London, UK Given recent developments in Germany and Spain, will the UK’s solar feed-in tariff be enough to engender a long-term sustainable solar manufacturing and installation industry in Britain? If not, then how can this be achieved? And how should the UK’s policymakers seek to avert a boom-and-bust-scenario?
Richard Garth Jones, Director, The Low Carbon Energy Company
All the early signs suggest that there is a long-term sustainable future for the solar industry in the UK. Installations in the first four months since the introduction of the feed-in tariff (FiT) have risen from around 400 in April to over 4000 by the end of July, according to iSuppli. Take-up has been higher than expected in the commercial market and in line with expectations in the residential sector.
Expansion in the German market was mainly led through the residential sector, while Spanish growth was achieved through solar farms. The UK is seeing expansion in both sectors simultaneously. This, coupled with investment support from the financial sector, is supporting the required growth.
To avoid a boom-and-bust scenario the government must send out a clear message on the future support and continuation levels of the FiT scheme. Additionally, policy on carbon emissions, energy security and fuel poverty will need to be sustained. Legislation in place such as the Carbon Reduction Commitment and Code for Sustainable Homes (CRC) will help ensure a sustainable market to 2020. Business will need to employ a range of actions to avoid penalties under the CRC, and PV installation systems will be part of the mix.
Barriers to growth remain, but are being addressed. Installation capacity is still low, despite a surge in Microgeneration Certification Scheme (MCS) accredited installers since the introduction of the FiT. Inverter supply is still intermittent, though improving.
But the key factor is still the need to educate markets on the benefits and opportunity in terms of return on investment. This is not to mention the knock-on benefits of good-quality jobs and careers, carbon reduction and energy security.
Peter Thiele, Executive Vice President, Sharp Energy Solution Europe (SESE)
By launching a FiT in the UK this April, the government has set a solid foundation for strong development of its PV market. The country has a huge potential for the deployment of PV and the market will — according to research institutes — experience the strongest growth in PV worldwide in terms of percentage.
iSuppli, for example, projects 96 MW of installations by the end of this year. Already the first four months since the tariff started in April have seen impressive growth: the UK’s electricity and gas regulator Ofgem states 4457 new PV installations in this period with a total of 11.26 MW, up from 5 MW in 2009.
To meet the rising demand, the industry is required to supply the products. The infrastructure, including distribution, marketing, planning and installation, also has to be established.
Sharp has been producing solar modules in the UK since 2004 and is doubling its production capacities in its factory in Wrexham, Wales, by next year to 500 MW. But only an estimated 10% will be installed in the UK. We also supply the wider European market from there, following a business strategy modelled on ‘local production for local consumption’ philosophy.
With the expansion of production, we emphasise our commitment to building up a long-term solar industry in the UK. We expect a steady and sustainable growth that will remain within the predicted scale. The government has to achieve ambitious goals to reduce carbon emissions by 20% on 1990 levels by 2020 — and has acknowledged photovoltaics as an integral part of it. Besides, a strong solar industry is contributing to sustainable job creation as Germany proves, where 83,000 jobs have already been created in PV. The UK has a historic chance to drive forward the technology in the country, develop effective employment opportunities in a renewable energy and develop a sustainable green economy.
Sebastian Berry, Head of External Affairs, SolarCentury
Can the new UK feed-in tariff deliver a long-term sustainable manufacturing and installation industry in Britain? Yes, of course. But given uncertainties around future tariff level reviews in 2013 and beyond, concrete projections of a sustainable multi-hundred MWp UK market after 2012 are premature.
In the short term, the UK PV market looks on course to deliver sustained growth to first quarter 2013 from what is an extremely small base. Since 1 April, around 5000 domestic PV installations or 12.5 MWp have been accredited under the feed-in tariff, fully in line with the DECC emphasis on the importance of engaging householders in the scheme. This represents a solid start for the new scheme but no more than that.
Comparisons with Germany and Spain need to be kept very firmly in perspective. The UK market will still be around 0.1% of the German market in 2010, and the coalition government’s projection of nearly 3 GWp installed in the UK by 2020 is a modest one in global terms.
