UK solar's record-breaking 2014 looks certain to make it Europe's number one market this year. But as Peter Bennett reports, this success could prove costly to solar, exposing it to political meddling that may put the brakes on future growth
The UK is unquestionably Europe’s largest PV market this year, a feat that has been accomplished largely on the back of sensible, stable government support schemes which have allowed the industry to scale up at an impressive rate.
In the first six months of 2014 alone, almost 1.5GW of solar capacity has been installed in the UK – more than it managed in the whole of 2013.
You would think that this would be a cause for celebration, a success the government should be holding up as an example of how well its green policies are working, that now employs over 13,700 people and that has driven down costs so successfully that it is on the cusp of becoming the cheapest renewable technology in the UK.
The problem is, the Department of Energy and Climate Change (DECC) didn’t predict this success. And if it didn’t predict it that means that it didn’t budget for it.
So the UK solar sector now faces its fourth consultation designed to drastically lower solar support in three years. The target this time is large-scale, ground-mounted solar farms.
UK solar farms too successful
Developed under the renewable obligation (RO) scheme, solar farms have dominated UK deployment in 2014, representing 75% of all new capacity. The astonishing rate of deployment has taken DECC completely by surprise, so much so that it is now taking steps to completely remove support for solar developments over 5MW from the RO scheme by April 2015.
The department says that it’s been forced to take such drastic measures because of concerns over the impact the rate of deployment under the RO this year could have on the Levy Control Framework (LCF), the mechanism which sets annual limits on the overall cost of DECC’s levy-funded policies. “If spend in one area of the LCF increases unsustainably, it will increase pressure on bills unless it is matched by cost reductions elsewhere,” DECC said.
Essentially, the government is admitting that it failed to accurately model the level of solar deployment (for the fourth time).
The government is now forcing large-scale solar farm developers to use its brand new support scheme for renewables: contracts for difference (CfDs).
CfDs have been in a state of perpetual flux since the government announced them back in 2012. The scheme forms part of the government’s wider electricity market reforms (EMR). Under the catch-all ‘CfD’ the government is including support for new nuclear, all renewables and gas-fired backup capacity.
Following new EU state guidelines on renewable support the government has introduced auction-based subsidy for ‘established’ renewables. To the surprise of many in the industry, solar was listed as an established technology alongside onshore wind, energy from waste with CHP, hydro and landfill & sewage gas.
Industry body the Solar Trade Association has challenged DECC’s assertion that solar farm deployment is threatening the RO budget, claiming that solar currently accounts for just 5% of RO expenditure. And speaking to Solar Business Focus STA chief executive, Paul Barwell explains that there a number of issues facing the UK solar industry as a result of DECC’s attempts to force the adoption of CfDs. Chief amongst the association’s concerns are the proposed grace periods for developers to continue planned RO projects , the route to market under CfDs for small developers and the need for a clear and visible budget for the scheme.
To compound the issue further it has been clear that the government is distancing itself from supporting ground-mounted solar developments in favour of installing PV on commercial rooftops
Turning Britain’s rooftops into power stations
Addressing delegates at the British Photovoltaic Association’s (BPVA) rooftop solar seminar in London this month, Greg Barker, the UK’s energy and climate change minister, promised that the government was committed to driving the hitherto disappointing deployment of commercial solar in the UK. With characteristic slickness, Barker claimed that DECC was putting in place a raft of incentives that would put “rocket-boosters” under the commercial sector.
Specifically, the government said that it would consult over simplifying planning for arrays sized between 50kW-5MW; consider proposals which would allow businesses to transfer solar arrays between buildings without losing FiT support; and set up an industry roundtable to bring together stakeholders and lift the barriers that prevent solar deployment because of landlord/tenant issues.
However, the vast majority of the solar industry is sceptical over the proposed changes. From June 2013 to May 2014 the total deployment across the 50kW to 5MW rooftop sector stood at just 59MW – a figure that Barwell believes needs to be boosted ten-fold.
“Tinkering around the edges isn’t going to be sufficient enough,” claims Barwell. “Permitted development, landlord/tenant problems – that’s kind of the long-term game; the sector needs something more sufficient than that. My view of a successful market – even a mediocre one – is something along the lines of 110MW a quarter, just under 0.5GW a year.”
However, under the current feed-in tariff structure, that level of deployment would trigger a series of degressions which would drop the tariff to 2.87p/kWh from the 6.38p/kWh currently on offer.
The STA maintains that the UK government will have to fix the policy mechanism for commercial sector if it is to realise the ambition that it has laid out for the sector. Barwell explains: “We have to adjust the policy mechanism to allow that growth. If we don’t fix it now it will be much more difficult to fix in the future when it’s growing.”
Domestic solar: stable policy equals success?
The domestic solar market has been largely untouched by controversy since the government enacted wholesale changes to the feed-in tariff in 2011. However, deployment rates have failed to significantly grow since then.
“Our view is that this is a fantastic market – all the mechanisms are in place and we don’t understand why it isn’t deploying,” says Barwell.
Looking at the latest deployment figures it looks likely that the market will again fall short of the 100MW degression trigger this quarter. Barwell notes that “the retrofit market is just not expanding enough”.
He continues: “Traditionally the second quarter is the boom quarter. Returns are fantastic, it’s a great investable market but it needs a further boost”. The STA has called on the government to remove or relax the current minimum energy performance certificate (EPC) requirements in order to help stimulate more deployment.
The combination of all of these pinch points means that it looks likely that UK solar won’t be able to sustain its incredible performance this year. Too many unanswered questions remain and, as Barwell admits, “the stars would have to align” on a lot of solar policy to allow continued growth – given the current outlook that looks unlikely.
“A year ago we were very bullish about the market,” explains Barwell, “but the greatest concern now is that the rug has been pulled for large-scale solar deployment but the policy framework and the growth isn’t in place yet to replace that with commercial rooftops – we can’t go from 2GW a year of solar farms to 2GW on commercial rooftop, it’s just not available.
“It’s looking likely that we’re risking DECC’s modest 12GW by 2020 prediction let alone Greg Barker’s 20GW by 2020 ambition.” This figure has achieved almost mythical status since Barker said it was his ambition to see this level of deployment in the UK, but the minister has since downplayed suggestions that this is the government’s target.
Looking ahead, Barwell remains optimistic over the role solar will play in the UK’s mainstream energy mix. He says: “If we can fix the policy framework and get stable policy support I think just one more push from government and we should be able to hit zero subsidies by the end of this decade.
“Solar is a secure, home-grown solution for Britain in terms of its impending energy crisis but we’ve to have that support from government to enable one last push to get us to zero subsidy.”
The long-term outlook appears even more uncertain: a general election in 2015, the development of new nuclear, shale gas and gas-fired plants, and the increased politicisation of ‘green’ technologies will all play significant roles in determining just how much solar will be deployed over the coming years.