1. Do you share the Solar Trade Association's concerns that the contracts for difference (CfD) scheme could prove unwieldy for the U.K.'s utility scale solar PV industry?
Finlay Colville: CfDs remain an unknown to everyone, with many solar developers being forced into early participation almost by default. The main issue on CfDs is that the solar industry has been given a very short timeline to get its act together, having previously been working on the basis of 2017 transition from ROCs to CfDs. So, it is not so much unwieldy but more ‘change' in business models that is impacting the industry right now. Nobody was complaining too much before, but having said that, nobody was having to think too much about what was involved with CfDs.
2. How do you envisage the U.K.'s utility scale (>5 MW) PV sector to look post-April 2015? Has the country already sowed the seeds for an inevitable boom-bust cycle?
The quick conclusion is one of boom-and-bust, especially if we do any comparison with mainland European markets over the past six years. For the >5MW projects, it is likely to be lumpy deployment determined by the outcome of the CfD auctions. However, the wildcard remains the grace period, and how many larger projects will fulfill the final acceptance criteria to build-out. But just one month after April 2015, there is a general election in the U.K. and it is likely that a different group of decision-makers will be in place from May 2015 onwards. Therefore, it is way too early to call a boom-and-bust situation.
And the PV industry is very different today compared to the industry metrics that confronted Spain, Germany and Italy in the past. There is still plenty of finance coming into the industry, the investor community remains largely supportive, and the U.K. has a strong rooftop market with upside that will prevent a bust cycle seen in other countries that relied upon large-scale for deployment.
3. What has the reaction been from overseas investors to the withdrawal of the ROCs next year? Is there the same appetite for/understanding of CfDs, or has the proverbial rug been pulled from beneath their plans? Or, in fact, is it too early to tell just how things will pan out?
For some, it is almost as though nothing has changed, and many are still citing long-term stability and assuming that inward investment alone is sufficient to stimulate demand. Many others, however, have the contacts and relationships established that can make a short-term difference. Some are looking simply at buying sites and maximizing returns based on ROCs. Only a few overseas investors are aware of the speed at which the clock is ticking to get up to speed on the CfD requirements. Bringing in money is one thing using it effectively is altogether different.
4. The anticipated rush to build before the April deadline must surely be nearing its peak after August, will we have a clearer idea of how the dust is likely to settle on the U.K.'s utility scale PV sector?
We are actually some way away from it reaching its peak. April 2015 is still quite some time away, and the rush is yet to kick in. The industry is still adapting to the early May shock from DECC. Most developers are seeking to build up portfolios before pressing the build button any time now. Grid connection is also a key issue. At the end of the day, the developers that have had the foresight to capture grid-ready approved sites could be the winners. It is likely to be well into Q115 before the full picture will be seen.
5. Does the DECC's ‘support' of rooftop and industrial solar strike you as genuiue, or an exercise in political posturing?
If DECC had advocated driving development of the large-scale rooftop market in isolation, this would be an easier question to answer. But the promotion of the rooftop market happened to overlap exactly with the negativity towards the large-scale ground-mount segment under ROCs. Therefore, it is harder to understand the commercial rooftop agenda. Most of the aspirations of DECC are valid, but the timescales and policies to stimulate the commercial rooftop segment are very much a work-in-progress and still need incentives or creating financing models to come to fruition.
6. Given the U.K.'s rising proportion of rental tenants versus owner occupiers, and the oft-reported stories of solar panels harming property prices, is there enough appetite within the U.K. for organic growth in the residential sector, even with the FIT?
The residential segment under FITs is perhaps DECC's greatest success in the past couple of years. Once the FITs were put on quarterly capacity-based degression, this segment has been trending gradually upwards at the 80-100MW per quarter level. Residential adoption remains one of DECCs underlying ambitions and, coupled with the sustained interest from the social housing and housing associations, this remains a very strong part of the U.K. market.
7. Developing brownfield sites is rarely a bad idea; how is this sector currently performing in the U.K., and will the DECC's support changes next April actually boost brownfield development?
It is interesting that brownfield development was not ring-fenced within DECC's draft proposal for ROC changes at the start of May. Developing former airstrips and landfill sites has seen strong uptake by the project developers and planners in the past 12 months. The industry has every right to be disappointed that these type of sites especially the landfill or disused industrial sites were not granted exemption from DECCs ROC change proposals.
8. The U.K. solar leasing market has yet to take root in the same way as it has in the U.S. Is Britain's rather dysfunctional housing market to blame for this slow uptake, or are there other factors at play?
One of the things that is often overlooked is that the ‘free solar' model has been prevalent in the U.K. for many years. In fact, before the U.S. installers coined the third-party-ownership acronym, free solar had taken off considerably in the U.K. And with the U.K. having one of the strongest and most stable residential markets globally, it is perhaps not a surprise that third-party ownership kicked off so early in the U.K. In fact, free-solar was dominating residential for some time in the U.K., and remains a massive driver.
From a personal standpoint, I must get a cold-call once every two weeks from someone wanting to put solar panels on my rooftop at no upfront cost to me. It is an indication of how strong the push is for this type of installation. In the past year, the leasing model has been extended to small commercial buildings, albeit on a lower scale. But it shows that the financial models for leasing rooftops are getting ever more appealing from an investment perspective.
9. The recent buzz caused by the Solar Roadways technology (chiefly via social media), served to prove that Brits can get excited about solar energy, and STA studies show that solar is a preferred energy source given the choice. Do you sense that attitudes towards solar power in the U.K. are changing for the better?
Well, this is truly a mixed bag! It is clear there is way more public understanding of solar compared to a few years ago, but still a long way to go. But with about 500,000 homeowners having solar PV on their rooftops, the numbers speak volumes for the public adoption. This issue remains one of how much solar the public is prepared to accept on the ground, or nearby their villages. And here, solar is no different to other renewables or non-renewables that require build-out. Given the choice over solar, wind farms, fracking or nuclear, then solar is by far the most popular, but this is not the same as saying it is wanted.
10. Next May's general election will likely have a profound impact on the future of the U.K.'s solar sector. In a nutshell, what are your hopes, fears and expectations for this time next year?
It is unlikely but not impossible that the existing arrangement of a Conservative/Lib Dem coalition will be the party in power after May 2015. So far, neither David Cameron nor George Osborne has been vocal about renewables many will say things less diplomatic! So, at the end of the day, it may come down to whether Labour gains a majority or are the dominant partners in another coalition. Until now, the Labour party has generally been reactive in criticizing government policy, rather than being proactive in outlining its own renewables-based roadmap, including solar.
But solar now has such a momentum in the U.K., and it is hard to see how it will not have to form a key part after May 2015. Deployment by then will probably be above 10 GW, and the national grid will be having to deal with daytime spikes from solar output. And as electricity prices continue to rise and solar costs keep coming down, the proposition for elevating solar as a core energy type may end up being too compelling to sideline regardless of who is in power.
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