SolarCity continues search for new markets as UK adventure comes to an end

Last week it emerged that SolarCity had decided to shelve plans to build a presence in the UK through Zep Solar, the mounting specialist it bought two years ago.

Zep Solar entered the UK market earlier this year, establishing a base in Milton Keynes from where it hired a team of six people as it looked into launching its offering in the UK as part of a global expansion. Given its status in the US and backing from Tesla founder and renowned entrepreneur Elon Musk, SolarCity would have been a strong contender to be a dominant player in a future UK market.

But those plans have since fallen foul of UK government proposals to cut the feed-in tariff for residential and small commercial rooftop PV arrays. Of the six staff employed at the firm, it is understood four have been made redundant and two have been found positions elsewhere.

Speaking of the decision to close Zep Solar’s UK operation, Krapels, said the company had evaluated the UK and come to the conclusion that in the wake of a reduced feed-in tariff, the UK “just doesn’t economically make sense”.

“We can achieve much better IRRs for our investors in other countries where solar intuitively makes a lot of sense,” Krapels said. “In the absence of feed-in tariffs and a net metering policy, I think it’s very difficult when you have a country that doesn’t have a lot of sun hours. It’s just very hard, economically, to make it work.”

But Krapels was quick to point that the withdrawal of Zep Solar from the UK market did not spell the end of SolarCity’s overseas ambitions, which so far only encompass Mexico where the company has acquired local installer Ilioss.

“Latin America overall is an attractive market;  they have the conditions of high irradiation, structurally high and rising utility rates, increase in per-capita use of electricity – so Latin America is definitely on the radar,” he said.

“There are certainly a couple of European countries that we'll be looking at as well. Europe is somewhere in my top ten, and there are other parts of the world where even in the absence of net metering or feed-in tariff rates, you have such high irradiation rates that it economically works. I'm very pleased having scoped out the world in the last few months where we see tremendous opportunity for us to expand our core competencies – being rooftop solar – into key international markets.

“For us, what's really important to enter a market is to understand the regulatory framework that allows solar to thrive, and allows for the economics to exist where I'm able to convince my board to take a dollar out of the US and put it into another country.”

While Zep Solar has now shuttered its UK operations, Krapels lauded the work the unit had achieved in researching new installation techniques and technology on UK rooftops, which he noted were now being used in other international markets.

“The beautiful thing about the UK is that you have all these different rooftops, such as town roofs. We can do two to three homes a day now with the same crew, and we can do a large commercial building in less than two days. That's unparalleled,” he said.  

He also said the UK generally had done a “great job” in expanding solar in the past, and hinted at a possible return in the future.

“[Solar] is good for the economy, it’s created thousands of jobs and I think it’s good for energy price stability…I really do hope the UK continues to expand and create a regulatory runway where it is attractive for companies like ourselves or others to enter the UK market,” he added.

SolarCity became the second big international solar installer to back away from the UK market in the wake of proposed cuts to the feed-in tariff after SunEdison announced it was to “de-emphasise” the UK, prompting the sale and subsequent administration of its UK installer subsidiary Mark Group.

Investor confidence in the UK’s clean energy sector has taken a battering against the backdrop of numerous cuts to support frameworks since the Conservative Party’s general election victory in May. EY demoted the UK to outside the top 10 in its Renewable Energy Country Attractiveness Index for the first time in its history in September.