Although the FIT cuts to solar were not as drastic in the residential sector as had been originally proposed by the government 64% instead of 87% meaning it still presents a viable investment opportunity, consensus is clear that the ground-mount sector has taken a big hit, attracting criticism from companies and industry bodies alike. According to some, however, it is not all bad news.
The government has closed the Renewables Obligation to all solar PV projects from April 1, 2016. While the plan is to gradually replace it with the Contracts for Difference (CfD) auction system, no decision has been made and developers are uncertain of its future. Grandfathering has also been pulled for all projects that do not meet the July cutoff date. Consequently, with a FIT of just 0.87p/kWh, there is very limited support for projects over 1 MW.
Ash Sharma, senior director of solar & storage research at IHS Technology tells pv magazine, " the cuts will make it difficult for the commercial roof sector to take off and obviously the ground-mount sector is already unviable post March 2016. It's hard to see solar playing a larger role in the UK's future energy mix based on these changes."
"… the fixed FIT offers little and developers are not counting on CfDs any time soon, so there will be much more focus on private wire projects and maximising the value of existing ones," Nico Tyabji, an associate at Bloomberg New Energy Finance additionally told pv magazine.
He went on to say that developers knew what was coming and have been working towards getting their pipelines built before the final ROC cutoff. As a result, he forecasts another "big boom" in Q1 2016, which could see more than the 2 GW installed this Q1. Then, "a smattering of grace period projects allowed to accredit for up to another year," are expected.
Better than expected
Finlay Colville, head of market intelligence at Solar Media Ltd was less pessimistic. He told pv magazine the ground-mount actually appears to have fared much better than anticipated, since the changes to ROCs are "nowhere near as bad as thought," with the new proposals giving existing projects that qualify an extra 12 months, albeit it at lower levels.
"The large-scale ground-mount sector appears to have favored much better however, albeit with a raft of legal caveats that will have the lawyers sweating over for the next few weeks. But potentially the scope for build-out to 31 March 2017 at manageable levels does appear an option, but still requiring planning applications submitted before 23 July 2015 and subject to some subtle changes for Scotland that are yet to be fully assessed," he said.
The U.K's biggest large-scale solar farm developer, Lightsource Renewable Energy, also takes a more positive view of the changes. "Whilst the announcement may not be the Christmas present the industry was hoping for, the announcement is certainly more positive than the consultation proposals and we believe that a much consolidated industry may be salvaged. We are reviewing the Government response in detail in order to fully gauge the impact on our own future plans," said CEO, Nick Boyle. "Its important to note that the solar tariffs in the U.K. have actually done exactly what they were designed to do in driving the industry towards grid parity," he added.
While no details were offered, Boyle said Lightsource will be building large-scale solar plants without subsidies in 2016. "Admittedly, these plants will not be connected to the National Grid, but we are able to build and hardwire the plants directly into large electricity users comfortably beating the retail price that they are paying for electricity," he explained.
He added, "However, were not quite there yet across the whole solar sector. Domestic and Commercial & Industrial rooftops are the furthest away from grid parity and it remains to be seen if this latest round of changes will afford enough support to allow them to catch up to large-scale ground mount solar."
Investment in small-scale
Investment in the residential market still appears worthwhile, according to industry. In its documentation, released yesterday, the government calculates a target rate of return of 4.8% on solar PV installs.
Sharma tells pv magazine, "The new rates proposed will offer relatively modest rates of returns for domestic installations, that will at least prevent this segment being killed off altogether." This ties in with STAs comments that "The new tariff levels are challenging, but solar power will still remain a great investment for forward-thinking home owners who want to protect themselves from volatile energy prices and do their bit to reduce global carbon emissions."
Speaking to pv magazine at COP21 in Paris before the final changes were decided upon, Lior Handelsman, VP marketing & product strategy, and founder, SolarEdge, said that there is "concern" that once the incentive mechanism changes, a lot of people are going to think that solar doesnt make financial sense anymore. "But it makes different sense," he said. "The numbers are different but it still makes sense."
Another effect, he said, will be that a lot of the companies that operate in the U.K. solar sector are going to pull out. "They will have cut down staff, scale back activity, scale back advertising, and it becomes a vicious cycle," said Handelsman. "Weve seen this in a lot of markets where there were FIT cuts, and Im afraid it is going to be the same in the U.K." The government has estimated that between 9,700 and 18,700 solar jobs could be lost as a result of the changes.
Solar still makes sense
According to Handelsman, the U.K. industry needs to let people know that solar is still a viable option. "Whatever campaign there was to fight the incentive cut, which seems decided, the industry should convince people that solar still makes sense," he said.
"The U.K. market needs a lot of education around how to present this value of solar to homeowners, because if installers are very used to selling solar in a certain way, these are the numbers etc., everything changes and not necessarily all of them will adapt faster to the new sales pitch."
He added that the industry needs to adopt a new model of selling solar to homeowners, and to help the whole market understand the approach. "This will help start the market again," he said.
He concluded, "Technology wise, we hear that increasing self-consumption will make a big difference now in the U.K. so there is storage and load control. These are two products that we are now bringing to the U.K. market. They make the system more expensive but if thats going to flip the numbers then its definitely worth it."
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