Conergy: Why Solar Farms Will Keep On Sprouting

In the first three months of this year, an estimated 1.1GW of new PV capacity was installed at solar farms, taking up thousands of acres of mostly farmland. The boom sparked calls from some politicians to block further construction on the basis of the conservation of the countryside. But one of the striking features of the quarter one build-out was the tolerance of local communities to these large construction projects. They were not big nuclear or gas plants, and tucked away from built-up areas and hidden behind hedges, we did not see the large local protests that have bedevilled many on- and offshore wind developments. By and large it looked like the solar industry had just about everyone on its side "“ local communities, the wider British public, the media, DECC and the politicians.

We were therefore caught off guard when DECC announced a consultation on solar's continuing receipt of the renewable obligation certificates (ROCs), which direct a small portion of the nation's utility bills towards solar power, part of the government's commitment to cut carbon emissions in the power sector.

The ROCs became so attractive with large-scale solar that big pension funds began pouring money into new PV development. The bigger the solar farms were, the greater the returns, and such was the efficiency of City investors seeking long-term reliable returns, and the brilliance of our young industry in rapidly completing projects, that the Treasury and DECC suddenly changed tack and started a consultation on the scheme.

For some time, we have known that the main funding mechanism for much-needed new power capacity would change - from the ROCs to Contracts for Difference (CfD), which theoretically will see solar compete for the same funds as wind or nuclear in technologically-neutral bidding. What we did not know was how the transition from ROCs to CfDs would take place.

DECC's proposed changes mean ROCs will be denied to solar plants bigger than five megawatts that do not connect before the end of March. As the CFD scheme is not yet ready, this effectively means we lose three months of large solar farm construction, which investors and plant builders have been banking on for some time, because no one will invest in a project that might not complete in time, and then be left without any incentive structure to support it. The risks associated with missing the March 31 deadline will also put developers off who are not expecting planning consent until later in the year.

Deja vu?

There are echoes to the 2012 changes to the feed-in-tariff scheme, which provoked howls of protest from the industry, a march on Westminster and eventually decimated the businesses of hundreds of smaller installers up and down the land. We must see past the bluster of those times. The facts are that returns for rooftop PV are the same today as back then, as the costs of technology fell and installers became more efficient and experienced. Had the feed in tariffs remained in place, the entire scheme might well have collapsed under the weight of demand. It took time for the message to get through to the public that rooftop PV was still economic, but installers found new ways of marketing and selling, and the industry is better off for it.

This reflects an inevitability about solar which is why I chose to work in this industry. However the incentive schemes are set up to help get the supply chain in place, and however they are changed, solar is such a simple technology that it is only going to become more ubiquitous with time, further cost reductions, and increased efficiency alongside storage technologies. It is its fundamental simplicity that the government is today grappling with, faced with what they see as the excessive enthusiasm for large-scale solar farms.

Having ignored PV for some time as a serious player in the UK energy mix, the government is now faced with the fact that solar is highly investable and competitive with other technologies, that have longer investment lead-times, greater logistical complexity, greater environmental impact, and therefore require more intensive support through their deployment.

At the time of writing, we do not know the outcome of the consultation, but we have enough visibility to plan around the proposed changes. We could complete the larger projects before December, and focus development of 5MW plants until the CFDs are in place. All businesses need to respond to change in order to survive. Given the history of PV in this country, we've already shown a remarkable capacity to bounce back. And we'll do it again.

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