No large-scale solar farms to be built in 2015/16
No large-scale solar farms are scheduled to be built in the UK this financial year, as the two solar projects that won funding in the recent Contracts for Difference (CfD) auction will not go ahead.
The auction administrator, the Low Carbon Contracts Company (LCCC) published the CfD register for the upcoming year on Tuesday, with no large-scale solar projects listed.
The move was widely expected as Royston Solar Farm and Wick Farm Solar Park were awarded contracts for a strike price of £50/MWh – just £5 more than the current wholesale electricity price and far below the current generation costs for solar.
Gaming the system
STA head of external affairs Leonie Greene suggested that the low bids may have been an attempt to take advantage of the ‘pay-as-clear’ auction format, where every successful provider in the auction is paid the price set by the most expensive successful provider of that bid.
By bidding so low, the two providers ensured they would be successful, but there was not a higher successful bidder to ensure they would be paid a more deliverable strike price.
“This confirmation shows that what everyone in the industry was saying was right: the £50/MWh bids wouldn’t get built,” said Greene. “That no large solar farms will be built in the next year under either the Renewables Obligation (RO) or CfDs is a tragedy, as we predicted these types of projects could be cheaper than gas in just 3 years with stable policy support.”
New business models
The three solar projects that won contracts for 2016/17 at a strike price of £79.23 are still scheduled to go ahead, but that conversion rate of 60% falls short of rival technologies. For instance, all 15 onshore wind projects offered contracts have signed and will go ahead.
Greene added: “British solar SMEs now have to rewrite their business plans, again. For an industry that is predicted to be the dominant global energy source by 2050, the UK’s rollercoaster policies are not helping its position.
“We hope that the new government looks at this technology with fresh eyes to develop a fairer and more sensible approach.”
The last few weeks of RO support saw an unprecedented flurry of large-scale installations, with as much new capacity installed in the first quarter as in the whole of 2014. But following this subsidy deadline on 31 March , the STA expects installations to fall by up to 80% as most firms will not be able to compete with established technologies.
The Renewable Energy Association (REA) joined the solar industry in urging the next Government to establish policy certainty for the technology.
A statement from the lobby group said: “We call on the next British government to encourage the ongoing deployment of solar and development of storage which could be viable in the UK as early as 2017 by levelling the regulatory playing field for developers, in particular through ensuring sufficient support is forthcoming to ensure a viable industry is in place when grid parity is reached.”
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