Boom in Large Solar Sustains UK Capacity Expansion
The UK had a record 520 MW of solar panels installed in the first quarter of 2013. This eased in the
second quarter to 282 MW, leaving a first half-2013 total of 802 MW - bringing cumulative solar
photovoltaics installed in the UK to 2.71GW, of which 50% was residential, 22% non-residential
rooftop installations, and the remaining 28% ground-based. Of the first half 2013 additions, 70%
were in the ground-mounted segment, reversing the dominance that the residential sector has
shown in previous years.
Analysts believe the strong ground-mounted demand will continue, with investor returns under the
current Renewable Obligation Certificate (ROC) levels sufficient to drive demand in the second half
of 2013 and Q1 2014 “to very high levels”, according to Finlay Colville, Vice-President of research
firm NPD Solarbuzz. A substantial back-log of approved projects backs up this view.
A Department of Energy and Climate Change (DECC) spokesperson said that there was currently a
total of 1090MW of 5MW and above ground-mounted projects approved and awaiting installation,
or under construction. Giles Redpath, Managing Director of Hive Energy, one of Britain’s biggest
developers, said his company had 126MW through planning, 80% of which is built, 10% is being built
and 10% is just through planning. “There are a further 100MW of sites in planning and a
considerable amount more in the pre-planning development stage… There is a lot of interest from
funders, despite the ROC cut in April,” he said.
For all sizes of ground-mounted units, NPD Solarbuzz’s UK Deal Tracker database (see table 1) shows
projects pending roll-out have reached 2.7 GW, with more than 1.25 GW fully-approved and seeking
completion before 31 March 2014. Next financial year, the UK is set to add between 950MW and
1.3GW of new ground-mount solar under the ROC scheme, according to Mr Colville, with the wide
range reflecting uncertainty over government policy, brownfield site use, district council approval
processes and Chinese module pricing.
“Indeed, there is even upside to this, but is highly conditional on projects being approved, fullyfinanced and completed during the winter months of November to March 2014… There may be
several reasons why projects are pushed to Q1’14, including any possible reset in floor pricing of
Chinese modules from China,” he said.
But while ground-based is forging ahead, subsidies for roof-based installations appear to be
insufficient to attract investors. According to Mr Colville: “The rooftop ROC rate is currently
challenging the market, resulting in a depressed large commercial rooftop segment. There is strong
lobbying by the UK industry to address this segment and this could change demand forecasts if
action is forthcoming from policymakers.”
The UK’s ROC support levels for solar installations for the period from 1 April 2013 to 31 March 2017
were announced in December 2012 (see table 2). The dip in installations in the second quarter was
in reaction to a cut on 1 April 2013, and by uncertainty related to the EU-China trade case, which
limited the availability of Chinese modules coming into Europe prior to the European Commission
ruling in early August. The next decline is on 1 April 2014, when ROCs are cut from 1.6 ROCs/MWh to
1.4 for ground-mounted, although the cut is not expected to stall development.
Table 1: ROC levels for ground-mounted and building-mounted stations
2013/14*
2014/15
2015/16
2016/17
Ground-mounted solar
PV
1.6**
1.4
1.3
1.2
Building-mounted solar
PV
1.7
1.6
1.5
1.4
*Apr 1 2013-Apr 1 2014
**In line with Government’s longstanding grandfathering policy, ROCs are awarded at the level of support
applicable at the time of accreditation for 20 years.
Beyond 2017, ROCs will be phased out, and the strike price for solar under the replacement
Contract-for-Difference (CfD) mechanism is currently under consultation. “Subject to the [CfD] rates
being set appropriately, we think the mechanism should be stable and highly attractive to investors”,
said Frans van den Heuvel, CEO of major developer, Solarcentury. “From 2017, CfD levels will be
critical,” said Mr Redpath.
At the lower end of the scale ground-mounted solar also qualifies for Feed-in-Tariffs (FITs), and to
further stimulate development DECC intends to increase the capacity maximum from 5MW to
10MW, for community projects only, once the UK’s Energy Bill is approved. According to DECC
ground-based stand-alone solar FITs fell from 7.1p/kWh to 6.85p/kWh on 1 May 2013 (3.5%). They
will “degress” again automatically on 1 January 2014, “probably by the minimum 3.5%,” said the
DECC spokesperson. He said installation levels “are generally within estimates, thus only triggering
the minimum automatic degression of 3.5% every nine months.” This provides – as intended - a
gradual reduction in tariff levels over time without any noticeable reduction in deployment levels, he
added.
However, Mr van den Heuvel voiced a note of caution, again directed at rooftop installations: “The
FIT process has stabilized, but we think the Government needs to be mindful of where the FITs are
working and where they are not. Medium and large rooftop projects can’t be developed and built
within a three month degression window, so this makes investors uncertain of what returns they will
receive. And yet this is the type of project the Government publically favours”.
