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UK Moves to Cut Support for Large Scale Solar PV

DECC, the UK’s Department of Energy and Climate Change, has unveiled proposals for further reform of the country’s renewable energy support program. The measures include plans for the closure of the Renewables Obligation scheme to new solar PV capacity above 5 MW from 1st April 2015.

Outlining the plans at the launch of a series of consultations, the government argues that  the proposals are designed to maintain the growing momentum behind renewable electricity investment in the UK and a smooth transition to the new Contracts for Difference (CfD) support scheme, while continuing to deliver value for consumers.

In one of the key measures of the new proposals, the government points out that large-scale solar is deploying much faster than expected. Industry projections indicate that by 2017 there could be more than the 2.4 to 4 GW set out in the electricity market reform (EMR) delivery plan deployed.

This is behind the consultation on proposals to close the RO to new solar PV capacity above 5 MW from 1st April 2015, though the proposals do include grace period arrangements to protect developers, which have already made significant financial commitments to projects.

The proposals also envisage keeping the RO open for projects under 5 MW, which are not eligible for the new Contracts for Difference (CfDs). Projects above 5 MW will be able to apply for CfDs — part of the Electricity Market Reform Programme that is slowly progressing.

Utility-scale solar projects under fire in the UK

Meanwhile, following on from its recently published Solar Strategy, the U.K. government has also determined that more focus on deploying solar panels on industrial and public sector buildings is required since this sector had been deploying at lower levels than anticipated.

In order to support rooftop deployment, the government has also launched a consultation on splitting the current "degression band" for projects over 50 kW under the Feed-In Tariffs scheme (FITs) into two parts — one for standalone, and one non-standalone (rooftop, for example). Thus tariffs for building-mounted solar panels would reduce at a slower rate than those for ground-mounted.

The U.K. has a total of some 2.7 GW of solar PV capacity currently installed.

As part of the measures the government also launched a consultation on support for community energy projects under the FIT scheme, considering the possibility of increasing the maximum capacity for community anaerobic digestion, hydro, onshore wind and solar PV projects from 5 MW to 10 MW under the FITs scheme, and whether more can be done to allow grants to be combined with FITs payments for community projects up to 5 MW.

DECC also confirmed that the budget for CfD renewables spending will be divided into groups including established technologies and less established technologies.

Technologies in the established group have benefited from significant cost reductions following early research and development and as a result are, in some cases, taking forward large-scale deployment.

Included in this category are onshore wind greater than 5 MW; solar photovoltaic greater than 5 MW; energy from waste with combined heat and power (CHP); hydro between 5 MW and 50 MW; landfill and sewage gas.

These technologies will compete with each other for support from the first allocation of Contracts for Difference, helping to reduce costs and ensure that consumers get good value for money, the government says.

In the government’s view less established technologies have a range of characteristics including significant potential for cost reduction and delivery of low-cost renewable generation in the future.

Included in this category are offshore wind; wave and tidal stream; advanced conversion technologies; anaerobic digestion; dedicated biomass with combined heat and power and geothermal.

These technologies will only move to auctions if there are more applicants for Contracts for Difference than are affordable within the budget.

In addition the government is also launching a consultation under EMR on proposals to treat biomass conversions as a separate technology group, and Scottish Islands onshore wind projects as either part of the “less established” technology group, or as a separate technology group. A minimum allocation for wave and tidal stream to ensure that budget is available for at least 100 MW to be deployed is also under consideration.

Responding to the development, the Renewable Energy Association (REA) expressed disappointment, saying the moves create yet more uncertainty and instability for most renewable power industries. “Proposals to close the RO for 5-MW+ solar farms, meanwhile, simply create very damaging instability to existing policy,” the REA added in a statement with chief executive Dr Nina Skorupska noting:  “Government must ensure that policy drives and rewards technology cost reductions with a stable trajectory of gradually declining financial support, not the cliff edge the government is proposing for solar.”

Similarly scathing, Greenpeace U.K. chief scientist, Dr Doug Parr, said: “Solar is hugely popular in the U.K., costs are falling faster than for any other energy source, and the latest technology is on track to beat nuclear on price. Sowing uncertainty for a key source of clean, home grown energy, as ministers are doing, makes no economic, political, or strategic sense.”

Parr continued: “Far from hitting the big energy companies this compulsive policy tinkering sucks confidence out of independent generation and leaves the future of community solar projects up in the air — yet independent producers are our best hope to challenge the big six’s stranglehold on the market.”

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Independent supply companies also expressed dismay, for example Juliet Davenport, founder and chief executive of Good Energy, said: “This will undermine growth, investment and jobs in a sector which is helping to introduce more competition and new players into the energy market. This decision will bring further instability and uncertainty to investors, and we will have to reconsider our portfolio of investments as a result.”

Davenport added: “The solar sector needs a stable policy framework from which to grow — we believe if properly supported now, it could compete equally on cost with other technologies by the end of this decade. What it does not need is revised levels of support and political uncertainty, which will serve only to stifle investment, growth, competition and ultimately, the opportunity to make a meaningful low-cost, low-carbon contribution to the UK’s longer-term energy security.”

Considering the market outlook a recent analysis of the U.K. solar PV sector by IHS indicated that the UK’s solar strategy, together with prevailing investment conditions for ground-mount PV plants, were expected to drive total UK PV installations into the 2.5- to 3-GW range annually until 2018. In 2014, IHS said it expected 2.4 GW of new PV installations with an estimated 922 MW of utility-scale PV projects installed in the U.K. in the first quarter of 2014.

By 2018, IHS had forecast the UK to have 16 GW of installed PV capacity with utility-scale installations peaking in 2014 at a total of 1.5 GW. 

However, having already raised its near-term forecasts for the U.K., in the wake of the new proposals Josefin Berg, senior analyst Solar Power for IHS Technology’s Power and Energy division, explained to REW: “Despite the intention of this proposal to curb installation what we risk facing is booming installations of solar before the ROC scheme would expire, between now and 1st April so we are revising up our forecast for this year for the first quarter quite dramatically because we do see the potential for a very strong rush.”

IHS is currently revising the 2014 PV forecast for the U.K., pending the results of the consultation, noting that several scenarios exist for the future of the U.K. utility-scale PV market.

IHS believes that the announced end of the ROC scheme will lead to an installation rush of ground-based PV projects for the remainder of 2014, and more importantly in the first quarter of 2015. The company estimates there are nearly 5 GW of projects in various stages of development. Exactly how much of this capacity that can actually be installed will hinge on local permitting, the ability to sign power purchase agreements and access to finance, but the group estimates that nearly 3 GW of new utility-scale systems could be installed over the coming nine months.

Post-April 2015 the sector is looking far less rosy, though the full extent of the proposals have yet to be calculated given the plans are still at the consultation stage. Utility-scale PV activity will be limited to projects approved for the grace period. Further on, utility-scale PV deployment will hinge on the size of CfD auctions capacity allocations, and the ability of PV to compete with bids from other renewables sources such as on-shore wind. Nonetheless, Berg warned that solar faces a future CfD market in competition with other renewables — the details of which are still to be determined.  “It’s hard to say if solar could have a role,” she concluded.

Ian Glover, general manager of ReneSola UK, commented: “We are disappointed that the ground-mounted PV market is likely to contract, as we have seen some excellent examples of how ground-mounted PV can benefit both communities and investors. Such projects have also helped to sustain a large number of jobs in this sector, and the transfer of interest into new sectors may not necessarily absorb all of these jobs."

 

Image: Wymeswold utility-scale solar project. Photo by David Appleyard.

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