Solar 2.5 years without access to clean power auctions
11th October 2017
The STA revealed it has written, together with seven major investor members, who collectively own 2GW of solar assets, to the Secretary of State for Business, Energy and Industrial Strategy urging him to allow solar back in to auctions for clean power as part of the Clean Growth Strategy, due tomorrow.
The letter  was sent before today’s announcement of a further £557m for ‘less established’ technologies and before recent auction results for offshore wind. It reflects widespread optimism in the solar industry that the technology may deliver clean power at £50 – £54/MWh by 2020 (effectively almost net subsidy-free) given access to the Contracts for Difference (CfD) clean power auction process. This would mean solar would supply clean power for half the price of the Hinkley contract (around £100MWh in today’s prices).
Solar has been shut out of competing for Contracts for Difference for 2.5 years and investment has consequently stalled.
STA CEO Paul Barwell said;
“Today brings further good news for clean energy but we are still missing any positive news for the UK solar industry as it continues to be shut out of the auctions market.
Solar has delivered incredible cost reductions and can continue to demonstrate this in the marketplace if it is given policy certainty and fair access. The UK needs a balance of low carbon generation and solar with storage is an essential part of that mix. Recent wind prices are good, but consumers will benefit from even lower prices and faster decarbonisation when the Government provides a level playing field that enables solar power to compete for long-term CfD contracts. We hope the Clean Growth Strategy will tomorrow move to level the playing field for solar power.”
Solar secured the lowest CfD contracts in the last and only round for ‘Pot 1’ technologies early in 2015, but only three contracts were won due to the novelty of the scheme. Solar schemes over 5MW were closed to the Renewables Obligation in April 2015, and schemes less than 5MW from April 2016. Large-scale solar now has no support in the UK. Despite huge preparatory work for CfDs, the solar sector has been left with a great deal of uncertainty. However, there are a large number of projects which could deploy very quickly if long term contracts could be secured.
A new CfD round which allows solar to compete for clean power contracts is now long overdue. The Government, responding to the 2016 Committee on Climate Change Progress Report, said a year ago that it would ‘set out our plans for mature technologies (pot 1) in due course.’  Both the CCC and National Audit Office also back auctions for ‘mature’ technologies (see also letter text).
The letter makes clear that the expected very low price for new solar CfD contracts is unlikely to amount to a net subsidy for consumers. Because CfDs stabilise the incomes of solar projects they de-risk investment and would enable projects to build out today, even with no net subsidy (depending on future energy prices).
For lack of a level playing field, the industry has been left waiting for the stars to align to resume activity, including further drops in the price of battery storage, but despite some pathfinder schemes meaningful activity is unlikely to resume until 2019, with worrying implications for British industry capabilities.
Matt Black, Senior Investment Manager at Foresight, one of the signatories to the letter said;
“The cost reductions seen in solar over the last 10 years mean that solar offers the lowest generation costs in many markets globally. Competitive auctions drive significant cost reductions, as can be seen by the recent auction result for offshore wind. The UK has a leading solar industry which would be able to deliver cost-effective new generation if it was provided with fair market access. The days when solar was reliant on significant public subsidy are over but what the solar industry needs is a route to market and the ability to compete“.
 Letter Text:
Dear Dr Clark
Stimulating Investment in Large Scale Solar
We are writing as a group of asset owners and as future investors in new solar power plants in the UK, to express our concern over the current vacuum in government policy, which we believe is holding back considerable levels of investment in this cost effective low carbon electricity generating asset.
Collectively our companies own 2GW of solar assets under management across the UK, powering 628,000 homes. Since the withdrawal of solar PV from the Renewables Obligation Scheme, there has been a dramatic slowdown in the deployment of large scale solar, at a time when costs continue to fall.
Government’s own figures state that they expect the levelised cost of energy (LCOE) for solar to be lower than gas fired generation by 2020, and we agree with this assessment. Indeed, there are some in the industry that believe the figure could be nearer £50-54/MWh, by 2020, some £6-10/MWh lower than the BEIS 2016 estimate. We know of numerous solar projects that have planning permission and grid connection agreements and that are ready to be developed. The only barrier to unlocking the new investment needed to build these assets is access to long term contractual arrangements, which are particularly important to solar where the vast majority of the costs are in upfront capital.
In February 2016, the Government had confirmed it was working towards some ‘market stabilising’ contracts for difference auctions which were expected to be open to mature low carbon technologies, such as large scale solar. There have now been 17 months without any progress on this policy. Whilst we appreciate the delays caused by the Referendum and the General Election, this is exactly the sort of policy uncertainty that stops investment in the UK economy at a time when we dearly need it.
We urge you to remove this uncertainty as soon as possible by announcing the timing of a CfD auction for ‘Pot 1’ mature low carbon technologies in the forthcoming Clean Growth Plan. The Committee on Climate Change recently stated that large scale solar projects “could be brought forward by auctions with low reserve prices that imply no net subsidy over their lifetimes, including when allowing for the system costs imposed by intermittent generation.” In July this year, a similar auction has just been held in Spain where 4GW of subsidy free solar capacity has been awarded contracts. Other groups who have supported this proposal include the National Audit Office, Energy UK, Policy Exchange and the Aldersgate Group.
We very much hope you will move swiftly on this issue and look forward to the publication of the Clean Growth Plan. [letter ends]
 See Government Response to 2016 CCC Progress Report
For further information or to request an interview, please contact:
Name: Leonie Greene
Title: Head of External Affairs
Main line: 0203 637 2945
Mobile: 07932 720 091
About the Solar Trade Association;
The mission of the Solar Trade Association is to empower the UK solar transformation. We are paving the way for solar to deliver the maximum possible share of UK energy by 2030 by enabling a bigger and better solar industry. We represent storage, solar heat and power, and have a proven track record of winning breakthroughs for solar PV and solar thermal.