Why solar needs a serious strategy from the new Government
The treatment of non-domestic solar is illogical and leaves this star industry bewildered, writes Leonie Greene, head of external affairs at the Solar Trade Association (STA).
So as of yesterday (31 March) the Renewables Obligation (RO) rug has been pulled for large-scale solar. It is solar and solar alone that has been removed from this established form of support for renewable power two years early.
No large-scale (5MW+) solar farms will be built over the next year, except those which for no fault of their own missed the deadline, and therefore qualify under under the Government's 'grace periods'.
The question is, why? It is surely not, as DECC claims, because solar is breaking the budget. Solar took less than 5% of the RO budget last year and, with stable support, it will be the first renewable off subsidy. UK consumers obviously stand to benefit hugely from cheap, low-carbon power. Many also stand to benefit from high quality jobs. Recent research for the Department for Business, Innovation and Skills shows the UK solar industry employs 35,000 people directly and indirectly.
Boom or bust
You probably noticed solar has been on a roll. The large-scale industry has navigated unprecedented reductions in support of 65% this Parliament. World-wide large-scale solar has been instrumental in driving massive cost reductions. And no, these extraordinary cost reductions are not down to international panel prices, which account for just 35% of installation and operational costs. The competitive price of large-scale solar is mostly due to British SMEs installing and operating solar at minimum cost and finding everypossible efficiency in the supply chain. For Government to stall this extraordinary progress makes no sense at all. Yet that is the risk.
Is Government singling solar out in the policy framework because solar farms are unpopular? We know they can be done badly, but we also know they can be done very well. All the polling we've seen shows solar farms are the single most popular local energy development. Research shows that MPs of all parties know that solar farms are the most popular local energy development. Yet Whitehall has decided for local communities that large-scale solar, the most wanted utility development, is off the table.
Environment Secretary Liz Truss's claim that solar is displacing valuable agricultural land was revealed in a Parliamentary question to be based on no evidence. This damaging claim particularly annoyed the industry as the STA, the National Solar Centre, the NFU and lead UK conservation charities went to great pains to define good practice in solar farms, and the industry has committed to combining solar and grazing, as mentioned in our 10 Commitments. Our guidance shows how solar farms can actively boost biodiversity and farmer security. It is explicit about avoiding high-grade agricultural land.
So it is understandable that many people in the solar industry feel bewildered and unfairly treated. A hugely popular and responsible British industry delivering low-carbon power, quality jobs and unprecedented cost reductions reasonably expects to have the consistent support of Government. After all, we are not asking for special treatment in solar power. We simply want a more level playing field instead of a policy framework that discriminates against us.
And this really matters. The IPCC identifies solar power as having the greatest technical potential to meet our energy needs cleanly. The IEA warns that securing a deal at the UN Paris conference later this year presents the last chance to avert dangerous climate change. Many people in the solar industry are fiercely alive to this threat. For some it's their raison d'etre. So the frustration many in the industry feel when Government slows the progress of solar goes far beyond the pain of difficult business planning. Most people working in this industry know just how high the stakes are.
The extent of our difficulties may not be fully appreciated by those outside the industry. Why not just build on factory roofs instead as Liz Truss believes we can? It's not that simple. The inadequacy of DECC's policy framework for commercial roofs greatly compounds the sector's problems. Just one or two chunky (250kW+) roof schemes, roughly the size of a large station, a university or commercial building, are being developed per month under FITs. Failing to fix this framework while removing the rug from large-scale solar creates really serious worries for the wider market. Has DECC thought through where the UK market will go?
Furthermore, the huge risks entailed in DECC's Contracts for Difference alienate many of the SMEs that make up much of the solar industry. Exactly as we predicted, just a few - three - schemes won contracts to build solar farms in future years. No wonder DECC consultants asked in a recent CfD meeting if solar developers would take flight from the UK and if the downward pressure on wind prices would stop. And where will CfDs, which drive a race to the cheapest schemes, leave our push for quality solar farms? Self-defeating indeed.
Within this messy policy landscape, it is the smaller commercial roof market and the small-scale solar farm market (less than 5MW or 25 acres in size) which will be the lifeline for the non-domestic solar industry. The non-domestic industry will be guarding these as if its life depends on it, because it does.
Personally I find this an extraordinarily self-defeating way to treat a technology that UBS, Deutsche Bank and the IEA predict will dominate world power supply mid-century. Sometimes a winning technology stares us in the face - ask Apple who have just invested almost $1bn in solar farms. Yet the UK policy framework leaves the brave people who want to build world-leading solar companies scrabbling for stepping stones to cross a river that still runs towards the big utility model. The UK needs to recognise that the technology tide has turned and take a much more serious and tailored approach to supporting this extraordinary technology.
Policy complexity is a barrier to explaining the quandary that solar is in. By the time we have explained the RO anomalies, the CfDs distortions and capacity triggers on FITs, most politicians and journalists are cross-eyed. So, at the STA we have come up with a relatively simple and coherent plan to cut a path through this policy forest. We propose stable policy over the next five years with a specific aim of getting solar competitive with fossil fuels by around 2020. Radical? Hardly, and quite a prize for the next Government.
Our 'Solar Independence Plan', which we'll be presenting to the new Government, will be published shortly. Our modelling shows that by providing a stable and more intelligent policy framework with long time horizons, we can deliver much more solar power for little more cost. At the same time we can achieve a much better balance across the solar sub-markets, while creating greater growth for all.
And there is another major barrier that we'll be taking to the new Government and it's one that everyone who has raced to finish their solar farm in time will know only too well: the grid. Amazingly the distribution networks anticipate less solar in 2023 than we have connected today. The network itself is in danger of becoming the biggest barrier to renewables - just as solar and wind become competitive with fossil fuel generation. In practice the UK appears to be cobbling through to meet its 2020 targets. That won't do.
Much more care needs to be taken by Government about where its energy policies are leaving solar power overall. This extraordinary technology has been the success story of the coalition Government but it is too often subject to extreme, illogical and unfair treatment. If we are to embrace new technology, it is not solar power that should struggle to fit in frameworks designed for mega players with big kit - it is the policy framework that should adapt to solar power. The same can be said of the grid. Internationally, Governments are recognising and supporting solar's vast global potential. Having come from nowhere on solar at the start of this Parliament, the UK cannot afford to fall behind in the next.
Leonie Greene is head of external affairs at the Solar Trade Association (STA).