A bright future for solar PV?
Recent UK policy changes have challenged the sector but the emergence of new funding models and energy storage paint a more positive picture
Report from – Damien Carr
Policy changes have had a largely negative impact across the UK solar PV sector, with the reduction of the Feed-in Tariff (FiT) hitting the small rooftop market the hardest.
Meanwhile, the commercial rooftop market has struggled to take off in the past as businesses struggled to balance the upfront cost of a PV system with the 20 year FiT contract, with the changing policy landscape making it difficult for companies to invest.
However, picture is not an entirely gloomy one, particularly in the commercial property sector, as Lauren Cook, policy analyst at the Renewable Energy Association, which is supporting the Solar PV Summit on 19 July explains.
What effect have you seen on the market from recent solar PV-related policy changes?
Whenever there are significant adverse policy changes then the lead up to their implementation sees a rush to get systems installed. This year was no different as the year got off to a very busy start, with installers from domestic, right through to solar farms, rushing to install before cuts to the Feed-in Tariff (FiT) and the closure of the Renewable Obligation to solar. This has artificially skewed the numbers for 2016 and installations will be much lower for the remainder of the year as the industry adapts to the new incentive landscape.
What would the REA like government to be doing in terms of supporting Solar PV?
Solar PV is now viewed by many as approaching maturity and should be able to operate on a level playing field without subsidies. However, this level playing field does not exist yet and some support is still needed to boost the areas that have struggled to take off. Commercial solar is an example of this, previous incentives have not successfully supported this segment of the solar sector and it could be better supported by tax-based mechanisms which are better understood by the financial decision makers. An example of this is Enhanced Capital Allowances (ECA) which would allow businesses to benefit from solar within the first year. DECC held a consultation on this earlier this year and the REA has asked for solar to be included in the Energy Technology List which determines the eligible technologies for ECAs. We are yet to receive a response to this consultation.
What is the primary business case for commercial building owners and developers to invest in solar PV?
The cost of solar PV has fallen significantly over the past few years and is now at a point where it makes financial sense for many companies. In the past the business case would have been primarily based on FiT revenue, primarily with the savings on energy bills coming second. However, businesses are now able to sell solar PV based on self-consumption using a Levelised Cost of Electricity (LCOE) model where the cost per kWh of the generated electricity over its lifetime can be compared to the cost of purchasing electricity from the grid. In many cases this works out cheaper and also allows companies to guarantee electricity bills during this time. The key thing here is self-consumption: previously system sizes would have been maximised to earn the Fit revenue, however, it now makes most sense to match the generation capacity and profile with the businesses electricity usage profile in order to minimise the amount of electricity purchased from the grid. This can be managed in different ways but with many businesses subject to time-of-use tariffs, avoiding purchase of grid electricity during peak time allows them to make the most savings on their electricity bills.
How do you see energy storage transforming the solar PV market?
Energy storage provides huge opportunities for solar PV, better enabling self-consumption, which is now a major factor in determining the financial case for solar PV. This market is still at an early stage and although we have seen lots of different companies and products entering this area there is currently relatively little storage installed alongside solar. But with many people looking for new business models to make such combinations economical and prices for batteries constantly falling, it is only a matter of time before it takes off. The UK already has over 800,000 rooftop solar PV systems and companies will see these properties as a future opportunity to install storage.
Lauren will be speaking at the Solar PV Summit on 19 July, 2016.
The conference will review the current policy landscape, ‘post-subsidy’ funding and PV from the valuer and lawyer’s perspectives. It will give examples of successful PV installations in a wide variety of sectors, as well as advice on getting the best out of solar assets. It will also examine energy storage, solar car ports and Building Integrated PV.
When: 19 July 2016
Where: Berwin Leighton Paisner, Adelaide House, London Bridge, London EC4R 9HA
Book now: www.solarpvsummit.com