27 August 2015

Solar news

It has been an extraordinary year for solar photovoltaics in the UK. From 2011 until mid-2014 the industry had been building at a steady pace of around 100 MW each month, taking installed capacity from virtually nothing to around 4,200 megawatts.

Then in May 2014 the government announced that large solar farms (i.e. those bigger than 5 MW or approximately 30 acres in size) built after 1 April 2015 would be barred from the Renewables Obligation (RO), the most popular subsidy scheme.  From that point the race was on to build as much as possible before the deadline and the rate of deployment jumped to 300 MW per month, including 1700 MW in March 2015 alone.  Britain now has 7300 MW of solar photovoltaics; 10% of the country's generating capacity.  In June 2015 solar supplied 15% of total demand during the early afternoon peak.

The closure of the RO to large-scale solar will change the sorts of projects that are developed, but the pace of development is likely to remain strong, driven by attractive features of solar and the subsidy schemes still available.  Among the attractions of solar are:

  1. Public and political support for solar is high.  The Department of Energy and Climate Change's regular survey shows 81% public support for solar, compared with 65% for onshore wind.  The government has a target of between 10,000 and 12,000 MW of solar by 2020.
  2. Solar is also comfortably the cheapest form of renewable generation available, with onshore wind farms likely to be barred from all future subsidy schemes, as well as from the RO.  Prices of solar panels have been falling fast.
  3. While solar is generally described as "intermittent" generation, its intermittency is highly predictable.  In contrast to wind, where output cannot be relied on, solar output varies by time of day and by season but only slightly with weather conditions.  As energy storage options such as batteries become cheaper and more widespread, this variation will become even less significant.

For the next year, solar developers are likely to turn their attention to slightly smaller sites on farms and estates, as installations of under 5 MW can still qualify for the RO.  Forsters Rural Team is already seeing evidence of this surge in interest through the experiences of estate-owning clients who have been approached by developers.  An additional attraction to such schemes for landowners is that the land is not necessarily taken out of commission; sheep can continue to graze around the installations, for example. 

A 5 MW farm is still an objectively large development, typically covering around 30 acres.  Developers will build these under the RO and secure a guaranteed 20-year funding stream on top of the volatile wholesale electricity price. 

As an illustration, at the current level of subsidy, a 30-acre ground-mounted solar farm would generate around £326,200 per annum for the developer, and this is before any income received from selling the energy it generates to the grid.

From April 2017, the RO will be replaced with a new subsidy scheme, Contracts for Difference.  Solar did not win any contracts in the first CfD auction last year, which will effectively guarantee a price, with no market element, for 15 years.  This was probably a result of developers focusing on Renewables Obligation Certificates still available.  Future auctions are likely to include significant wins for solar.

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