Despite the current strong progress, DECC denied that it was aiming for 20GW of installed solar
capacity by 2020, a figure widely reported in the UK press: “Government does not have targets for
deployment of particular renewable technologies. The figure of 20GW, which was published in the
December 2012 Renewables Roadmap Update, was the upper bound of a potential technical range
of deployment for solar photovoltaics by 2020 of 7-20GW.” However, the proportion of the 2011
Renewable Energy Roadmap 15% renewables target to be met by solar are rising, while expectations
for onshore wind and biomass have fallen.
Grid Capacity Constraints and Nimbys Limit Location
The southern regions of England dominated large-scale solar park development during the first
quarter 2013, with 67% of the total large-scale capacity installed, while eastern regions accounted
for 27%. Such regional concentration has left local grids struggling to cope with the new supply.
According to Mr Redpath, the biggest problem for developers is grid connection: “There are many
parts of the south of the country – including South Wales, East Anglia and the Southwest - where the
grid is saturated – it is not called a distribution grid for nothing”. Mr van den Heuvel agreed: “The
location of our sites is changing. There isn’t really any grid capacity left in the Southwest or East
Anglia so we are focusing on the Southeast and the Midlands.”
Mr Redpath said: “Because of the rapidity of the roll-out we have clogged up the local grid, and this
is an obstacle to renewable development. Ofgem rules state the grid must offer a connection, but
sometimes it is not at the nearest point.” He explained that one of his developments in Angelsey,
north Wales, was made uneconomic when the grid was only able to offer a connection 11km from
the site, despite the grid running nearby.
Moving developments further north means lower land prices, but this is offset by the lower solar
radiation levels, making such sites less economic overall. Mr Redpath said this opened the question
of different levels of subsidies for different regions, although he added that was probably not the
answer. Grid reinforcement work is being carried out but it takes time and money, and Mr Redpath
said the government needed to refocus on the issue.
Although public opinion is generally positive towards solar parks, sometimes local opposition can be
strong. A £20m project in Suffolk, East Anglia, was turned down in June following a high-profile
campaign by local opponents, and there is concern that there are already enough competing land
uses for the UK’s limited land resources. “Local opposition varies from 90% to just 10%. Much of the
opposition is to do with visibility, so appropriate site selection, tree-planting, and on-site biodiversity
can help address this”, said Mr Redpath.
There has been particular unease about new projects in Cornwall and the rest of the south-west. In
August, Somerset MP and foreign minister Jeremy Browne described large-scale solar farms as a
"monstrous desecration" of the countryside after plans for a 20-hectare site were unveiled.
City Finance
Capital has increasingly been flowing to solar developments from the City of London, including a new
£200 million solar fund created by asset manager Foresight to buy eight solar farms across the UK –
totalling 145.5MW, including two over 30MW each - through a stock market flotation. This adds to
£450m already invested by Foresight in a variety of solar projects both in Britain and on the
continent. A further £300m is currently being raised for wind and solar farms by the Renewables
Infrastructure Group.
In the summer Solarcentury sold a plant in Norfolk for £17 million to Bluefield Partners, which
attracted £130m earlier this year for its Solar Income Fund. Solarcentury’s Mr van den Heuvel said:
“We are seeing more money being raised for solar investments. It was very encouraging to see that
Foresight is planning a fund raiser. And it’s great to see the Abundance model working…. Our model
as a developer is to sell the project prior to construction, so technically we don’t own any sites.
We’ve developed circa 100MWp and have a similar amount in development at the moment.”
Bluefield and Solarcentury expect to have their 14.8MW solar project on an agricultural site ready to
generate electricity by December. “We are very excited to be working with Bluefield. Their fund
raising was extremely successful (over-subscribed). We were keen to work with them as it was clear
they had the appetite and drive to buy the kind of projects we develop,” said Mr van den Heuvel.
Mr Redpath said development models varied, with developers partnering with builders and
manufacturers, arranging planning, land and links with the grid. Some development models are
build, own and sell electricity, others just develop and sell on to investors. “Some manufacturers are
also developers such as Canadian Solar and Trina Solar,” he said. Mr Colville suggested there was:
“further upside [finance] potential if crowd-funding schemes gain traction”.
While British finance may be readily available, almost all UK panels are still sourced overseas, mostly
from China. Mr van den Heuvel said Solarcentury sourced most of the modules it used from Chinese
Tier one suppliers. “We are always on the lookout for modules from new markets (regardless of
sanctions), and continue to nurture relationships with [suppliers],” he said, helped by growing
market stability. That stability could, of course, easily be shattered by policy change, not least the
retail power price freeze proposed by The Labour Party at its conference in September.