Ross McGuinness is Area Sales Manager for Kingspan Insulate and Generate. In this guest post, he celebrates the unprecedented take-up of solar PV, but warns it’s too early to break out the Champagne just yet…
The massive expansion of solar PV capacity in the UK has passed another milestone recently. Just a couple of weeks ago, SPV broke through the symbolic barrier of 1,000MW of installed capacity.
This growth has been rapid: in April 2010 there was a mere 26MW installed nationally. 23 months down the line and the industry has topped 1GW, which is a stunning result. The driver behind this seismic shift towards green, renewable energy is without a doubt the government-backed Feed-in Tariff (FiT).
This is all very positive news, and with the announcement from the Department of Energy and Climate Change some weeks ago stating their wish to have 22GW installed by 2020, you could be forgiven for thinking that everything is rosy in the SPV garden.
This announcement of several weeks ago has set out something of a roadmap for PV, but key questions need to be addressed before the industry will come out and support the new policy.
The government has destroyed any trust it may have had with the sector and it will take quite some time to repair what has become a fractious relationship. Continued court actions and appeals mean that, in the short term at least, a cloud hangs over SPV in the UK right now.
Looking at what is proposed by government, many industry insiders believe that it will be challenging to convince consumers to invest in SPV at the new rates. One of the main drivers of SPV has been the willingness of investment firms to “fund” SPV, hence the plethora of “free” installs whereby the end user got the benefit of free or discounted electricity and the funder got the Feed-in Tariff.
The new FiT rates will make it unlikely that similar funding models would be viable from an investor perspective. Funders look for an IRR of a minimum return of 7%; anything less and they simply go elsewhere for their fix. The government is on record as stating that they envisage returns of ca. 5% and will strive to ensure they do not go any higher by linking the price of PV modules to the FiT rate.
On the face of it this is a good proposal and should go some way to preventing the “Boom and Bust” that has beleaguered the industry. The mechanism has the potential to provide a sustainable and controlled future for the FiT.
In the long term, this is a positive for the industry, but short term – bearing in mind the skepticism and mistrust about the government’s attitude, and also bearing in mind the further cuts announced for July – you can understand why many are not cracking out the champagne just yet.
The belief is that Westminster is out of touch with where the industry is at, but most crucially and disappointingly, they fail to see where the industry can go. The Minister of State for Energy and Climate Change tweeted a couple of weeks ago that the Germans had just announced big cuts to their FiT scheme, implying that he was actually correct in pursuing the cuts here – blissfully ignoring the fact that Germany has had a Feed-in Tariff for the past decade, has a total installed capacity close on 25GW and operates on a completely different scale to the UK.
Under the new rates, the German government is proposing to pay €0.135/kWh for ground-mounted solar farms with a capacity of 10MW or less, and for rooftop installations that are 1–10MW in size. Germany is lightyears ahead of what is currently viable in this country.
There are, however, some reasons to be optimistic. The Chinese government last week directed the leading polysilicon and solar cell manufacturers to increase production, which should see prices continue to fall. That’s good news for consumers and probably bad news for non-Chinese manufacturers. China really does seem to be attempting to establish itself as the SPV equivalent of the Middle East. Continued downward pressure on price of SPV definitely looks set to continue in the short-to-medium term.
The great PV breakthrough should achieve one thing, however: SPV will at least now receive the recognition it deserves as a viable and high-quality alternative to fossil fuels. The SPV industry deserves recognition in Government energy strategy.
There is simply no reason why, if there is willingness on behalf of the powers that be, that by 2020 the UK cannot have the 22GW of solar capacity that government says it wishes to have.
Ross McGuinness, Area Sales Manager, Kingspan Insulate and Generate