New solar photovoltaic (PV) capacity additions during 2014 from the UK have now exceeded the 2GW level, a level never reached before in UK.
The mid-year lull is now officially over. Lorries and crates are arriving at fields, and capacity additions are coming online at a frantic rate. The three largest PV farms in the UK have been completed in the past few weeks also, each bigger than Wymeswold.
Of course, no one should be surprised about the new-build rush going on right now. Although, not all of the deliveries of components coming into the UK right now are necessarily hitting the fields, but awaiting call down.
This article reviews the breakdown of the 2GW in 2014, and talks about where the calendar year may end up for the UK. The commentary also addresses the potential inventory issue for modules and inverters on 31 December 2014 that may skew the country deployment figures relative to company reporting on shipments during Q4’14.
Understanding what 2GW means
Two-thirds of the new solar PV capacity added so far this year has come from large-scale solar PV farms that exceed 5MW in size. Anyone looking for the reality of the Department of Energy and Climate Change (DECC) May 2014 reset need not look any further.
In fact, three-quarters of the 2GW of new capacity this year has been located on the ground, as opposed to rooftops. Cue the call for more rooftops also.
Figure 1: Breakdown of the 2GW deployed so far in the UK. RT (rooftop), GM (ground-mount), YTD (year-to-date), CY (calendar year). Sources: NPD Solarbuzz UK Deal Tracker report & related government registers.
With so much attention on the ground, large commercial rooftops are currently only providing 2% of capacity additions, despite the best intentions of many in unlocking the rooftop potential.
But make no mistake, rooftop will happen as there is an increased momentum from the UK solar industry to make this happen and the intentions are very real. The only thing lacking is a change to FiTs, but ROIs are a combination of business models, not simply the FiT level, so the prospects do remain positive for more action in 2015 and beyond.
What is 2014 going to end up at?
The UK is currently on track to add approximately 2.4-2.5GW of new capacity in 2014, moving the cumulative PV deployed to approximately 5.5GW. By the end of March 2015, this will have exceeded the 7GW mark.
Shipments however are expected to exceed market deployment. However, this is hardly any cause for alarm as any global market expected to exceed the GW level in a quarter will always have a high level of inventory at the end of the previous quarter. Given that the big push is coming in the first quarter of 2015, there will also be a calendar year end rush to ship product from factories to recognise shipment date reporting. So the year-end inventory is set to be high, relative to previous levels seen in the UK.
The other issue at large in the UK right now relates to the site selection options that relate to developers’ true intentions. Sites are being lined up with component delivery, despite having final council level sign-off, or even assuming a positive outcome from appeal processes.
Such is the push to hit the 31 March 2015 deadline. No one wants to be left without component supply, should a site come out of planning successfully on 1 January 2015.
The same is also true from greenfield developers that are pitching sites that are far from shovel-ready. This only makes it harder for project developers, and it is inevitable that there will be many disappointed investors and suppliers on 1 April 2015. As a consequence, EPCs are left in limbo awaiting eleventh hour instructions on where to deploy resources.
Another trend observed in the past few months is the uptick in 5MW sites. Or more specifically, 4.99MW sites. In fact, sites that were previously approved at 6-8MW are likely to become 4.99MW options after 31 March 2015. Again, this is entirely expected, given the RO changes proposed by DECC.
In the past, a 5MW site approved could easily have ended up at more than 6MW installed. From 1 April 2015, the opposite situation is likely to be seen.
How many 4.99MW sites will be deployed? Right now, this is far from clear. Developers cite the challenging economics of these sites, but surely this is to be expected? Give Germany, Italy or Spain a two-year uncapped funding scheme under the equivalent of 1.2-1.3 ROCs/MWh and they would probably bite your arm off on the spot.
For now, it seems that developers are lining up sub-5MW ‘options’, as having options (ground and roof alike) is surely the name of the game in the UK right now. The frequency of legislative changes over the past few years has been largely behind this, with companies having to change strategy every six months.
Celebrating the 2GW figure
Despite all the concerns and uncertainties, a 2GW market for solar PV in the UK was not on anyone’s radar a few years back. In the recent investor presentations by most Chinese suppliers at SPI, and from leading European-HQ firms such as REC Solar and Hanwha Q CELLS, the prioritisation of UK shipments is taking equal billing to other leading end-markets such as China, Japan and the US.
The 2GW figure reached so far in 2014 confirms the elevation of the UK end market, but the real success can surely be attributed by the developers and investors that have stoically driven PV deployment in solar farms and on domestic rooftops over the past 12 months. Regardless of government interventions, 2015 is likely to see annual growth, irrespective of the legislative obstacles introduced over the year.