Making pay while the sun shines?

Driving on the left, three-pronged plugs, tea served with milk: The U.K. likes to be different. As a nation renowned for its appetite for global expansion, the country can be surprisingly insular: the English Channel as effective a cultural buffer as a geographical one.
But when it comes to their energy supply – mains sockets aside – Brits are no different from the rest of Europe. They want affordable electricity, are largely supportive of efforts to cut carbon, yet are reluctant to pay through the nose for expensive subsidies.
Electricity prices in the U.K. are roughly $0.23 cents per kWh, below the European average of $0.27 cents per kWh. Of the typical British household bill, 9% consists of taxes and subsidies for renewable energy. In Berlin, Germany, that figure is closer to 30%. The fabled ‘Big Six’ energy companies are distrusted in equal measure, but U.K. consumers have never been less active in changing their energy supplier. What might be considered apathy is perhaps more akin to the great British pastime of not kicking up a fuss.
Yet there are some issues close to every Brit’s heart that are sure to stir an impassioned response. House prices is one, and conservation of the British countryside another. The two are inextricably intertwined. With Brits paying a higher proportion of their monthly paycheck on rent and mortgages than any other nation in Europe (an average of 35% according to the Office of National Statistics), one could be forgiven for thinking that the clamor to build new housing was deafening. Not so – Britain’s Greenbelt land and countryside holds near mythical status in the minds of the majority, and attempts to develop it are usually met with furious opposition (see the recent furor over the HS2 high speed rail link between Birmingham and London).
Enter large-scale solar parks. Those with an interest in the solar industry will have noticed that the U.K. has become Europe’s most dynamic solar market in 2014. Last year, with 1.5 GW of PV capacity added (according to figures from the European Photovoltaic Industry Association – EPIA), the U.K. edged out Italy to take second place behind Germany. This year the U.K. is set to lead, with various experts predicting new PV capacity of between 2.9 and 4.5 GW based on various forecasts.
Although more evenly balanced than many other European PV markets – ground-mount accounts for 39% of all PV capacity installed, commercial 34%, rooftop residential 24%, and industrial just 3% – the U.K. government wants to tilt that balance in favor of the rooftop and commercial sector, and has recently announced a shift in subsidy support designed to do so. By April next year, the Renewables Obligation (RO) scheme for solar parks in excess of 5 MW will be removed as the government switches its support toward smaller commercial installations and the rooftop market.
These proposals have been met with criticism, but the Department of Energy and Climate Change (DECC) remains committed to pursuing its current path. In proposing the withdrawal of financial support for the U.K.’s large-scale solar sector, the DECC stressed that the segment was deploying much faster than previously expected, adding that in order to keep government financial support within the constraints of the Levy Control Framework, action had to be taken.
“Given the under-deployment of non-standalone PV to date, and the relative success of standalone [large ground-mount] PV, we are keen to ensure that the existing budget for over 50 kW installations other than standalone PV is protected to ensure deployment in this part of the sector,” read a statement issued by the DECC in May.
By withdrawing the RO and replacing support for large-scale solar projects with the controversial Contracts for Difference scheme (CfD, see p. 39), the DECC is instead channeling already-scarce subsidy funds into the U.K.’s smaller-scale solar sector.
After the DECC announced the proposals, solar supporters were quick to decry the move, with the CEO of the Solar Trade Association (STA) Paul Barwell issuing this waspish response: “The costs of solar power have kept on falling, in large part thanks to the growth and learning in our successful U.K. industry,” he said. “We had forecast solar could be cheaper than onshore wind by 2018, but for this to happen we needed stable policy sustaining a high-volume market. The government is actually moving to slow down solar’s cost reductions towards grid parity.” As arguments about cost and support have raged over recent weeks, a decision by the coalition government’s Communities Minister Eric Pickles to personally block planning approval for a large-scale 24 MW solar park in his local Suffolk constituency is rather telling. Knocked back on the grounds that the proposed solar park would have “an adverse impact on the landscape,” the decision was met favorably by locals keen to preserve the surrounding countryside. Was Pickles’ intervention the first tangible sign that the U.K. government really is ready to throw its weight behind the rooftop and commercial solar segments? Regardless of Pickles’ wider intent, the Minister was left red-faced last month when the U.K. High Court overturned the decision, subsequently refusing any leave for the government to appeal. Justice Keith Lindblom said Pickles’ decision was in conflict with the local authority’s development plan and “does not show that he performed his duty under section 38(6) [of the Planning and Compulsory Purchase Act 2004.” The developer, Lark Energy, was understandably pleased with how matters eventually panned out. “We were always concerned about the legality of the secretary of state’s decision as it appeared to have been made without due regard to the local plan,” said Lark Energy’s development director, Jo Wall. “It was clear to anyone that read the secretary of state’s decision notice that this project was a victim of political expediency rather than rigorous application of planning policy.”

