Its Crunch Time For The UK Solar Market

Massimo Poli, Key Account Manager UK & Ireland from REC gives his view on the challenges the industry faces in the coming months.

The Tories' proposition to cut the subsidies on the solar industry is about to happen. In the coming weeks we will discover the destiny of one of the brightest industries in the UK.

The effects of the reduced incentives on renewable energy in the UK is going to be devastating, at least for the next 2 years, especially in terms of job losses. The STA estimates 35,000 jobs will be made redundant as a result of the change in renewable energy subsidies.

The UK solar PV market has been the largest and most attractive market in Europe for the last 3 years, since the German and Italian market almost disappeared at the beginning of 2013.

Unfortunately the lobby against the Government seems to not have a great response so far. The daily effort to explain in different terms, from the social aspects, by the climate and environmental prospect until a proper economic reason, have seen the Tories stick to their position of pure Conservative Party and pick the side of supporting Nuclear and fossil fuels.

Energy policy is a very weak and marginal topic for most people, but it seems a real major issue and a dangerous political weapon in the hands of the Tories. Maybe the future will explain and show the reasons for this controversial choice of going against the nature for the sake of "power".

I always keep in mind the definition of market:

"The term market refers to the group of consumers or organizations that is interested in the product, has the resources to purchase the product, and is permitted by law and other regulations to acquire the product".

The most important factor to create a healthy market in the energy sector is the economy of scale. renewable energy, without a robust economy of scale behind, is no longer a market due to the lack of consumers, which withdraw the creation of resources, finally killed by the restrictive and furthermore penalizing law and regulations. The wind power sector in the UK is a perfect example of penalising law, where the proposed changes to the planning system could make it more difficult for local authorities to give the go-ahead to new installations, since the earliest end of subsidies for new UK onshore wind farms has been announced last spring.

Back to the solar market, the UK Government has already cancelled the subsidies to support the large scale projects, the FIT cut proposal of 87 percent seems to be round the corner, which might declare the end of the residential market segment, without to forget that it's already not possible to access any sort of tax relief for renewable energy investments.  Recently the Treasury scrapped a tax break that community energy projects rely on to raise funds.

I don't mean to use philosophy or political terms, but it is quite obvious that the largest market in Europe for renewable power developments, of course the UK, with plenty of international and local companies involved, with business models developed to fulfil a 3 GW demand, will face one of the most epic and painful crisis, assuming that none here is ready to deal with a subsidy free market.

In the worst case scenario, where the UK Government will achieve the mission to cut all the subsidies, I do expect an 80 percent fall down on demand for the first year and recovery from the second year onwards, until we get a proper resurrection by 2018/2020 thanks to contribution of the battery storage industry. However the battery storage industry will need at least further 2 years to properly take-off and be digested by the UK Market, after the creation of track-record and proven business models.

As everybody knows, the German solar PV market has more than 40 GW capacity installed, the Italian PV market with almost 20 GW capacity installed, both countries are still enjoying the benefit of subsidies, Germany through a 0.1231 euro/Wp FIT plus a special incentive for energy storage and Italy through a tax relief up to 50 percent for residential installations. Either markets are struggling to reach their 1 GW target per year; it's not a secret that Italy and Germany are facing their own darkest time, while the UK PV market is still living the dream of being one of the most attractive worldwide. Now the question at the eve of the 9 GW deployed in the UK is...What do we have to expect next year with a potential 1.63p/kWp FIT level, without RO, maybe even without CfDs, and with no longer tax relief in place?. PPAs and Energy Storage will help indeed, but I feel that only a few businesses will survive in this market, only focused to develop commercial PV projects for high energy consumers.

In the meantime Scotland and Northern Ireland are playing the role of heroes of the clean energy, keeping the grandfathering of ROCs and blaming the Tories, in concert with the majority of national and international experts,  for missing the 2020 target.

Large UK PV project developers are already watching abroad, towards India, Africa, Latin America and back to the sunbelt, Italy, Spain and Greece, where the grid parity seems to be just around the corner... While the foreign Markets suddenly shake the heart of the UK Solar Industry, it seems that we are all waiting for the sentence from the Government, with a joint feeling of hope and concern for the future, before to take some important and strategic decisions.

A modern, united Government must support renewable energy development, there is no shame in subsidising renewable energy. Subsidised fossil fuels, oil included is much more expensive. As discussed at COP21 in Paris, how do we save our future from the climate change threat? The UK seems to be the only powerful Government which doesn't care at all about climate change and global warming. It is bewildering why they are launching a new nuclear power program, while the rest of the world is wondering how to dismiss their own existing plants as quick as possible.

Within the next few months, the UK renewable energy market will face an epic change, where only strongest players will find a spot to make business.

Scotland and Northern Ireland will lead the developments of commercial rooftops projects, and large scale ground mount systems, thanks to the grandfathering of the ROC.

The launch of the energy storage market, although it will take couple of years, will help massively to restore the UK renewable energy market in the medium term. From the ashes of the Tories' action against the UK renewable energy market, will raise a new Industry, focused on innovation and diversification into new different segments, from Energy efficiency to Energy Storage and so the revenge of who has invested effort, knowledge, time and love to develop the UK renewable energy market , will be finally accomplished. Unfortunately, to get the ashes, we must face the fire.