STA BLOGS: The end of the solarcoaster

14 May 2019:

In this STA Blog, Chris Hewett of the Solar Trade Association explores the short-term prospects of subsidy-free solar in the UK.

Now the dust has settled on the end of the Feed-in-Tariff, the UK solar market is looking ahead to a completely subsidy-free era. This is, of course, unchartered territory for the industry and it’s fair to say there is anticipation and fear, in equal measure for the next couple of years particularly.

At the STA we’ve looked at the prospects for growth from 2019 to 2023 and it looks like deployment will be on the rise again, but don’t expect another ‘solarcoaster’ ride. This time it feels like a sustainable growth is possible, but the pace is very hard to predict. We looked at the current market conditions, came up with a range of assumptions about future policy and electricity prices, then coupled this with what we know anecdotally of our members activity in 2019 and 2020. The results show a definite upturn on its way, albeit not yet to the heights of deployment we saw towards the end of the Renewable Obligation.

Large scale – costs down, some construction already underway

At every solar industry event there is usually a conversation with a developer who says they are building this year. Whilst it is true that some of these projects are further advanced than others, clearly subsidy-free solar farms are being built in the UK in 2019, and more in the next few years. A fair few of them are also incorporating battery storage. Some will be moth-balled projects from the RO or CfD auctions. Some have low cost capital from local authorities backing them. Some will have a corporate PPA attached. Our estimate is that 250 to 400MW could get built this year, increasing from 2020 onwards. What happens next will depend on the potential subsidy-free CfD round, or the appetite amongst corporate energy buyers for long term PPAs, as well as business rate revaluation and the outcome network charging reforms. All of these factors are high priority for the STA this year.

Commercial & Industrial Rooftop – deals being signed, some corporate interest

Anecdotal interest in commercial and industrial onsite solar is also growing, again, some with storage included. We already know that Tesco and Amazon have commenced a pipeline of rooftop solar projects, but this market is not as visible as the ground mount sector. Our projections here are more conservative, particularly as there will be many grid constraints to contend with as well as network charging reform. For 2019, we think 150 to 250MW could be built, with small increases on this in future years.

Residential Solar & Storage – the coming era of smart homes

As the market segment most affected by the recent closure of the Feed-in-Tariff, and where the economics on their own are the least favourable, this is the most uncertain of markets to predict. The first quarter of 2019 looks like it has yielded 200MW of installations, according to early Ofgem figures, and if this is correct then 2019 overall deployment will be up on last year. There is also the buoyant new build sector, where local authorities are starting to set higher energy requirements than national minimum standards. In Scotland, where standards were increased a year ago, nearly all of new homes require some solar installation. STA members will soon have access to a database of local authorities which are setting high energy standards for new build homes.

For the retrofitting residential market, the prospect of a smart home with PV, energy storage and possibly an EV charger as well, is attracting some with the capital to spare for such an investment. Bulk purchase schemes for social housing and private residents, being run by local authorities is another route being tried to drive down installation costs, but it is very early to assess what can be achieved.

Coming back to a 1GW market?

Put all of these factors together and UK could see 650MW to 1GW of solar deployed in 2019, and we expect that to rise each year to 2023, leaving the UK with between 17 and 20GW of solar capacity, and costs only going in one direction.

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  • Chris Hewett is the Chief Executive of the Solar Trade Association. He is the former Head of Climate Change for the Environment Agency, and provided advice to Government on climate change mitigation and adaptation. He has worked for a number of leading NGOs & government agencies, including successful advocacy for the Green Investment Bank at Green Alliance, global aviation research for the Committee on Climate Change, and more recently leading policy and advocacy for the Finance Innovation Lab.