The fate of the UK’s PV market over the next five years is likely to be determined to a large extent by a budget announcement which is expected by October, according to analyst Finlay Colville of NPD Solarbuzz.
In an exclusive two-part blog on PV Tech’s UK-focused sister site, Solar Power Portal, this week, Colville puts forward his five-year forecast for UK solar, including downside, upside and baseline scenarios. He writes that this year and the first part of 2015, driven by the need to qualify for existing support mechanisms, the UK market will be “by far the most important market in the EU”.
In the baseline, or ‘most likely’ scenario the country will install 2.9GW of PV this year, double the amount, 1.45GW, installed in 2013. Meanwhile the upside scenario will see more than 3GW deployed in 2014. The downside scenario will see just over 2GW installed.
Under all three scenarios, 2014 and 2015 is likely to present something of a boom, followed by a dip, more severely in the downside and baseline scenarios than in the upside. Commenting on his findings, Colville said that despite the uncertainty that faced the industry, due to its growth in the past three years, the UK still holds “great potential”.
This post-2015 dip will come as support mechanisms change – the UK is switching from its current Renewables Obligations (RO) subsidy scheme to the new Contracts for Difference (CfDs) in October. CfDs will see all energy sources competing in a tender process served by a centrally controlled budget called the Levy Control Framework (LCF). The apportionment of funds to each competing generation source has yet to be revealed by the UK government.
Colville compared the uncertainty the UK industry faces to that experienced when previous policy changes occurred unexpectedly, such as 2012 when feed-in tariffs for large-scale solar were cut and April 2013, when Renewable Obligations Certificates (ROCs) were lowered in value.
However, Colville wrote in his blog that “regardless of the historic analogies, there is much more at stake this time around; and more to lose for developers, if the nightmare scenario of minimal ground-mount activity comes to fruition from 1 April 2015.” Colville wrote that, paired with the possibility of further changes in government personnel, this possible ‘carve out’ of funds where solar could theoretically use up the budget allocated to it well ahead of 2020 when the term of the present LCF budget extends to.
Nonetheless, after detailed breakdowns of each of the three scenarios and predictions of what the next five years might hold for each market segment, Colville concludes his Solar Power Portal blog by saying that from early beginnings five years ago, the UK has raced to being a 2.5GW to 3GW market in 2014. Colville takes this as indication that “five years is clearly a very long time and strange things can and do happen”.
Colville places his predictions in context of the outgoing energy and climate change minister Greg Barker’s “personal ambition” to deploy 20GW of solar by 2020, which had so excited the UK solar industry over the past two years. With Barker now gone, resigning earlier this week, Colville writes “it is now becoming clear that the 20GW was including a rather large contribution from unsubsidised solar PV deployment. So, for ‘grid-parity’, read ‘unsubsidised’: for 20GW, read ‘aspiration’ in as broad a context as you wish.”
Looking beyond 2020, Alan Whitehead, a member of parliament for the UK’s Labour Party and chair of PRASEG, the All Party Parliamentary Renewable and Sustainable Energy Group and a prolific blogger on energy issues, criticised the LCF strongly. Whitehead called it a “fat dud” and a “collapsing bag of uncertainties”.
Speaking at a recent parliamentary event, Whitehead said “Because the LCF has both a year-by-year rising effect that is capped, and a cumulative effect, you have to keep your eye on what is available for new entrants and what is the accumulation. This is where the problems are really starting to pile up. The whole picture that the overall LCF is now, no longer fit for purpose.”