New subsidy scheme likely to lock out large scale PV

Three days ago the government announced the abrupt end of the current subsidy scheme for large scale solar PV farms. From early 2015, no PV installation above 5 MW will be entitled to payments under the Renewable Obligation (RO). The industry was understandably upset but assumed that the next scheme (called Contracts for Difference) would replace the RO. This seems to be very much the wrong impression. Another DECC document, put out on the same day as the subsidy withdrawal, makes clear that under the new scheme, starting in late 2014, solar will have to fight onshore wind and other cheaper technologies for budget. A limited pot will be made available in October for all mature technologies such as wind, energy from waste, PV and sewage gas. These are all grouped together in Group 1 and a solar development will only win funds if it bids for a lower subsidy than these alternatives.

I contacted DECC this morning and it confirmed this. 'Technologies in group 1 will have to compete with each other. This will require projects in those technologies (to) submit bids, which will be assessed on the basis of price'.

In effect, this probably kills stand-alone solar PV in the UK. Although solar has rapidly come down in price, well-located wind farms are likely to be able to substantially underbid PV for the subsidy funds. Furthermore, the indications are that the pot available in late 2014 and beyond for these more mature technologies will be very small. (Partly because offshore wind, a less mature technology in Group 2, will need very much higher levels of subsidy).  Solar PV will be entering a very crowded Dutch auction against better positioned competitors. Perhaps some new PV farms on the south coast will able to match other technologies but the odds of success are not great.

DECC acknowledges the precarious position of stand-alone solar. ‘Solar costs and support are currently higher than other (mature) technologies’ competing for money, it says. It seems happy to see farm-scale PV in the UK die. Its rationale is that solar is being rapidly rolled out elsewhere in the world. The UK can piggy-back on the cost reductions achieved in other countries which will ‘occur largely independently of what the UK does’.

Although DECC says that solar PV will be ‘first large-scale renewable technology to be able to deploy without financial support at some point in the mid-to-late 2020s’ it thinks that the UK should play no part in this global effort. Instead, DECC suggests, the country should play a more aggressive role in developing PV built into roofs and other surfaces, even though these are always likely to be more costly than field solar. (That is until Henry Snaith and his colleagues at Oxford PV start painting buildings).

It has to said that there is some logic in the new DECC stance, however destructive the policy is going to be. But most of us would prefer these policy decisions to be made more explicitly and more consideration given to the companies struggling to compete in what has been an extraordinary success story. The UK was going to be the largest PV market in Europe this year.