Coalition risks its own solar revolution

The Government has published critical decisions on solar power, including the finalised budget for Contracts for Difference (CfDs) [1]. The decisions taken are all particularly damaging for solar power, the UK’s most popular energy technology [2], which has gone from near zero contribution at the start of this government to providing 9.4% of renewable power in 2014 Q2 [3].

DECC claims it is moving solar out of the Renewables Obligation (RO) two years early because of pressures on the RO budget, but the announcement today reveals the cost of the RO had been lower than expected, and DECC’s latest figures show solar power took just 1.3% of the RO budget in 2013/14 [4].

Solar Trade logoNo other energy technology has ever delivered cost reductions at the speed and scale seen in solar power. The industry is asking for just one more push of stable policy support to deliver parity with fossil fuels towards the end of next Parliament. This decisions come as climate change negotiations highlight the urgent need for more green energy.

It is important to note however that decisions taken today do not affect the domestic solar sector.

STA Chief Executive Paul Barwell said:

“The large scale solar sector has been in shock since DECC’s consultation was announced back in May. Solar has been the rising star in the Coalition’s renewable energy programme and has been championed recently by the Prime Minister at the UN and by Ministers at conference. Why is the UK Government putting this industry’s incredible achievements on solar power at risk? To curtail its growth now is just perverse and unjustified on budgetary grounds – solar has only consumed around 1% of the Renewables Obligation budget.

“This is not a good outcome for consumers either. Why remove support for solar power when it could be the first low carbon power source to become subsidy free by the end of this decade? British Solar needs a stable policy framework to retain its growth to drive down costs so consumers see a direct reduction in their future electricity bills.

“This decisions represent serious strategic mistakes in energy policy that are not supported by the facts and fly in the face of the urgent need for cost-effective action on climate change. The industry will do its best to muddle through, but this is not the sensible or coherent approach this technology deserves.”

The STA has launched an online petition, backed by Greenpeace, Friends of the Earth, 10:10 and Green Party MP Caroline Lucas, to gather public support to ask Cameron and Clegg to get the solar revolution back on track [5].

In making these decisions, DECC has effectively capped solar deployment at 4GW by 2020, but this decision is based on out-of-date modelling carried out in 2012 that does not reflect major progress in technology cost reductions in recent years. The STA is particularly disappointed that full confidence has not been provided to the sub-5MW market, with DECC again raising the prospect of further intervention.

As a result Westminster is picking the energy mix and tilting the playing field away from solar power developments, despite current cost data (repeatedly provided by STA) showing solar can save consumers money, and despite opinion polls showing good quality solar schemes are the most popular local energy development.

The large scale solar industry has managed to absorb a 65% reduction in financial support over the course of the Coalition Government, which is unprecedented in the energy sector. The move to take away support from large-scale solar was backed by some of the Big Six energy companies, an FOI revealed.

Paul Barwell said:

“Pulling the rug on the technology the International Energy Agency says could be the biggest global power source by 2050 is crazy! This is unfair and unjustified discrimination against large scale solar. A fair outcome would be an RO banding review based on up-to-date costs, which we have provided to DECC. Our message to Ministers is simple: Let us compete on a level footing with the other technologies that still get RO support.” [6]

The STA has led several meetings with DECC officials to discuss the impact of grace periods. Whilst they have listened and made some constructive changes to the eligibility criteria, they have not changed the 13 May eligibility date, which is crucial. Projects that had perfectly good expectations of hitting the 1.4 ROC deadline have already been impacted and cancelled. These developers have already decided that the financial risk due to the ‘cliff edge’ of zero ROCs from April is far too high.

The results of the new consultation released today, relating to a three month grid connection grace period, won’t be available until November, leaving minimal time to determine viability of potential projects.

The Feed-in Tariff (FIT) is a user-friendly scheme which supports investment mostly in rooftop solar, as well as community-led ground-mounted schemes. The Government’s own Impact Assessment on the FIT proposals show the changes will deliver at best only around 80MW more rooftop solar per annum, while reducing overall solar deployment cumulatively by 420MW by 2020.

The proposals will do little to address the barriers to rooftop solar which were identified as a priority in DECC’s Solar Strategy [7], published earlier this year. Instead, DECC will split tariff deployment triggers 65/35 for roof-mounted/ground-mounted schemes, potentially making it harder for communities to deliver local schemes as leasing rooftops can provide additional complexities. However, the STA welcomes the proposals to consult on the transferability of panels and FIT payments to new buildings, which will encourage investment.

Paul Barwell said:

“The Government says it wants to put ‘rocket boosters’ under the rooftop solar market. The impact assessment shows the proposed changes will not do that. The great danger is Government is destabilising the large-scale solar industry without having done enough to fix the commercial rooftop market.

“The STA has modelled the full FITs budget and devised a series of proposals that will boost deployment across all rooftop sectors at no extra cost to the budget whilst keeping industry on track for zero subsidy by 2020. That is our Solar Independence Plan, and this will give DECC the fuel to fire the ‘rocket boosters’ on rooftop solar.”

An extra £15 million has been allocated to ‘established’ technologies (including solar power) commissioning from 2016/17, which could help some solar projects compete under the scheme, but this is not sufficient to drive growth at the pace needed to achieve solar’s full cost reduction potential. This contrasts with the extra £80 million given to the less cost-effective ‘less established’ technologies, which in total now have three and a half times as much budget as the cheaper technologies like solar. The auctions will open later this month for projects for all years to 2018/19.

Generally the structure of the CfDs favours large players in the industry who can shoulder large risks, while the UK solar industry is dominated by new entrants and SMEs that are less able to cope with risk and uncertainty.

Paul Barwell said:

“This is not a policy mechanism that has been designed to deliver the stable market growth that solar power needs to bring down costs, nor has it been designed for new entrants and SMEs despite the urgent need for new players in the power industry.

“We have repeatedly said to DECC they need to adapt these policies or they will remove rather than increase competition in the energy sector. Smaller solar companies are set to be hit very hard by the design of CfDs because unlike the other technologies large scale solar alone will not have the security of the RO. The rationale for constructing a policy framework that disadvantages solar power is hard to fathom.”

A recent STA membership survey revealed that half the companies active in the large scale solar sector are planning to reduce staff numbers next year following these policy changes. The STA is extremely concerned the decisions add up to a package of measures that will derail the industry’s path to parity with fossil fuels. The STA is developing its own Solar Independence Plan showing how to provide stable policy to deliver subsidy-free solar power at all scales and applications by 2020.





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