Investor view: Daniel Wong

“The solar industry has installed over 2GW of capacity within two years of effectively being sidelined by the government”

In July 2011 the Department of Energy and Climate Change (Decc) published the UK Renewable Energy Roadmap, pointing to offshore wind as the future of the UK renewable industry. In contrast, solar was hidden in the “other” category. This was hardly surprising in a sun-starved country, where solar installations total only 66MW, around 1 per cent of total renewable generation.
Fast forward to Q3 2013. Total installed photovoltaic (PV) capacity in the UK had increased 38-fold to over 2.5GW, the UK had become the world’s sixth largest market for PV solar in terms of capacity installed, and solar represented 13 per cent of the UK’s installed generating capacity. In the same period, offshore wind capacity increased to only 19 per cent. Ministers were saying they expected installed PV solar capacity to exceed 10GW by 2020, maybe even hitting 20GW. So what happened?
The twin drivers have been cost and demand. Faced with a PV solar cost per megawatt-hour of £202-380 in 2011, Decc forecast a range of £136-£250/MWh by 2020, assuming continued efficiencies. But over the following two years, the cost of panels halved and nearly 1GW of solar was installed, earning closer to £125/MWh.
The solar industry’s growth is in part attributable to the unprecedented achievement of installing over 2GW of capacity within two years of effectively being sidelined by the government. The table below demonstrates the advantage solar has over onshore and offshore wind in terms of speed of deployment.
This speed was also spurred on by investor demand. Initially fuelled by retail investors investing through VCT and EIS funds, larger investors are now being attracted to the asset class. Most recently, LSE-listed yield companies have given solar further access to a more liquid and potentially unlimited pool of capital – with £300 million raised for solar-only funds in the past six months and two IPOs planned for a further £300 million. This is likely to translate into a lower cost of capital and ultimately benefit consumers, further driving solar growth in a country better known for its slate-grey skies.