Solar PV will struggle to compete with more established renewables under the contracts for difference mechanism when it is introduced in April 2015, according to industry analysts IHS.
IHS has issued a warning to developers considering competing under the CfD mechanism that the available opportunity under the new scheme relies heavily on the level of participation of competing technologies.
Speaking to Solar Power Portal, Josefin Berg, senior analyst at IHS explained: “IHS predicts that on a price basis, PV will struggle to be competitive with most onshore wind and small hydro projects.”
Berg notes that the Renewable Obligation (RO) will be more profitable for onshore wind developers and is due to run until 2017. This could potentially leave solar without much competition for the initial £50 million pot in 2015/16.
Berg acknowledged that IHS’ wind analysts have been talking to a number of onshore wind developers but have “yet to to talk to anyone expressing direct interest in the first CfD auction”.
Looking ahead, IHS predicts that solar PV could still struggle in the second CfD auction. Berg said: “The opportunity for PV in the second auction will be dependent on how advanced PV projects are in terms of permitting compared to onshore wind. Onshore wind projects struggle to move through the permitting process. A similar resistance to large-scale solar could build up in certain regions, however.”
IHS adds that, if the CfD budget remains the same in future auctions, PV could see its share of projects “gradually squeezed out by onshore wind projects”. IHS predicts that the commercial rooftop sector could step in and help pick up some of the lost capacity. The company is forecasting that the UK market will install over 2GW of rooftop solar in 2018 on the back of a resurgent commercial sector.
In the run-up to 2018, IHS also predicts that the sub-5MW ground-mount sector under RO support will play a greater role. Berg stated: “In the period 2015-2017, we expect the <5 MW and rooftop projects under ROC to form an increasingly important share of the PV demand.”
According to the company’s project database the UK has a ground-mount project pipeline of 5.2GW – of which a minimum of 843MW is already under construction. IHS is predicting that the UK could connect more than 3GW of new capacity before RO support is scrapped in April 2015.