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PV in the UK: The Future Is Still Bright

The UK's stated policy aims at the start of the feed-in tariff scheme in 2010 were twofold: to create more demand for modules in order to ramp up production and bring their unit price down; and to increase public awareness of renewable energy. In 2011 both these aims succeeded beyond expectations. As a result, the tariff rate has been reduced from 43p to 16p per kWh for common domestic installations. Yet the costs of modules have also almost halved (although the balance of system costs have not).

In a southern UK climate, an installation with 1 kWp typically produces about 850 kWh of electricity per year (at favourable orientation and not overshaded). Assuming a 16p per kWh feed-in-tariff this equates to an income of £136.00. A 4kWp system might cost around £8,000. This will take around 15 years to pay off at that rate, which represents a simple interest rate of 6.8%. This compares well with investing in a bank account, and, for further comparison, is the same as the reported ROI of Triodos Renewables' shares, which are invested in small, onshore windfarms, over the previous six years. 

Solar electricity has received far more attention as a result of the feed-in tariffs than solar water heating, which deserves more. In the UK, solar water heating is supported by the Renewable Heat Incentive (RHI) for the non-domestic sector, at a rate of 8.9p/kWh, which yields a similar rate of return. Yet the latest figures from the regulator, Ofgem, show that there has been just one solar thermal scheme supported under the RHI since the scheme began. 

This is mystifying, because in the previous support scheme for domestic renewable energy run by the UK government, solar water heating was by far the most popular technology. It has proven over the years to be much more successful than solar PV in the UK in terms of value for money, because on the whole it is better suited to the climate. But half of the grants available under the RHI scheme have remained unspent. The Renewable Energy Association's head of policy, Paul Thompson, blames this on three factors, all decided by the Department for Energy and Climate Change (DECC): the time-limit, the lack of publicity, and the small amount of support on offer, which, he said was “not enough money to influence people's decisions". He has called upon DECC to use unspent funds to run a publicity campaign for renewable heat akin to that for renewable electricity.

Utility-scale solar PV installations in the UK currently receive support under the Renewables Obligation (RO) worth 2 ROCs (Renewables Obligation Certificates per MWh). This makes non-domestic solar competitive with other renewable technologies supported under the RO. Around 500MW of utility-scale solar is expected to be installed this year. The UK Government is currently consulting over whether to withdraw this support from April 2013 for schemes below 5MW. These would then have to look to the feed-in tariff for support, which has a much lower budget. The Solar Trade Association is concerned that the effect of this would be to greatly limit support for this scale of deployment of the technology, whose developers are quite different from those at the domestic scale, often farmers and other landowners looking to diversify their income.

Tiny in comparison to the world's largest — 2000 MW or so — the UK’s largest solar farm is at Westmill, a community-owned scheme located just outside Swindon. It is a 5-MW community-owned ground-mounted array that is connected to the National Grid under the government’s Feed-in Tariff scheme. It is expected to generate 4.4GWh per year. But this will soon be beaten: Lark Energy is currently developing a 30-MW, 150-acre solar farm at Wymeswold near Loughborough. More ground-mounted solar farms up to 40MW in size are being planned in the south of England, and are expected to be increasingly popular, with up to 1 GW expected in the next two years. 

In countries such as Denmark and Germany, there is much more community ownership of renewable energy projects than in the UK, and there are moves to repeat that success here. The UK’s Minister for Energy and Climate Change, Greg Barker, has publically committed himself to the belief that community-backed schemes that help put solar modules on offices, homes, churches and public buildings are key to the uptake of renewable energy in the UK. DECC has said also that community-owned, social housing and the commercial rent-a-roof sectors' projects of 50kW or less (DNC) will be eligible for a generation tariff equal to 90% of the standard tariff.

The Co-operative Enterprise Hub, run by The Co-operative, has committed £6 million between 2012 and 2014 to enable it to deliver free advice and guidance to create and grow sustainable member-owned enterprises across the UK. The Co-operative also runs the Co-operative Energy Challenge, which aims to provide financial backing and support, to a select group of communities across the UK to help them develop significant renewable energy projects.

