UK government offering little encouragement to the solar sector says the industry

The U.K.’s golden years for solar may have gone but the industry recently tried to foster hopes for a renaissance via two routes: the capacity market – introduced by the government to guarantee supply meets demand in the renewables age – and a subsidy-free pipeline.

However both suggestions have been met with indifference, at least for now, delegates were told at a conference held by the Westminster Energy, Environment and Transport Forum (WEETF) in London.

Capacity Market

The prospect of the capacity market permitting renewable energy providers to properly participate has been explored extensively in recent months but Robert Gross, of the Centre for Energy Policy and Technology at London’s Imperial College, told the conference a speech by business secretary Greg Clark late last year had shattered such hopes.

Gross said Clark’s speech suggested allowing renewables to compete in the capacity market was a good idea but an unnecessary one, as the U.K. government is looking to reform the contracts for difference (CfD) mechanism for financing renewable projects.

Commercial solar projects

Gross told the conference, although the U.K. has already seen unsubsidized schemes developed, the “corporate long term PPA market is still small for good reasons”. For instance, said Gross, a lack of large consumers with an appetite for long-term contracts mediated by a supplier; or the fact “PPAs do not remove or ameliorate wholesale market risks, including price cannibalization”.

Although a small number of private PPA projects were announced last year – less than 100 MW worth, according to Gross – there are not enough PPAs in the market to drive impressive solar growth.

Solarcentury founder Jeremy Leggett told the conference the U.K. will see 300-600 MW of new subsidy-free solar this year. However, that message did not signal his satisfaction with government policy, with Leggett urging Westminster to ditch plans for a shale gas industry in favour of PV to demonstrate it was serious on carbon emission reduction.

High transaction costs

Jan-Willem Bode, director of energy practice at Navigant, told the conference complex U.K. electricity regulations ensure high transaction costs for commercial projects. By comparison, said Bode, it is much easier to develop such projects in Germany or France.

Bode asked U.K. investors to come up with innovative ways to develop commercial projects adding, although he wanted to stay positive, the outlook for such arrangements will be tough over the next two years.

That is why, Gross told the conference, subsidy-free should not mean policy-free, with the academic adding the U.K. needs “a coherent, investment-literate, subsidy-free proposition to deliver low cost renewables”.

Small-scale and community energy

The WEETF conference also touched on small-scale solar and community energy.

Giovanna Speciale, director at South East London Community Energy, said “the feed-in tariff phase out has eliminated the community energy sector massively. And this is not going to change until the cost of solar drops below grid parity.”

Speciale added there is still innovation, with some community projects looking to bring in aspects such as battery storage, but other speakers agreed the future for small-scale PV in the U.K. is uncertain, and much will depend on the final policy for export tariffs.

Hitachi dreams

The renewable industry has called on the U.K. government to embrace its expertise to fill the gap left by Hitachi’s withdrawal from the plan to invest in two new nuclear power plants, at Wylfa on Anglesey in north Wales, and at Oldbury-on-Severn in south Gloucestershire.

Fiona Reilly, non-executive director at the Nuclear Industry Association, said the media had misinterpreted Hitachi’s decision and argued the Japanese company is simply taking a step back to consider how the energy market will be after Brexit, and whether the U.K. would be able to support a nuclear program outside the EU.