Revolution – the UK is looking to the skies for energy salvation

This article is worth reading as it gives a good overview of the growth of Solar PV in the UK, it does highlight that the renewable heat incentive is still being consulted on and is not yet confirmed for April 2011.  As soon as it is we will let you know.

It is common knowledge that the UK solar industry has lagged terribly behind its European counterparts for the past decade due to the lack of government subsidies. Nevertheless, activity has been burgeoning in recent years thanks to trade and academic institutions such as the UK national chapter of ISES – the International Solar Energy Society and the UK Solar Trade Organisation.

Whereas Germany, Spain and Italy have seen tremendous multi-gigawatt growth in installed capacity of solar PV, in the UK just an approximate 22.5 MWp of capacity was installed from 2000 to 2009. The bulk of these installations have been supported by the UK Government?s capital grant support mechanisms, either through the Major Demonstration Programme or the Low Carbon Buildings Programme.
Historically, as a result of limited demand, only a handful of solar installers and operators have existed in the UK. These included Solar Century and Sharp, which, against all odds, still runs a manufacturing facility in Wales.

Back in February 2000, the UK Government began pushing forward a renewable energy policy consisting of four key strands:

  • The Renewable Obligation on all electricity suppliers in Great Britain to supply a specific proportion of electricity from eligible renewable energy, introduced in April 2002;
  • An exemption of electricity from renewable sources from the Climate Change Levy, introduced from April 2001;
  • An expanded support programme for new and renewable energy including capital grants and an expanded research and development programme; and
  • The development of a regional strategic approach to planning and targets for renewable energy.

These policies, combined with the Government?s requirement for property developers to source at least 10% of their energy from on-site renewable sources before planning permission could be granted, should have stimulated the renewable energy market. However, the reality was that there were a number of economic factors that limited the growth of the small-scale renewable energy market, especially in terms of solar PV.

These included minimal capital grant supports, the low value of the Renewable Obligation Certificates (ROCs) allocated to solar PV technology, the fact that prospective generators were by no means certain that they would secure a buy-back agreement with utility suppliers, and that installation costs were considered the highest in Europe.

This meant that, shamefully, consulting engineers often recommended against solar energy schemes on the basis that the payback times were always longer than the useful life of the systems.

The holy grail ? the feed-in tariff

On 15 July 2009, after intense lobbying by solar enthusiasts and renewable energy professionals, the UK Government issued a consultation paper proposing the introduction of a feed-in tariff mechanism for small-scale renewables. This proposal gave a clear indication that the Government was getting serious about supporting the UK solar industry, and feed-in tariffs subsequently became available in the UK on 1 April 2010, with rates being higher than those put forward in the original consultation.

In summary, and in particular for the solar PV generators, the UK feed-in tariff provides a generous, guaranteed index-linked generation tariff over 25 years for sub-5 MW installations.

The second component is the export tariff, which is now guaranteed at a minimum of £0.03/kWh; however there is the flexibility for solar PV generators to enter the competitive energy market and achieve higher export rates through Power Purchase Agreements.

The feed-in tariff effect

Four months after the introduction of the scheme, we are now seeing tremendous interest in the UK solar PV market. For instance, where previously there had been just a handful of accredited installers and suppliers, there are now several hundred accredited installers registered on the Micro-generation Certification Scheme (MCS), with these ranging from one-man local electricians to major international organisations such as E.ON.

Similarly, the UK market is now flooded with certified and bankable products manufactured in Europe, the USA and Asia.

While there are more solar panels to choose from now than there were four months ago, the choice is still very restricted as some major solar panel manufacturers are missing from the accredited list. Nevertheless, this has had a limited impact on inflating the installed costs.

As an advisor to some major organisations who are getting involved in the UK solar market, I have noticed prices drop dramatically in the last four months – in some instances, this has been up to 15% for major bulk purchases, reaching a level equivalent to installations in mainland Europe and Germany in particular.

This is welcome news for the UK solar market, and as consulting engineers and advisors to major UK organisations, we are wholeheartedly recommending the installation of solar PV panels on assets held or being developed by our clients.

Carbon Reduction Commitment

Another scheme that is helping to bring about a UK solar revolution is the Carbon Reduction Commitment. As a result of its introduction, some of the leading organisations in the UK have taken notice of the bottom line benefits of energy savings, and the prospect of generating additional revenue in excess of typical company’s internal hurdle rates has led to a flurry of activity and appetite in the commercial real-estate sector for solar PV.

For instance, we are seeing that most major retailers in the UK are implementing multi-megawatt nationwide deployment strategies for solar PV on the roofs of their assets.

And while most of the activity in solar PV is noticeable in the commercial real-estate sector, growth is also occurring in the private residential sector. This is mainly due to increases in the residential electricity tariffs and the Budget announcement that revenues from micro-generated renewable electricity will be tax-free for households.

It does naturally seem that the activity is mostly clustered in the South-West and South-East of England, where the solar radiation levels are at their highest and therefore the financial returns from solar PV generators could reach ten percent; leveraged installations can reach in excess of 12% over a 25 year period.

Solar thermal uncertainty

Although it appears that the UK solar PV industry is looking ahead at the next few years with optimism, uncertainty around the fate of the solar thermal industry is looming.

In February this year, UK Government issued a new consultation document introducing a revolutionary concept of subsidising renewable heat generation. In a similar manner to solar PV generators receiving a generation tariff for every kWh of electricity produced, owners of solar thermal collectors would receive a subsidy payment for every unit of heat produced.

However, since the change of Government in May, no indication has been given as to the future of this latest proposal, which, in many ways, is the missing piece of the puzzle for the UK’s transition to a low-carbon future.

After the long and depressing lost decade for the UK solar industry, are we now on the brink of a semi-solar revolution in the UK? Only time will tell. In the meantime, I look forward to seeing more and more solar panels installed in England, Wales and Scotland. Why not Northern Ireland? The scheme does not apply there!

James Eades

By: James Eades

Operations Director, James Eades is EnergyMyWay's in-house expert on renewable energy policy, microgeneration technologies and best practice in the renewable energy industry.