Solar left scrapping for crumbs in first UK CfD auction

Solar was the expected loser in today’s inaugural Contracts for Difference (CfD) auction, with the Department of Energy and Climate Change (DECC) revealing that just five solar projects were successful, meaning the new scheme will deliver a mere 72 MW of PV capacity to the U.K. over the next two years.

The CfD competitive auction was introduced as a replacement to the Renewables Obligation (RO) scheme, which was controversially ended for solar projects larger than 5 MW two years earlier than planned.

From April 1, large-scale solar projects must instead compete with established renewable energy technologies for a share of the £50 million ($77.6 million) pot – placing the relatively callow solar sector in direct funding competition with U.K. renewable heavyweight onshore wind.

As expected, the larger, more financially secure wind companies were able to underbid most solar firms, winning 15 contracts to solar’s five.

Despite earning praise from the European Commission for introducing such a competitive renewable energy support system, the CfD process has been criticized by the solar industry for insisting on an uneven playing field that pits wind and solar power against one another.

"Unfortunately, this result is as disappointing as we predicted," said Solar Trade Association (STA) CEO Paul Barwell. "The soon-to-be-cheapest and most popular renewable – solar power – has lost out in a complex auction scheme that favors big players and genuinely established technologies. Is a policy that trips up the U.K.’s emerging solar industry really a successful policy?"

Crumbs of comfort?

There had been fears among the PV industry that solar projects would face a whitewash in the first CfD auction round. However, the five successful bids demonstrate solar’s ability to compete on price with more established renewables, argued the Renewable Energy Association’s (REA) Ray Noble.

Totaling 72 MW of capacity, the successful projects were: Wick Farm Solar Park, a 19.1 MW project that won with a strike price of £50/MWh; Lightsource’s 14.67 MW Charity Farm project (£79.23/MWh); the 13.78 MW Royston Solar Farm (£50/MWh); Netley Landfill Solar, a 12 MW project (£79.23/MWh), and the 12 MW Triangle Farm Solar Park, which won at a strike price of £79.23/MWh.

Just two of the aforementioned projects – Wick Farm and Royston Solar Farm – are scheduled to come online in the next fiscal year, meaning CfD’s inaugural support to the solar sector is a meager 32 MW, which is enough clean energy to power just 7,000 U.K. households annually. In the current fiscal year, the U.K. is expected to add between 2-3 GW of large-scale solar PV.

Amid questions whether solar projects can yet be delivered at the cost of £50/MWh, Barwell mused that the majority of U.K. solar companies are likely to have decided not to bid for a contract under the CfD, such were the risks involved.

"The problem is that it was just far too much of a risk for a small or medium sized solar company to even put in a bid,” he said. “The system was a bit like asking first-time buyers to put down a deposit on a house, without knowing whether they were going to be able to buy the house at the end of the process – and with the risk of losing their deposit."

Solar kept in shade

The competitive nature of the ’established technologies’ pot has left some solar observers wondering aloud why PV was grouped with onshore wind, landfill gas and hydro, rather than in the ‘less established’ category where offshore wind technology – and a larger pot of funds – awaited.

"We are very disappointed but we will now look to the next government to apply a more sensible budget to the next allocation round this coming October – a budget that is fit for purpose and that provides the support for solar that it deserves," said Alex Fornal, head of project development at juwi – a solar developer that made three unsuccessful bids.

The £50 million budget will rise to £65 million in October, but even that sum pales into comparison against the £3.1 billion ($4.8 billion) RO budget for 2014/15 – a budget that remains open to all renewable technologies except large-scale solar power, despite solar farms regularly proven to be the most popular form of local clean energy development.

"Much more care needs to be taken by government about where its energy policies are leaving solar power overall," said Barwell. "This extraordinary technology has been the success story of the coalition government but it is in danger of falling through the gaps in a policy framework too often designed for really big players deploying big technologies."

In announcing the full CfD results, secretary of state for energy and climate change Ed Davey said: "This world-leading auction has delivered contracts for renewables projects right across the U.K. These projects could power 1.4 million homes, create thousands of green jobs and give a massive boost to homegrown energy while reducing our reliance on volatile foreign markets."

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