UK publishes revamped subsidy levels for renewables

The U.K. Solar Trade Association (STA) has welcomed the government’s revamped support levels for renewable power under its Electricity Market Reform, saying the prices showed solar was on track to compete with fossil fuels.

The U.K. government on Wednesday published new strike prices for renewable technologies for the period 2014/15-2018/19 and updated contracts for difference (CfD) terms. British subsidies for renewable energy take the form of "strike prices," which are set substantially above the current value of energy for the long term to encourage private investment.

According to the document, published by the Department of Energy & Climate Change (DECC), strike prices for large PV installation generation will be set at £120 per megawatt hour between 2014 and 2016, then decrease to £115/MWh the following year, to £110 in 2017/18 and £100 in 2018/19.

The STA pointed out that support levels post 2015 were higher than it had requested.

"The STA had requested a higher strike price than the proposed £125/MWh up to 2016 because the price of Chinese solar panels has been fixed by EU trade action until then," the association said in a statement. "However, post-2016, when the industry has access to world pricing again, significant cost reductions are anticipated."

By 2018/19, the STA anticipates that solar will require £91/MWh, nearly the same as the strike price for onshore wind announced today and lower than new nuclear, the organization noted.

"The negative political rhetoric about solar farms is a shame given the announcements today show good support for solar after 2015," said STA chief executive Paul Barwell.

"The strike prices clearly show this is a technology on track to compete with fossil fuel prices. This is fantastic news for the public as solar will deliver clean power at a very stable price, with no unexpected cost fluctuations. The changes in strike price announced today widen the gap between the cheapest and most expensive technologies, which is a concern as funds are limited."

Barwell added that developers still had the option of the Renewables Obligation until 2017, which the Energy Department had pledged to keep stable to support investor confidence during the transition to EMR.

"All in all, the outlook remains positive. But it is frustrating that the strike prices don’t properly reflect real world costs – it looks as if on the back of the consultation they’ve simply taken off £5/MWh across the board. Certainly the cost evidence the STA submitted was much more nuanced than that. Perhaps DECC have sought to spare nuclear’s blushes by giving us a higher strike price than them, when we could have gone lower."

According to the DECC, the strike prices are meant to equate to support under the Renewables Obligation in the early years, but STA modeling does not support this assertion, the STA added.

"The large-scale solar industry is therefore likely to rely on the RO for the next few years, meaning there will be little opportunity to test-run the CfD scheme for solar developments,” the association said.

Barwell added a key concern for the STA was the continued exclusion of sub-5 MW solar from the CfD program. "This will prevent the development of smaller solar farms in future that want to sell their power into the grid."