The fate of the U.K.'s utility-scale solar industry may rest in the hands of the onshore wind sector under the conditions created by the government's Contracts for Difference (CfD) scheme, say solar analysts at IHS.
Following the announcement by the Department for Energy and Climate Change (DECC) that solar plants larger than 5 MW must compete with onshore wind power for a share of £50 million ($85 million) in funding under the new CfD scheme, IHS' senior analyst for solar research, Josefin Berg, believes that the utility-scale solar sector could add as much as 800 MW of capacity in the first allocation round.
However, much will depend on the scale at which onshore wind developers participate for support under the new scheme, said Berg. "As DECC plans to end the support for utility-scale PV under the ROC by 1 April 2015, the future of ground-based PV hinges on the success of projects in the CfD auction [scheduled for October]," said the analyst.
"Given the competitive pricing of onshore wind and small hydro, IHS considers the opportunity for PV projects in the first allocation round to lie in a possibly low participation rate of onshore wind projects."
The Renewable Obligation certification (ROC) scheme, which is a more profitable subsidy for clean energy developers, was withdrawn early for utility-scale solar, and will end in April next year. Yet because the ROC runs for onshore wind until 2017, Berg does not expect to see too many onshore wind developers entering the first CfD auction round, in which case utility-scale solar projects could win as much as 800 MW of capacity approval. However, there is still a possibility that some wind developers will seek first-mover advantage by entering the CfD scheme early on," Berg added.
The current ROC support conditions will spur the installation of 4 GW of utility-scale solar throughout 2014 and into Q1 2015, says IHS, but the sector is likely to be squeezed out by onshore wind projects after the ROC support is withdrawn falling in line with the governments strategy to steer support for solar PV towards the residential and commercial rooftop sector. Current IHS projections forecast the installation of 2.7 GW of PV capacity in 2018, with rooftops accounting for 80% of that figure.
Seb Henbest of Bloomberg New Energy Finance (BNEF) told pv magazine that the impending support changes are likely to be successful in tipping the balance of solar installations in the U.K. towards smaller, sub-5 MW installations.
"The potential of the commercial rooftop sector is largely untapped so far, and likely to pick up if policy in this area [currently a standard feed-in tariff] is simply held steady, driven by declining prices and innovative ways of enticing customers as much as by the policy itself," he said.
"The transition from ROCs to CfDs is unlikely to slow investment in clean energy more widely, but it is worth remembering that large offshore wind deals can skew data in any one time period."
In allocating funding pots for the CfD scheme, the DECC decided to group offshore wind in pot 2, where it will compete with other less established technologies for the £155 million ($264 million) share of the subsidy money. Although a sound principle to back maturing clean tech, the DECCs labeling of offshore wind technology as such appears dubious, with some industry watchers suggesting that the decision has been driven more out of fear of NIMBYs (Not In My Backyard) against onshore wind development.
A few days after the DECC announced CfD support levels, ministers in the U.K. government are today expected to green light the expansion of exploration drilling in a number of national parks that could lead to a boom in fracking over the next few years.
This content is protected by copyright and may not be reused. If you want to cooperate with us and would like to reuse some of our content, please contact: email@example.com.