Solar sector sets out ‘grid-parity’ roadmap following subsidy cut
The UK solar industry remains on track to deliver power without subsidies by 2020, but clearer and more stable support from the Government will be needed in order to avoid a 'cliff-edge' of deployment.
That’s the conclusion of a major new report from the Renewable Energy Association (REA) and consutancy firm KPMG, released just a day after the Tories unveiled shock proposals to end a key subsidy support scheme for solar energy developers.
“This report shows how close solar is to competing with traditional power generation, and with positive government decisions we can ensure the smooth transition from subsidy to business as usual,” said REA chief executive Dr Nina Skorupska.
“We need to get to the low carbon economy in the most cost effective way, but to do that government and industry have to work together. Clear and stable policy leadership is vital, and as robust as solar is, it can still be held back just short of the finishing line by misguided government interventions.”
The report, which the REA claims is “the most authoritative report to date on the future of solar”, details solar’s impressive cost reduction over the past decade and models different scenarios to grid-parity in the next five years.
It concludes that, under current projected retail and wholesale prices, solar PV is starting to become an attractive investment without direct subsidy incentives within the next five years or so, at all scales.
According to the report, Solar PV – which is the most popular renewable energy in the UK – will be the first renewable technology to achieve ‘grid-parity’; as PV costs are coming down, they will begin to compare favourably to retail electricity prices, so that a need for direct subsidy will no longer exist.
However, the report explains that parity cannot guarantee that the industry could be fully self-sustainable, warning of a ‘cliff edge’ scenario seen in other countries such as Spain and Greece, where no provision was made in time to sustain the indigenous PV developed industry.
“It is now time for the UK to capitalise on the subsidies paid so far and the deployment achieved, and start planning for the post parity world, so that the industry can avoid a potential ‘cliff edge’ phenomenon,” the report states. It calls for a review of alternative ways to support the solar industry, including the tax regime and net-metering, to allow a “smooth transition” away from subsidies.
The report has been welcomed by DECC Minister of State Andrea Leadson, who said “it clearly demonstrates the global significance of solar PV”.
“I look forward to working with the industry to enable further deployment across the UK in particular on domestic rooftops and larger roof spaces – for example, on commercial and industrial buildings,” said Leadson.
“Subsidy schemes such as the Renewables Obligation (RO) and small-scale Feed in Tariffs have helped to drive down the cost of renewable energy. As we move away from demand-led schemes, I’m confident that further cost reduction should enable solar PV to deploy without subsidies, forming an important part of the UK’s future clean electricity investment.”
Yesterday, DECC launched a a consultation on proposals to end support for solar PV of 5MW and below under the RO subsidy scheme from April 2016. This follows a similar move last year which saw solar farms of more than 5MW in size – about 25 acres – excluded from receiving support from the RO scheme as of April this year.
DECC is also proposing to end ‘grandfathering’ – the guarantee that a certain level of subsidy will be provided throughout the lifetime of a renewable energy project once built – from now on.