There are plenty of incentives or opportunities to invest in solar power in the UK, many of which are underpinned by the legally-binding carbon-reduction budgets specified under the UK's unique Climate Change Act. The following is a non-exhaustive list:

  • The Climate Change Levy and the Climate Change Agreements, which require a 50% reduction in carbon emissions from large energy users by 2025
  • The Energy Act 2011, which enables a lot of the initiatives below
  • Energy Market Reform (EMR), which will make it easier for small generators to enter into the market and sell surplus power. Expected to be complete by Spring 2013
  • The Renewables Obligation (RO). Smaller installations are now supported by:
  • Feed-in tariff support (see above)
  • DECC has also offered discussions with developers about projects which can benefit from a proposed Feed-in Tariff with Contracts for Difference (FiT CfD) and the capacity mechanism under the EMR. Projects that could be considered would be those which might not be eligible for the Renewables Obligation or able to receive ROCs before the end of March 2017
  • Green Investment Bank — to start investing mid-2013, with £3 billion overall to lend up to 2015, but unable to borrow until after 2015 at the earliest. Its priorities however will be offshore wind and waste-to-energy
  • The Localism Act and National Planning Policy Framework (NPPF), allowing Neighbourhood Plans and Local Plans to favour renewable energy and sustainable development
  • The Code for Sustainable Homes, which requires all new homes and non-domestic buildings to increase the use of on-site low and net zero carbon energy generation in new buildings by 2016 in order to be zero carbon by 2016 (under Building Regulations)
  • The Low Carbon Buildings Programme, which manages a number of grant schemes to cover part of the costs of installing solar thermal, solar photovoltaics, wind turbines, small-scale hydro turbines, ground and air source heat pumps, wood-fuelled boilers or pellet boilers
  • Departmental Carbon Budgets, which require reductions in carbon emissions from government buildings
  • Local Authority strategies, which favour reductions in emissions and have local or regional targets for renewable energy
  • Separate targets and standards for the devolved administrations such as, in Wales, the Low Carbon Energy Policy statement and Technical Advice Note 22 (Wales) (Sustainable Buildings (2010)), and in Scotland, a target of 20% of energy from renewable sources by 2020 and the Second National Planning Framework
  • The Committee on Climate Change, the independent watchdog which was set up to ensure the UK meets its legally binding greenhouse gas reduction targets over several four-year ‘budget’ periods undere the Climate ChangeAct. 

Some of the above is summarised on the Government’s Enabling the Transition to a Green Economy roadmap and the Renewable Energy roadmap.

Subsidies for PV everywhere have suffered much more volatility than for wind power over the last two years, partly due to installed PV capacity rising faster than predicted, causing increased balancing costs for grid regulators to maintain the stability of the grid. In the recession, governments are also worried about household end-user energy costs and fuel poverty. While high oil and gas prices is the real reason for high energy bills, governments have no control over this but can control subsidies to renewables. 

Subsidies to PV come under greater pressure than other renewables because the ratio of subsidy to power output is higher for PV than any other renewables, and in the UK this is even more true than central southern Europe. In Europe, of the €22 billion spent subsidising renewables last year, half went to solar PV, but its output constituted less than 6% of renewables’ total output over Europe as a whole.

Nevertheless, within the next five to eight years lowering production costs and technological innovations will mean that solar electricity will be poised to find even more widespread applications. Some of these will be distributed grid-feeding installations on many new and retrofit buildings in the business sector in the UK, others will be niche applications.

David Thorpe is the author of Solar Photovoltaics Business Briefing, published by Do Sustainability, and The Earthscan Expert Guides to Solar Technology and Sustainable Home Refurbishment, News Editor at Energy and Environmental Management Magazine, and blogger at lowcarbonkid.blogspot.com.

Lead image: Bright sun via Shutterstock

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