The great RO rush

Figures published by the Renewable Energy Foundation (REF) suggest that the U.K. solar sector will see a huge surge in PV installations before next year’s April deadline. As echoed by analysts at both IHS and NPD Solarbuzz, REF estimate that there is currently 3.2 GW of solar PV capacity granted planning consent that should be constructed before April 2015.
Encouraging? Certainly. Sustainable? Probably not. The next ten months or so promise to bolster the U.K.’s solar PV capacity by multiple GW, but growth is widely expected to plunge sharply once the RO scheme is withdrawn. Its replacement has been routinely criticized by the solar industry, with the STA arguing that the bidding process for the contracts favors the onshore wind industry.
NPD Solarbuzz also believes that the early introduction of the CfD program, two years ahead of schedule, could negatively effect 215 planned solar farms.
PV plants below 5 MW will still be able to be completed under the RO program, of which there are currently 81 in the planning stages. However, for the 198 solar projects sized between 5 – 30 MW, these changes could have a damaging impact. NPD Solarbuzz states that 80 solar farms in this range have full planning permission and are likely to be completed by March 31 next year, but that there are 100 or so that may miss the deadline altogether and could also be too small to successfully compete under the CfD scheme, putting their very future at risk.

Severe criticism

The uncertainty that is now threatening to cast a shadow over the U.K.’s bright solar future could have been avoided, believes Leonie Greene, head of external affairs at STA. She argues that much of the analysis the DECC relied upon in making its decision to withdraw RO support for solar rested on data and modeling that is severely out of date.
“Solar has fallen in support needs against offshore wind by nearly 30% in 18 months,” Greene said. “After onshore wind, solar is now the second-cheapest major renewable and, with sustained support, it was set to match onshore wind and nuclear in the next few years. Our analysis, which the DECC does not dispute, shows that solar was consuming just 5% of the RO budget at the time of their intervention.” Calling the suppression of solar growth ‘nonsensical,’ Greene argues that a political dislike for solar farms threaded through the halls of Westminster has handicapped the industry from the start. “Renewable energies should be for communities to decide, not Westminster,” added Greene. “Our YouGov poll showedthat solar farms were the most popular local energy development given a choice of nuclear, shale gas, wind or solar.” Although a popular energy source with large sections of the general British public, the STA believes that the government has used solar to balance its energy books, undermining a still-fledgling industry and harming market confidence with inconsistent policies. “Sudden changes to support schemes are never a wise move as this damages investment and the industry’s trajectory towards grid parity,” said Greene.
Since announcing the consultation to remove the RO next year, the DECC did assure investors that there would be a sensible ‘grace period’ for projects already in the planning stages. But even this, argues Greene, is unworkable, and merely serves to heap further harm on the U.K.’s reputation as a stable investment destination.

Solutions for future growth

Has the U.K. solar industry’s unexpected success made it the architect of its own downfall? The DECC’s literature certainly seems to suggest that the pot of money allocated in its Levy Control Framework for renewable support has emptied faster than predicted. “If present support continues, we could see more than 5 GW in large-scale solar installations a year by 2017,” the DECC wrote recently. “This exceeds by some margin the upper end of the potential range set out in the Delivery Plan for 2020. This is more than we can afford.” By switching support away from the RO and towards the CfD scheme, solar is forced to compete with other renewable energy sectors for available funds – a fight for which the industry is ill-equipped, believes Greene. “Auctioning for CfDs is meant to start in October. We are still discussing with the DECC how they can make the scheme work for solar SMEs. If the DECC makes the changes we think CfDs need so that they work for smaller players and new entrants, that will improve the outlook, but there are real problems here. We are not asking for special treatment for the solar industry, simply a level playing field so solar has equal access to resources where it is competitive.” At smaller scale, the U.K.’s rooftop and commercial sector still enjoys the benefits of a feed-in tariff (FIT), although the scheme also requires tweaking, says the STA. “We’ve been pressing for a year now for the DECC to fix the FIT scheme,” adds Greene. “This is the right mechanism for rooftop solar and community schemes, but it requires major increases in capacity trigger points for the cost effective scale [250 kW+] if we are to have a serious market.
“I’m afraid that right now we are hearing a lot of rhetoric about supporting rooftop solar without a policy framework that delivers that. Given the extent to which the ground-mounted sector has been destabilized, that is a real worry.” Critics of renewable energy as a whole, not just solar, are voluble and, unfortunately, influential. Fatigue for solar support is detectable within each of the major political parties in the U.K., and there is a sizeable section of the population that detests the very mention of the word ‘subsidy,’ particularly when they believe money is being taken directly from their pockets in order to prop up these fresh-faced industries.
Greene, however, disputes the notion that ‘subsidy fatigue’ should see solar power ushered quietly towards the exit. “What is tiresome is the focus on renewable subsidies,” she argues, “particularly when the International Energy Agency (IEA) calculates that globally, fossil fuels benefit from six times the subsidy of RE, which is rather striking when the impacts of climate change are being externalized around the world, with the poorest hit first and worst.” Under the feed-in tariff scheme, solar adds just $12 to the average household bill, and just $1.36 per GW for larger-scale solar, says Greene. Public support is there – the DECC’s opinion poll tracker showed 85% in favor of more solar – and for all the hysterical headlines trotted out by the anti-solar brigade, prices have dropped dramatically in the past few years.
“It is pretty clear where solar is headed if steady support is sustained,” concludes Greene. “All we need is one more push to get solar cost-competitive. I think that is a performance to get very excited about.” But it has become clear that such a final push is not likely to come from government, and could all come down to the whims of the Great British public. The real question now is this: Is solar power their cup of tea?
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