The Department of Energy and Climate Change (DECC) has confirmed the U.K. solar market’s shift towards the rooftops of the country’s homes and businesses.
Speaking at the Solar Finance and Investment Conference in London, Richard Cave, the DECC’s head of solar PV and hydro, said the U.K.’s solar strategy aims "to shift [the PV market] from large-scale to buildings, with the commercial and industrial rooftops fragment of the market being largely untapped today."
Cave said the DECC’s priority was to "guarantee power supply at affordable prices for the consumer," but added that there was "no magic wand" to achieve this. Nevertheless, the DECC’s solar strategy puts in a place "a portfolio of different actions, which together are designed to help."
These actions include governmental efforts to lead the rooftop market via developments at its estates. On this front, Cave said that pilot projects are under way aiming to achieve scale.
Secondly, the DECC is examining the current feed-in tariff (FIT) framework and is particularly interested in the transferability of the tariffs, agreements for permitted development as well a revision of the degression bands currently in place.
Thirdly, the DECC recently hosted a round table discussion concerning the landlord and tenant relationship and what regulations could perhaps ease this relationship in order to boost commercial rooftop installations.
Finally, Cave said the DECC was very much interested in community PV, hence the policy framework announced in November, which, he argued, extended the definition of a community project.
Barriers to the rooftop PV commercial market
The PV shift to rooftops is not going to be easy. A debate on Wednesday revolving around the U.K. rooftop market at the solar finance and investment event exposed barriers to this market fragment that don’t exist in ground-mounted plants.
Such barriers might be technical (e.g., the building needs to withstand the installation weight), regulatory (e.g., what happens when businesses want to install PV in buildings they rent) and legal (e.g., the case of business insolvencies).
Specifically, the landlord/tenant relationship is more characteristic of the U.K. than other countries. In Germany, for instance, businesses own rather than rent the properties they occupy.
Other DECC guidelines that are eagerly anticipated include new rules that regulate the ability to move a solar kit to another site in the case of an insolvency. The DECC consultation on the matter ended January 5 but the results have yet to be published.
Ultimately, "the life-cycle of solar PV is the same across Eurpean countries, albeit at a different pace," said Francesco Zorgno, executive director at 2F Capital, a company that invests solely in rooftop projects around Europe. "This leads to industrial rooftops. Investors are increasingly more interested in industrial rooftop PV."
The reason behind this interest, Zorgno said, is that commercial rooftop PV bears higher returns. In the beginning of a rooftop plant, returns might be low but later tend to increase. Zorgno pointed out that the attention paid to the length of power purchase agreements was overplayed and urged investors to consider how much of their generated power was also sold to the market.
James Hoare of LHW Partnership added that in order to avoid having power remain unsold, especially given the grid restrictions, rooftop PV owners should better develop systems that satisfy their demand.
Other panelists predicted that the U.K. industrial rooftop PV market would soon be run by institutional landlords, who, a few years ago, were mainly concerned about the financial stability of their tenants. These days, with an improved financial environment, institutional landlords are looking to install PV on their buildings and eventually rent the generated power to their tenants in the same way they rent their properties, they added.
The Solar Finance and Investment Conferencer took place March 10-11.