Q&A: STA’s Chris Hewett on how the industry has fared one year since the FiT

The UK’s solar industry has had a turbulent few years, not least because of policy changes driving the so called solarcoaster.

One of the most significant was the end of the feed-in tariff (FiT) last year, leaving the industry without a subsidy mechanism. However, throughout this period there has been many success stories, in particular in the growth of subsidy free large scale projects.

Now as we approach one year on, Solar Power Portal had a chat with Solar Trade Association CEO Chris Hewett about how the industry has fared in the post FiT world.

Has the last year without the FiT met your predictions?

I think so, in the sense that there was that peak, then it came down and since then the rest of the residential market has been roughly as we expected. We didn't expect it to disappear completely, it's kept going and it's kept some momentum up.

In terms of new build, that's less clear because of local authority policies and because of the Scotland building regulations now. That's basically been maintained anyway, and if anything it is growing. And there is the anticipation of the Future Homes Standard, which will hopefully grow that space as solar and storage will become mainstream for the housing industry. So that's all as we expected. 

We were reasonably pleased with export tariff offers and there's a market growing there. So there's something to build on. That was always more of a symbolic thing, I suppose. It's not just about economics for residential owners, but the economics are sometimes affected by the export price. But clearly it is mostly about saving on your bills and at least anecdotally, it seems it is much more about people wanting to do their bit and wanting to respond to climate change, that's driven more sales than it had previously, I think.

Something we’re really pleased with is the importance of standards in the residential market, the MCS was a very important part of the market and they've clearly proved what they're doing, their systems are much better, their enforcement is ramping up and there's plans to do more of that. It’s really, really important to maintain consumer confidence, so that's been pleasing and we've got a very good relationship with the MCS. Obviously moving standards into battery installations as well I think is really important, so that's all good.

I suppose the other factor for the market is the penetration of electric vehicles (EVs). That is a segment of the market where people clearly have some disposable capital so if people are getting an EV, they're also increasingly likely to think about [if they should] be trying to find ways of fuelling that car themselves.

How has the industry faired in terms of commercial installations?

That’s improved. I feel that the market is starting to pick up – well until the current COVID situation it was – but [installers] have seen growth in that market and they're anticipating more, and that might be partly localised schemes as part of climate emergency reaction sort of stuff, or it might be some corporate PPAs and some of the larger schemes, such as Tesco etc.

And it's just economics as well; I think more people are reporting that it's stacking up for more companies. So that's been pretty high, and beaten our expectations in terms of where the market has gone.

Obviously now, this conversation in the context of what's happening next, it does cast a shadow but the whole economy is facing that so we're not alone in that. Hopefully that's just going to delay some growth, it's going to push projects six months down the track maybe, but we don't know. And it's really, really early days to see what the impact will be.

How much damange did the policy gap between the close of the FiT and the Smart Export Guarantee (SEG) cause?

I think it did create some delays. I don't know whether it just delayed business that was going to happen anyway, though. So maybe a little bit of an immediate trough after that March peak was lower than it needed to be, but certainly it seemed that business picked up sort of previous levels from the year before reasonably quickly, within a couple of months.

So yes, there was an uncertainty, but I think it was more of a symbolic thing; the fact that government wasn't quick off the mark to guarantee that there was some sort of payment for people generating power. I think a PR mistake from the government, if you'd like.

We still think that there should be some sort of underlying price floor, and Ofgem has its power to look at this market now, so we'd urge them to look at this market once it's a year since the SEG has come in. We'd want them to use those powers to have a review, see if they think that market is really working and if it doesn't, then perhaps we should revisit the price floor.

In terms of larger scale ground mount developments, do you think subsidy free has now become the new normal in the solar industry?

Yes, absolutely. There's now multiple routes to market, so there are plenty of projects that are going ahead on the assumption that it will be a merchant risk, selling onto the wholesale market and there's increasing interest in corporate and public sector PPAs. We know there's a lot of conversations behind the scenes around that market.

Then there is the Contracts for Difference (CfD), so those projects that can't find a PPA don't have to think the cost of capital is too high to go merchant risk now, they have another option.

I think developers are now comfortable with subsidy free in the UK, absolutely.

How important is it that the government has brought back in the CfD auction for solar?

There's a political significance to it, as it's been so many years that we've been waiting for that decision to be made, so there's a signal impact that the industry will take heart from.

And then there is the fact that there's some projects which will be accelerated because that option is on the table. It's another route to market, which wasn't there before. So I think is significant.

We’ll be in discussions with the government around the detail of that, and we have got concerns. We don't think there should be a capacity cap on the pot one auction, for example. How frequently the auctions are run is another thing, if you look around the rest of Europe there are multiple auctions for solar across the year, and we would want to make the case to the government that theirs should be more frequent.

So there's details in there, but I think symbolically it is really important.