The feed-in tariff’s solid start has already led to significant jobs growth in the UK PV sector with SolarCentury and its 11 Welsh and English regional associate installers reporting a near doubling of staff numbers between January and July 2010, with further growth and over 500 jobs in total planned into 2011.
The stability, predictability and certainty provided by the feed-in tariff means that UK PV companies can plan with confidence, invest for the future and take on many more staff as the market continues to grow up to the first tariff levels review.
The new coalition government’s support for a long-term feed-in tariff after 10 years of unhelpful stop-start grant programmes and policy u-turns affecting the PV sector is extremely welcome and should help to ensure the sustained long-term growth of the PV and wider ‘small-scale’ renewables sector in the UK.
Claire Skinner, Senior Client Partner, Renewable Energy and Clean Technology, Korn/Ferry Whitehead Mann
It is undeniable that FiTs are driving real growth in the solar energy industry in the UK — incentives inevitably spur people on and in this sense, they have been very successful.
From a leadership and talent perspective, the FiT scheme is driving substantial interest in the UK market, particularly in attracting leading individuals from the Continent and further afield. The current climate is enabling investors seeking to exploit the UK market to attract a global talent pool. Building and sustaining this talent pool will inevitably lead to a stronger renewable energy industry in the United Kingdom.
The main question still up for debate, however, is will we see a shift in the UK industry from a largely installation and assembling-led market, to a manufacturing-led market?
Many manufacturers that have invested in Europe have been adversely impacted by changing incentive schemes and a difficult financing environment. Moves to invest in additional capital-intensive manufacturing capacity in the UK may be impacted by question marks over the sustainability of FiT.
Only time will tell whether investors have sufficient appetite for the UK market, but the signs are definitely positive. We have seen major corporate and private equity firms seeking to build businesses in the UK solar market and we anticipate further growth. This ranges from start-up organisations, as well as established players, pushing first-mover advantage and capitalising on the opportunities presented by FiTs.
Incentives alone will not build a robust solar industry in the UK. With the flurry of activity amongst new and existing entrants, there are likely to be both winners and losers; one of the key differentiators will be the quality of the leadership team.
Gabriel Milland, Policy Exchange
Our recent report ‘Greener, Cheaper‘ made waves when it called for abolishing the FiT scheme for micro-renewables.
The scheme is very generous, which, if you are a manufacturer or installer, is very good news indeed. Our criticism of the scheme is based on its cost and the extremely unfair way the subsidy is funded — a levy on all consumers, including the most vulnerable. It will effectively redistribute from everyone to those with large, south-facing roofs.
The report examined the cost-effectiveness of current policy. Looking at the costs per tonne of carbon emissions saved, we found that the FiT scheme was by far the most expensive — £460 ($690) per tonne saved, compared to the EU Emissions Trading Scheme which currently trades at around £12—15 ($18—27) per tonne.
Given the incredible cost of the subsidy, the key question is whether industrial policy should be used to engender a micro-renewables industry.
The cost of doing so, when money is scarce for government and households, casts doubt on whether this could possibly be a priority in our efforts to tackle climate change.
Ray Noble, Renewable Energy Association
When looking at reports that quote predicted UK PV market growth at 1500%, you need to take this in the right context. The UK market pre-April 2010 was minute, only around 30 MW installed over 15 years.
The UK government has been slow to create a PV market by adopting a FiT. However, it has taken into account lessons from the tariffs offered by other countries in setting out its policy.
Tariffs have been broken into size bands to attract all the sectors to partake. The initial tariffs are fixed for two years before degression comes in. A review is scheduled for 2012 to check how the market is reacting and allow tariffs to be adjusted should any sector overheat or fail to move as quickly. Tariffs are also index linked to ensure banks and investors provide funding to stimulate the market both to grow a sustainable industry and support adopters.
But the FiT is also part of a policy framework to move the UK to a low-carbon market. Planning permissions requiring on-site generation, zero-carbon new housing by 2016, zero-carbon buildings by 2019, and 35% renewable generated electricity by 2020 are all part of creating the longer-term goal.
In the first three months of the FiT only 9 MW has been installed, and some of this relates to eligible installations carried out since July 2009, so I don’t see all PV manufacturers needing to steer all their product to the UK. Yes, the UK is going to be a growing and long-term market, but please no comparisons with the ‘boom-and-bust’ policy of Spain.