A commercial solar installation under way in the south of England. Photo: Adrian Arbib / Renewable energy Cooperative - r-eco.coop.
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2014 - the UK's year of the sun?
Alex Stevenson & Oliver Tickell
20th December 2013
Cuts to feed-in tariffs and hostility to large-scale farms have undermined the UK's solar energy sector. But changes are under way in the heart of government. Could 2014 be the UK's 'year of the sun'?
A hardcore of MPs see themselves as enemies to solar. We need to do more to win them round in a way that makes it relevant to them and their constituents.
2013 will go down as the year that left the UK's renewable energy ambitions in tatters. First cuts to solar energy feed-in tariffs (FITs) left the domestic solar PV installers desperately short of work.
Next, in November and December, huge offshore wind projects were shelved because of the combination of high cost and the Government's perceived lack of long term commitment to the offshore sector.
Meanwhile powerful ministers are deeply opposed to on-shore wind power - the UK's lowest cost source of renewable energy and its most advanced and developed sector - because of opposition from Tory-voting rural constituencies, that the Conservative Party cannot afford to lose to its right-wing rival, UKIP.
So what's left? Answer: solar power
So this leaves solar power as the one big potential source of green energy that can allow the Government to meet its renewable energy targets.
So far it has been hostile to solar energy. One of its first moves was to dramatically cut the FIT rates paid for electricity from PV installations - illegally bringing forward the cut-off dates in a way that devastated the UK's solar installations industry.
Meanwhile Tory-voting property owners in rural constituencies have vociferously opposed large (10MW or more) solar farms in open countryside - the cheapest kind of solar PV installation, best able to attract large scale investment from City investors at current support rates.
Change is on the way
But big changes are on the cards for early 2014. A specially-appointed 'solar task force' (STF) made up of industry representatives and officials from the Department for Energy and Climate Change (DECC) is hard at work devising a new set of measures to revitalise the UK's solar industry, under the direct authority of Energy Minister Greg Barker.
"What Greg is saying is don't give up, we want to encourage it to happen. People are doing it, so there's no reason why others can't do it", says STF co-chair Ray Noble.
The Renewable Energy Association is among those welcoming the policy shift. "It's very helpful to get the political will", said REA spokesman James Beard. "As ever the devil will be in the detail, but it really helps us enormously to get this support just before Christmas."
First series of big solar energy investment announcements are in the offing in January, aimed at giving the sector a much-needed morale boost. First the Government will celebrate a key marker of the progress of solar PV in the UK - the number of 'solar homes' is set to tip over the 500,000 mark in January.
Even though the progress has happened more in spite of Government policies, than because of them, the news and any positive spin put on it by ministers will give the PV industry a much-needed morale boost.
Next, in the spring, the government will unveil its new solar strategy (NSS) - a raft of measures designed to give the solar industry a serious boost. The NSS is due to be unveiled at the end of March.
Industrial and commercial roofs - the missed opportunity
The Ecologist understands that it's the industrial and commercial solar installations which are set for the biggest boost. And for very good reasons: these roofs represent a huge solar resource across the UK, and one that remains almost entirely unexploited.
They currently make up only around one-fifth of the national solar mix, compared with 45% for domestic use and 35% for large-scale solar farms.
What's more, it is politically uncontentious - rural Conservative voters are completely unbothered about solar panels going up on existing ugly buildings in industrial estates they rarely see.
And the installation cost is low, at least when compared to domestic installations of 4kW capacity or less. Commercial scale installations are typically in the 50kW to 500kW range, giving economies of scale.
Much of the electricity produced from rooftop PV panels is also of direct use to industrial and commercial enterprises - who use large amounts of daytime electricity to run offices and manufacturing processes.
DECC's ambition - to be stated in the forthcoming strategy document - will be to boost industrial and commercial roofs to around a third of the UK's solar mix.
So why isn't it happening already?
According to Noble, solar energy on commercial and industrial roofs is "no-brainer" in economic terms - but more work is needed to persuade building owners to act. "We're trying to stimulate that market so that people do it, rather than just talk about it", he said.
There are currently a number of serious blocks to growth in the sector. First, the FIT is simply not high enough. There is a single payment band for installations between 50kW capacity all the way up to 5MW - 100 times bigger. And FIT rates are simply not high enough to finance smaller installations within that range.
Leonie Green of the Solar Trade Association (STA) complains that this makes the support price for a 250KW solar installation a lot cheaper than that for other renewables. "It annoys us that the sector is being suppressed", she says.
Noble says the reforms could see a change in solar feed-in tariffs in the 50kW - 5MW bracket, possibly targetted at the lower end of the range. The hike would be "minimal" - but could be approved if the task force can demonstrate that the change would make solar installations economically viable.
Also the Government has put in place an automatic FIT reduction mechanism that reduces support to PV generators every nine months - whether the market is moving or not. The REA wants to see that abolished.
"It's all very well to cut the FIT if it's set at a level where investors are making huge profits", says Beard. "But the 50kW-5MW sector has already gone into cold storage and in these circumstances there is no conceivable logic in cutting the FIT."
Second, many business owners have shorter leases on their properties than the 20 years typically needed to make investment in solar worthwhile. Five, 10 and 15 year leases are commonplace.
"Will the occupier be prepared to make that investment without long term certainty?", asks Tim Nicholson, a Chartered Surveyor with the Renewable Energy Cooperative, a solar PV installer.
"There is also the issue of dilapidations - re-instating property to original condition. It would be frustrating enough an occupier to lose the benefit of a PV system they had installed. But it would rub salt in the wound if a landlord made them take it off and make good at potentially considerable expense!"
