The future of solar

Sunlight

Image credit: Darren Johnson/Flickr

There seems to be a bit of a dichotomy around solar energy in the marketplace at the moment. On the one hand, research suggests that consumers want more solar solutions with a recent YouGov survey saying that 72% of respondents still favoured solar power.  But on the other hand, deployment figures seem to suggest that people aren’t opting for solar.

Let’s take a look at the last 12 months. There is no doubt that the market has taken a heavy hit with deployment of solar PV at an all time low.  At the beginning of 2012 we saw solar PV deployment peak at an unprecedented 120,000 KW per week. By June 2012 this was tracking at under 20,000 KW per week and by w/c 25 November 2012 solar PV installations had fallen to a mere 3.8 MW (1130 installations) per week.  (Source: STA)

On the surface this looks like a rapid decline resulting in a fragile market for all of us working with solar solutions. However, if you scratch the surface, there are reasonable arguments to support these figures, and I believe there could still be a positive future for the solar industry.

Return on Investment levels for solar still remain around 10%

We all know that the highlevels of solar deployed at the beginning of January were the result of an inflated market fuelled by over generous government incentives. With the cutting of the tariffs, many of the providers who had entered the market just to chase an easy buck departed just as fast. This led to stability for the industry and for many of us the chance to plan strategically for the future.  As the cuts reduced demand, suppliers reduced their prices and today we are experiencing similar levels of investment returns, of typically 10%, as we had 12 months ago.

The unfortunate side effect of the changing government incentives and the media and legal challenge furore around these changes has led to a customer crisis in confidence and it is our role within the industry to educate and encourage customers that they are not too late and have not “missed the boat”.

So what does the future look like for the solar energy industry?

Although on the surface deployment levels paint a depressing picture for solar energy, we believe at Riomay Renewable Energies that the future certainly looks greener.

We have already seen the promise of what could be the most adventurous environmental government incentive of our time – the Green Deal, which is scheduled to launch in March 2013.  Although there has been much speculation and discussion around what opportunities it will bring to the market, there is no doubt that the infrastructure and the financing of the initiative are beginning to take shape. The recent ECO initiative will direct £ 1.3 billion per year into home energy efficiency and the Green Deal promises households in England and Wales the ability to take advantage of home improvements which drive energy efficiencies such as solar photovoltaic, solar thermal and other renewable energies.  

Supported with a Green Deal Finance scheme, where companies secure the financial infrastructure, and introducing a Cashback Scheme which offers early adopters financial benefits for the work they have done, the future for solar, and the whole of the renewable industry, certainly begins to look rosier.   A total of £ 125 million is up for grabs, meaning hundreds of thousands of people could qualify and the published rates are guaranteed for the first £40 million of the scheme.

Then came the government’s new Energy Bill which confirmed a wide-ranging package of reforms that look to incentivise a greener nation through a new contract for difference (CfD) mechanism, which will be backed by a £7.2 billion levy on energy bills by 2020.  Alongside this Bill, the government announced a new consultation to introduce new incentives for investment in corporate energy efficiency measures.

And finally we await the imminent announcement of the rebanding of the Renewables Obligation Certificate (ROC), the green certificate issued to an accredited generator for eligible renewable electricity generated within the United Kingdom and supplied to customers within the United Kingdom by a licensed electricity supplier. One ROC is issued for each megawatt hour (MWh) of eligible renewable output generated.  The rebanding will reduce the number for ROCs issued per MWh but if the reduction is a reasonable one, this will reaffirm the market for larger scale PV systems.

The alternatives? The financial and environmental cost

So the Government is investing heavily in the industry and we believe that 2013 will see a very slow but progressive improvement in the market. And what many have failed to address, is without renewables and particularly solar what are the alternatives? We all know that energy from traditional sources such as fossil fuels is no longer a long-term option, both financially and environmentally. What about the rest of the energy mix?

Solar power is now the second cheapest form of renewable energy after wind power. A recent BBC article suggested that it would cost £56bn to decommission 20 nuclear sites with the estimated cost to build between £1.5bn and £ 2.25bn . In this context renewables such as solar PV and solar thermal, alongside wind, biomass and ground and heat pumps suddenly start to make financially and environmental sense.

So, far from the doom and gloom presently in the industry, we believe the long term future for solar and the renewable market is bright. With strong government incentives and real strategies in place, solar will claim its rightful place within as one of the leading sources of energy in the commercial and domestic properties across Britain.

Alan Aldridge

Solar Trade Association, Chairman

Alan Aldridge is Managing Director of Riomay Renewable Energies and Chairman of the Solar Trade Association. Read more about Alan Aldridge →

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