David Maguire, managing director of developer BNRG Renewables discusses his predictions for the UK’s large-scale solar market as the contracts for difference (CfD) scheme prepares to reveal its results and an unpredictable elections rears its head.
What’s the single biggest challenge the UK solar industry is currently facing?
The next general election is likely to have the single biggest impact on the solar industry in the UK this year. We are not sure what changes this may bring and political uncertainty is always the biggest challenge in the solar industry. Other factors such as the low price of oil will affect the market in the short term.
What’s driving the changing landscape of project finance?
There is a strong appetite for good yield infrastructure investment from the global funds community. Large-scale solar has become a very attractive asset class and I believe there is more capital available than suitable projects to invest in. This coupled with low interest rates have resulted in a drive south on ultimate yield from the pension funds. This is good for the UK solar market. With respect to project finance, in the last 18 months there has been a resurgence in appetite from traditional project finance providers who now have good liquidity and have emerged from the financial crisis seeking new business. Project finance have re-entered the market again on a competitive basis.
What new opportunities do you see opening up in the UK solar market?
The CfD mechanism will be a very interesting space to watch and I believe that unfortunately many small and medium players in the market will not be in a position to continue business in large-scale solar (>5MW). The large-scale roof-top market has great potential but has many legal obstacles to overcome. I feel that this is a market that is set to grow over the coming years. I also feel that community ownership or shared ownership could become a very interesting feature of the UK solar market and that this represents an exciting opportunity for communities.
How quickly do you see the solar industry reaching grid parity in the UK?
This is always a hot topic and the definition of grid parity is key to this discussion. I feel that ‘socket parity’ is almost there and may be reached within the next year. I deem socket parity as the point at which domestic solar can provide a payback period of less than six years. Grid parity is more challenging, as the current price of oil at around US$50 a barrel has pushed back grid parity by a couple of years. This however is a short-term affect and I do not believe that oil prices will be sustainable at this level for longer than a year or two. The transmission, distribution, administration and brokerage costs of electricity in the UK market can account for as much as over 60% of the retail price of electricity, thus, socket parity will be reached well in advance of grid parity. I believe we could see grid parity being reached by 2025.
What is your prediction for the UK solar market for 2015/16?
An additional capacity of just shy of 1GW implemented in 2015/2016, most of which, due to grid constraints, will be implemented in the midland and northern England and Wales. More distributed generation and roof-mounted schemes. Planning and grid will become more challenging with less and less projects being successful.
What are you most looking forward to about Large-Scale Solar UK 2015?
Open discussion on the future of solar in the UK in general and discussion on the success or failure of the CfD process.
Who are you most looking forward to hearing speak at Large-Scale Solar UK 2015?
The project finance contributors.
What’s your favourite thing about Bristol?
BNRG built its first two UK solar plants a short distance south of Bristol! Accessibility is great with daily flights to various international destinations.
David Maguire will be speaking at the Large-Scale Solar UK conference in Bristol, 28-30 April.