Sainsbury's, which is among the largest users of solar energy in the UK after installing PV panels on around 250 of their buildings, has succeeded in surmounting the problem. But smaller companies can still struggle in the legal minefields the issue throws up.
Now the STF is working on standard legal agreements that would define the legal situation between landlord and tenant while protecting their legitimate concerns.
This could save companies a small fortune in legal fees and enable projects to go ahead that would otherwise founder. "We would be very pleased to see anything that makes it easier and reduces costs", comments Nicholson.
A separate problem is that many commercial buildings have a relatively short lifespan, often less than 20 years. This is expected to be addressed by making it easier for solar panels to be switched from one structure to another - and guaranteeing they would not lose the original feed-in tariff rate.
Solar farms in open countryside?
The planned policy changes would see large solar farms of 10MW or more in the countryside continue at roughly the same proportion of total installations. But DECC and the industry are keen to avoid controversy - and aggressive newspaper headlines
Noble blames overseas companies, who took the view that "visible solar in a field is appropriate", for the stories in papers like the Mail and Telegraph which have cropped up in recent years. "Some planners realised they had made mistakes", he admits.
Since last summer, the industry has responded decisively. The National Solar Centre has devised a good practice guide while the STA published a list of ten commitments the industry needs to make. Planners have been treated to a series of roadshows explaining the new approach.
Now, Noble says, the only rejected applications are usually the result of a planning committee member who has been influenced by the broadsheets' cynicism.
There is certainly room for optimism as 2014 arrives. Matthew Buckland, the Conservative MP for South Swindon, is happy to support the proposal for a large 40MW farm - enough for around 12,000 homes - near the village of Wroughton in his constituency.
The site is on the hill above the village, meaning few residential properties will be able to see the solar panels. The land had previously been an RAF base and, with the World War Two hangars still in use to store science museum models, there is little prospect of an alternative switch to agricultural use.
But the scheme is not without its enemies. It is to be built in an Area of Outstanding Natural Beauty and will be visible from walkers on the historic Ridgeway footpath. Natural England has complained loudly with exactly the sorts of concerns Conservatives in government are worried about.
Yet Buckland remains a firm supporter of the farm. "What really sold it was a community feed-in element", he explains. As well as supplementing the local supply, which will help with energy bills, there will be extra cash available for enhancing the local sports pitches.
He believes that winning consent from those living locally is critical. "If a compelling case is made to local communities, then renewables are a viable and realistic prospect for investment."
A similar message is coming from DECC. Steering the industry towards low-impact farms, and making sure communities are kept happy, are seen as the biggest steps towards.
And as one DECC insider commented: "A hardcore of MPs see themselves as enemies to solar. We need to do more to win them round in a way that makes it relevant to them and their constituents."
But will it be enough?
The solar industry is certainly pleased that the Government is at last focussing on their sector - but some remain a little underwhelmed at the initiatives that have been floated so far. As Nicholson comments: "It sounds like they're tinkering. We need bold policies, and we need politicians who are going to say yes."
In other words, it will take rather more than just a "marginal" increase in solar FITs, and a model landlord-tenant legal agreement, to unlock the potential of solar in the UK. And Nicholson's ideas seem to go well beyond anything that DECC has up its sleeve.
One very helpful measure, he says, would be 'virtual net metering' or VNM. For example, an energy user might have two buildings some distance apart: a warehouse they own outright, with a good solar aspect, but little power demand; and an office building rented on a short-term lease, with heavy power usage.
With VNM the company would be able to install solar PV on the warehouse, but use the electricity in the office bulding. Half-hour meters would record the electricity production and usage at each site. And then every half hour, every surplus unit from the warehouse would be deducted from the units consumed at the office.
Ending market distortions
But then you could take the principle a stage further. Currently solar PV is mainly rewarded by the FIT, which is a fixed price paid per unit generated. But generators are also paid a much smaller price 'export tariff' per unit for electricity exported to the grid - any surplus that is left following their own consumption.
Currently the export tariff is set at a very low level of just 3.3p per unit, compared to the 15p or more per unit that domestic consumers pay.
This means that as FITs drop, it becomes ever more important for generators to use as much of their electricity as they can - to make the electricity they generate reduce the number of units bought at the higher purchase price, instead of putting them back into the grid at the much lower export tariff.
VNM, as set out above, would help some users to make the most of their situation. But there is another, far more general purpose solution: to raise the export tariff to a more realistic level, far closer to the typical purchase price.
And the export tariff is now very low - at 3.3p per unit it's well below even the current wholesale price of electricity at the 'power station gate' which is typically about £50 per MWh, or 5p per unit.
And this is aleady creating market distortions. Some domestic PV generators are installing devices that 'dump' their surplus units into hot water immersion heaters - because at 3.3p per unit it's cheaper to do that than to heat their water with gas. But meanwhile the house next door is drawing down coal-fired electricity at 15p per unit.
"The very low export price is distorting the market and encourages people to be profligate with their electricity use", says Nicholson. "This is the economic logic of the price structure - but it is inefficient and counterproductive. Much better keep that electricity for high value use where electricity is needed, and stop encouraging people to squander it."
A question of political power, as well as political will
On balance it looks like solar energy in the UK is set to do well in 2014 - or at least better than it has done so far under the coalition government. Noble says he is committed to "dealing with whichever hiccup is in the way".
But the whole area of energy policy has become acutely politicised, and the Big Six energy companies seem to be the ones dominating the national debate. They will surely resist any changes that will put even a small dent in their profits.
It remains to be seen if Noble, his solar task force, and Energy Minister Greg Barker, really have it in them - in terms of both ideas and political clout - to bring about changes of the scale, depth and scope that are needed.
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