Solar burnt by its own success

Large-scale solar’s much faster-than-expected deployment is swallowing up the renewables budget, so projects are about to have their life support machine turned off, says Mathew Beech.

You know the drill: government cuts solar subsidies; solar industry cries this will “be the death of solar”.

These alarms were first heard in 2011, and have been sounded again every time the Department of Energy and Climate Change (Decc) sets out plans to reduce central support further. We hear similar cries again today, this time with Good Energy saying the latest subsidy cuts have put at risk 70 per cent of its solar developments.

Ministers and those in government say they want to remove the “subsidy junkie” attitude, and push renewable technologies towards grid parity as soon as possible.

Decc’s number crunchers focus more on the cost that solar is putting on its, and therefore the taxpayers’, budget, especially as a result of its substantial growth in recent years. In its May consultation, Decc stated that the latest proposed changes to the solar subsidy regime were needed “to control the costs of large-scale photovoltaics to ensure it is affordable in the context of the Renewables Obligation and Electricity Market Reform (EMR)”.

Because large-scale solar “is deploying much faster than previously expected” (which Decc acknowledges is otherwise a good thing), the rapid growth could swallow up the renewables budget under the Levy Control Framework (LCF), and ultimately “increase pressure on bills”. To ease this pressure, large-scale solar farms are about to have their life support machine turned off.

Decc has proposed closing the Renewables Obligation to new solar developments with a capacity above 5MW. They will be left to compete for a contract for difference (CfD), and a lower rate of subsidy.

Solar appears to be a victim of its own success, as energy secretary Ed Davey has conceded. The government cannot afford to keep giving money to a technology that is thriving. Hence, it is being cut loose.

In May, when Decc first proposed its plans, the Solar Trade Association called them “unfair”, “a crippling blow to the future of the industry”, and “a kick in the teeth”.

Since then, the anger has been scaled back a little and the talk now is more of the sector being set back rather than on its knees. Companies say the government’s action will result in a slowdown in the rate at which costs fall, and that competition in the sector will weaken as small players are priced out and amalgamated into bigger companies.

This is a worry shared by Good Energy’s chief executive, Juliet Davenport, who made headlines with her comments on solar this week. Whereas Good Energy can rely on its other projects and income from its retail business – the benefit of being a (small) vertically integrated company – smaller businesses that rely solely on one or two solar projects cannot afford this luxury. She says the government’s plans will lead to consolidation, and less competition in the sector further down the line.

As for her own company, up to 70 per cent of Good Energy’s planned solar developments have been put at risk, she claims. As things stand, Davenport cannot commit as to whether these projects will go ahead. “Under the current criteria they wouldn’t qualify and would therefore be at risk,” she says, although she adds that these projects may still be developed when costs have come down.

Davenport claims an unexpected victim of the subsidy cut could be wildlife, because the larger companies will “squeeze out” any biodiversity plans.

As for the government pushing solar on to the rooftops, promoting smaller scale solar, the Good Energy founder says both parts of solar – rooftop and solar farms – are needed.

She also warns that a rush to the rooftops could mean history repeating itself, with government again deciding it cannot afford solar, and again pulling the rug from beneath the industry. “There is now a precedent of doing this,” Davenport says. “Basically what they told us is, if you break the budget they are going to close it all down.”

Costs need to come down to reduce the impact on the LCF, but for costs to come down, panels need to be deployed. And at the moment, subsidies are needed for panels to be deployed.

But all is not lost. Davenport is convinced that solar farms and large-scale solar will continue to be built, and that costs will come down as a consequence, but without government support it will take longer.

Solar may be running the risk of burning itself out, but it is unlikely to kill itself off – it is needed to help the UK meet its emissions and renewables obligations.