Following the latest round of downstream channel checks and project pipeline activity in the UK, NPD Solarbuzz is now further upgrading its forecast for the UK PV market in 2014.
We are now forecasting 2.5GW of new solar PV in the UK during 2014, having previously put the figure at 2.27GW when forecasting the market a couple of months back.
The reasons for this are as follows:
• There was a stronger than expected Q4’13, with project developers completing projects ahead of the wisely-predicted seasonal weather chaos of Q1. This is providing increased confidence that ROC-based large-scale projects will be spread out across Q2-Q4 2014, and not all left to the last minute during Q1 2015.
• Project developers and investors appear comfortable with the ROC change on 1 April 2014 to 1.4 ROCs/MWh. ROIs are adequate to secure financing, with investors and politicians alike becoming highly vocal that solar PV is a credible asset class that offers greater long-term returns than cash or bonds, but with a lower risk than equities or property.
• The upcoming election in May 2015 is helping to create a static policy environment until then, minimising risk to investors. It is highly unlikely there will be policy changes now in the run in to the May 2015 election and – regardless of the make-up of the next UK government – any energy policy changes after the election will not take effect well into 2016, by which time the solar PV industry will be working out how to shift from ROCs to the contracts for difference (CfD) mechanism. DECC has also indicated in the past few days that the ROC levels for solar will not be revisited before 2017 (although one can’t take this as gospel when an election is around the corner).
• The slowdown in other European markets (in particular Germany) has created extra sales activity in the UK, with extra component (module and inverter) supply and project developer/installer bandwidth available to complete UK projects this year and going forward.
• The residential market is showing renewed strength, with social housing and new builds being targeted by the investment community, although a range of different financing vehicles is starting to emerge here also.
• The rooftop market is gaining traction, especially the >250kW segment, with the UK’s largest rooftop installation set to be completed this quarter.
• Further upside to the rooftop market is expected to be driven by developer Lightsource Renewable Energy’s recent acquisition of Renewable Resources, providing Lightsource with a dedicated platform to accelerate deployment on commercial rooftops, similar to their activities on the ground in the past few years.
• The acceptance rate of large-scale projects remains extremely positive to the UK PV industry, with application success rates running typically at the 60-90% level (by MW volume). In fact, just recently, Swindon Borough Council even tabled legislation to relax planning rules to fast track solar farms, potentially even negating the requirement for planning applications. (Think of the US Solar Energy Zones concept, but on a smaller scale.)
• SunEdison is now aggressively targeting the large-scale UK segment and is set to complete its first project soon, with several others to be completed in the next few months.
• Capital continues to flood into the large-scale segment on the back of ROC certainty.
• Competitive energy sources, in particular EDF’s Hinkley Point nuclear build-out and any threat from shale gas exploration rights granted, will not have a near-term effect on meeting the shortfall of energy needed in the UK to prevent “the lights going out” until 2020.
• Some 700MW of PV is set to be installed on the ground in Q1 2014 alone within the UK, with the overall Q1 UK solar PV market likely to reach the 900MW level.
• There is a multi-gigawatt of approved pipeline, a significant part of which will be installed across the other quarters of the year.
• The Brussels/Beijing anti-dumping uncertainty phase is absent this year, compared to 2013 when it severely impacted project completions during Q2 and Q3 2013.
• Projects are being planned aggressively in Northern Ireland and Scotland, where the appetite for solar PV is at its infancy stage and is likely to see strong initial uptake. The shift of solar PV northwards is also key to mitigate any localised grid bottlenecks in areas such as Cornwall and Norfolk.
• Electricity pricing remains a major issue on the political stage, with the run in to the May 2015 election only set to increase public scepticism, while encouraging ongoing debate for alternative energy supply options. Solar is likely to get positive press out of this.
• The recent flooding chaos in the south of England and Wales has promoted the whole climate change issue, with strong pressure on politicians to acknowledge this and feed in actions to a longer-term plan that will only help the renewables camp. While short-term demand pull is not an issue here, it simply gets solar further up the priority list and, similar to above, it helps the image and acceptance in the public’s eyes.
The key thing is that the UK is offering growth in residential, commercial rooftop and large-scale ground-mount segments, and it is possibly this combination of application types that makes the country a lower-risk proposition than some other countries seeking to grow PV deployment, or ones where the annual levels are somewhat at the behest of political working groups meeting at the start of each fiscal year and having to factor in legacy manufacturing investments.
In fact, there is upside to the 2.5GW for 2014 in the UK, if module supply is assured and the industry tries to complete 1.4 ROC projects before 31 December 2014, and avoid a repeat of seasonal flooding disruption in Q1’15 ahead of the 1 April 2015 ROC degression. Even a small upside to the 2.5GW figure would likely make the UK market the leading solar PV country in Europe during 2014. It is not inconceivable that the UK could even reach 3GW in 2014.
The scope for political point-scoring at the start of 2015 – if the UK does become the number one European market in 2014 – could be huge also. The kudos in the UK from reaching this position can’t be underestimated, with Europe again set to be a major political hotcake leading up to May 2015.
In fact, if this accolade can be achieved through the use of private investment, then it will not go unnoticed by David Cameron and George Osborne, and could well provide the catalyst in UK solar PV transitioning from a DECC ambition to a government driven mandate. It is noted that the case for nuclear and shale gas is not decoupled from the ability of these energy types to attract external upfront funding that shields the treasury from large budgetary allocations.
By the time the election comes about in May 2015, the UK solar PV industry could have a cumulative PV install base of more than 7GW. This would correspond to 35% of the 20GW-by-2020 aspiration of Greg Barker. A further five years at 2.5GW per year gets the industry to the 20GW mark, something that was unthinkable a few years ago but is quickly becoming a figure that may need to be upgraded to reflect the changing status of solar PV within the overall energy mix of the UK.
Further upside to the rooftop market is expected to be driven by Lightsource’s recent acquisition of Renewable Resources, providing Lightsource with a dedicated platform to accelerate deployment on commercial rooftops, similar to their activities on the ground in the past few years. Image: Lightsource Renewable Energy.