement cannot be tainted in this way.
You will appreciate therefore that it is not just a question of complying with the treaty obligation to advertise in the Official Journal of the European Union. In these circumstances the solar thermal part of the tendering process must, as a matter of fairness be revisited without further delay.
I note your comment that Framework Suppliers were chosen on the basis of various criteria but you have had a very limited pool from which to choose your framework suppliers due to the lack of notification by the Solar Trade Association.
I note your comments about Mat Colmer, but this does lie easy with the comment in your letter that "Officials have made many presentations at external events with wide ranging attendance from all sectors of the microgeneration industry". In addition, the presentation was headed "Low Carbon Buildings Programme" every slide bore the DTI logo, Of course there are still other opportunities for businesses involved in the thermal solar industry, but that is not the point.
I am very aware of what the Government is doing to promote microgeneration. Its well meaning intentions are not in doubt. I have commented upon them extensively both in "the Energy Age" and in my company's submissions to the Energy Review, which the Solar Trade Association publishes on its website. I understand what the Chancellor is intending to do, and it would be helpful if he could reply to my letter last October in which I pointed out a simple, unintended VAT anomaly affecting the solar thermal industry and asked him to correct it.
I think somehow at the root of this problem is the fact that the microgeneration industry seems to rely so heavily on public grants and subsidies. Al though I think that people who buy microgeneration products should have a modest state incentive, which provides if no more than a seal of approval, giving out public money to wealthier people who make the investment seems wrong in principle. The way in which the money is dished out creates uncertainty. It is "stop-start" because people have to apply for the £400 householder grants at the beginning of the month before that month's allocation runs out. If they are refused the grant they often change their minds. The level of grant is so low that it does not make a buying decision.
I would be very supportive of some other kind of incentive -perhaps through taxation - which can move away from a grant based industry. The Chancellor, as you pointed out, announced a stamp duty exemption for "the holy grail" of a zero carbon home, You can do far greater good, save more carbon and encourage the use of microgeneration by for example allowing part of the expenditure by an individual against his or her income tax and it would be less costly to administer and audit.
I hope that you will understand that Genersys is genuinely commi tted to improving the uptake of solar thermal in a fair and positive way. I am sure that the Framework in so far as solar thermal is concerned has been unfair and is perceived as lacking in integrity and probity and I do hope that you will wish to correct this without further delay.
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