UK Solar in 2020: Priorities for the Government
- The Solar Trade Association is calling for the urgent delivery of key policies to build on the successes of the past decade and to unlock the true potential of solar in the UK, setting out three key deliverables which would drive the rapid levels of deployment required to decarbonise the power sector by 2030, including holding regular CfD auctions inclusive of solar, amending Ofgem’s remit to include the UK’s net zero emissions target, and rolling out policies to boost rooftop solar, including in the new build housing sector. Boosting the uptake of solar through the next decade needs to form an essential part of the Government’s package of measures to deliver net zero as quickly and cost-effectively as possible.
Hold regular CfD auctions inclusive of solar
The Committee on Climate Change has regularly recommended new government-led clean power auctions for solar and onshore wind to support the UK’s decarbonisation targets, as well as keeping the cost of energy down for bill-payers. This policy is also endorsed by the CBI, National Infrastructure Commission, Energy UK and many others.
Since 2015, solar and onshore wind have been effectively excluded from this mechanism as the Government has not undertaken an auction inclusive of “established” technologies – Paradoxically, on the grounds that these technologies are proven to be deliverable at lower cost. These technologies offer the most cost-effective pathway to the decarbonisation of the power-sector, and deployment must be ramped up significantly in order to remain in keeping with below 1.5oc of warming.
The STA’s preference would be for technology-neutral auctions that utilise a floor-price mechanism. Under this mechanism, when wholesale power prices fall below the floor price, the generator receives a top-up payment. However, when wholesale power prices rise above the floor again, the generator does not retain the upside until the value of CfD top-up payments received has been reimbursed. Investors would benefit from lower average cost of capital, whilst capturing potential upside in return for taking on merchant risk, while consumers would benefit from the lowest possible floor price bids.
A technology-neutral CfD would enable faster and more cost-effective electricity sector decarbonisation and would help to reduce annual electricity costs to consumers by £200-300m annually by 2023.
Amend Ofgem’s remit to align with our legally binding Net Zero emissions target
Ofgem’s current objectives are now outdated, as they were designed in an era of centralised, fossil fuel-based generation. Renewable generation and energy storage, now mainstream electricity technologies, do not fit into the regulatory and price control frameworks, which has made deploying and connecting such technologies to the grid more challenging than it need be.
The regulator needs to take a holistic, long-term view of the requirements of the energy sector in order to support the rapid decarbonisation and increased energy system flexibility which is essential to achieve the UK’s net zero emissions target. This would enable the network improvements necessary for consumers to benefit from the expansion of low-cost renewables.
Establish a new strategy for rooftop solar
Rooftop solar is now cost effective, but to compete with high-carbon energy alternatives new policies must be forthcoming, and tax and regulation need to be on a level playing field to help businesses and households get fair access to this proven and popular technology.
Business Rates reform
Under the current system, business rates penalise companies and organisations who invest in rooftop solar. The technology is categorised as ‘plant and machinery’ and the rateable value is determined by whether the installation is primarily exporting or self-consumed. The methodology to determine the rateable value was revised in 2017, resulting in an enormous increase of 600-800% for all commercial self-consumers, and 300-400% for public sector self-consumers such as schools and hospitals. Solar PV, battery storage, and other clean energy technologies should be exempted from business rates to ensure that those who take meaningful action to cut their carbon emissions and energy bills are not punished for doing so. This would place solar PV on par with Gas CHP, which is exempted from business rates.
Scrap VAT for solar/storage
In October 2019 changes were made to how VAT is applied to solar PV and storage. Now, where the cost of materials exceeds 60% of the total installation cost, the rate of VAT on the material element rises from 5% to 20%. This is applicable to solar installation and combined solar and storage installations. That these technologies can attract a 20% VAT rating while fossil fuels such as coal and fuel oil enjoy a reduced rate cannot be justified under current circumstances.
Zero-interest loans for solar/storage
While a combined solar and battery storage system is more affordable than ever, it still represents a significant upfront investment for a household. Zero-interest loans would ensure that these technologies are not simply the preserve of those who have the cash immediately available and enable many more households to take meaningful action on climate change while cutting the cost of their energy bills. Such a scheme for green home improvements have been successful in Scotland, the Home Energy Scotland scheme, so it makes sense to roll this policy out across the UK. This will accelerate solar uptake amongst existing homes.
Higher building standards
Poor national policy efforts has led to the built environment being responsible for roughly 40% of the UK’s total GHG emissions, with energy use in homes alone accounting for about 14%. The complete decarbonisation of new build properties is within our grasp. We need building standards with significantly improved fabric efficiency and requirements for onsite zero carbon technologies, such as solar PV and thermal.
Fair payment for small-scale solar power exports
In April 2019 the Feed-in-Tariff scheme was brought to a close, and with it the Export Tariff, which set a rate for power exported to the grid at 5.2p/kWh. Its replacement, the Smart Export Guarantee, will place a legal obligation on larger suppliers to provide at least one tariff for solar power exported to the grid. The Government has elected to let suppliers determine these rates, only setting a requirement that these be above 0p/kWh. The industry and consumers expect to see a minimum floor price set to ensure small scale generators are fairly remunerated, in line with other generators connected to the grid.