Large-scale solar costs expected to fall below £40/MWh by 2030

The cost of large-scale solar generation is expected to fall below £40/MWh by 2030, according to the latest assessment by the Solar Trade Association (STA).

The organisation said its previous assessment from 2014, which predicted the levelised cost of energy to hit £80/MWh by 2019, has turned out to be too conservative, with the figure now expected to come in at £50-60/MWh.

This is also significantly below the 2016 forecast by the Department for Business, Energy and Industrial Strategy of £67/MWh by 2020.

Although costs vary significantly from site to site, the STA said the findings confirm that under long-term power purchase agreements (PPAs) solar could soon be the cheapest generation technology in the UK.

“This is yet another example of the fast-moving solar power market outpacing official costs analyses,” said STA policy analyst Nicholas Gall. “Our aim here is to provide an accurate assessment of where large-scale solar costs stand as we enter 2019, when we hope to see some revival of the UK large-scale solar market.

“We urge all organisations conducting low-carbon or energy cost analyses to make use of this up-to-date industry data, which comes directly from our members’ own experience of the UK market. We also urge decision-makers to understand how effective policy frameworks enable the lowest possible costs for solar, which will greatly benefit consumers.”

Levelised cost of energy forecasts

Source: STA

Despite losing access to new support under the Renewables Obligation scheme and being excluded from contracts for difference auctions since 2015, the STA expects the pipeline of large-scale solar projects to grow significantly in 2019, partly due to a global surplus of photovoltaic solar panels.

However, the STA said the prospects for the sector are also being hampered Ofgem’s recently proposed changes to residual network charging, uncertainty over carbon pricing following Brexit and ongoing grid constraints.

The industry association has called for the introduction of technologically neutral price-floor contracts for difference auctions, as well as network access and charging reforms and an exemption from the Climate Change Levy for new-build projects financed through corporate PPAs.

STA chief executive Chris Hewett said: “We have a clear message for government and corporate energy buyers today: UK solar electricity is now cost competitive with fossil fuels. By establishing the right policy framework for solar and storage, including expediting a smart, flexible energy system, government can enable this technology to realise its full potential in delivering an affordable, low-carbon future energy system.”