In the first of a two-part feature, Finlay Colville, discusses the progress within the UK PV industry over the first six months of 2013. Colville confirms the new PV capacity added in the UK during the first half of the year and how this compares to global PV installations and prior first-half periods in the UK back to 2010. The article then reviews the challenges in tracking deployment levels in a rapidly growing market before analysing the NPD Solarbuzz UK Deal Tracker projects. The second part, to be published next week, will provide more detailed segmentation of this year's first half, highlighting installations by geography and installation size/type.
During the first six months of 2013 (1H 2013), the UK added 802 MW of new solar PV installations, representing the strongest first-half year ever for the UK PV industry. This was comprised of 520 MW in the first quarter of 2013, followed by 282 MW in the second quarter of 2013.
Over this time period, the UK reached a new high in global PV rankings, occupying the sixth position for the most solar PV capacity added by any country. The 802MW of new solar PV added in the UK during 1H 2013 represented 5.5% of the global 14.9GW. Only China, Japan, Germany, Italy and the U.S. added more PV capacity in 1H 2013 than the UK market. See Figure one below:
Figure one: The UK’s percentage of new global PV capacity added in 1H’13 reached a new high, stimulated by ground-mount installations that were accelerated in order to meet the 31 March deadline from 2 ROCs/MHh.
Calendar year phasing issues
The phasing of solar PV demand in the UK between the first and second half of each calendar year has historically been driven by a combination of incentive resets and seasonality. By far, the biggest factor has been the timing of adjustments to Feed-in Tariffs (FiTs) during 2011 and 2012, and to Renewable Obligation Certificates (ROCs) in 2013. Therefore, the market has yet to stabilise in such a way that second-half demand can be estimated based upon what was added in the first six-month period.
There is strong evidence to suggest however that this may change going forward, with 2013 perhaps being the first year in which such a pattern may emerge. This is due mainly to the segmentation of rooftop demand (residential and small commercial) being met purely by FiTs, while the large commercial and ground-mount segments utilise only the ROC (or forthcoming Contracts for Difference) mechanisms.
In this respect, the large installations would be subject to only one annual reset at the start of April each year, creating an inevitable surge prior to 31 March before incentives decline. Conversely, FiTs now have a well-managed quarterly degression mechanism. While not quite at the monthly frequency seen in Germany, it nonetheless provides an effective control factor and (while not watertight in preventing unforeseen quarter-end surges) dampens the spikes in demand seen a couple of years ago in the UK residential segment.
Of course, reality is never this straightforward. And since the UK relies on imported components (in particular modules and inverters), any factor that may impact short-term pricing and availability of imported products can have a large impact on quarterly phasing. This effect manifests itself in several ways:
First, despite having a healthy top-10 ranking globally, the UK is still in the second tier of global PV countries, with competing demand from Japan and the U.S. further benefiting from ASP premiums on offer to Chinese module suppliers.
Indeed, the UK’s geographic location (part of the EU) has the scope to have a major impact on phasing due to the European Commission (EC)/China trade case. Two factors come into play here regarding supply schedules to the UK; uncertainty (a key factor in softening 2013's seocond quarter large-scale deployment) and EC dictated timing on changes to floor pricing levels or allowed quantities coming from China to Europe.
It would be somewhat naïve to assume there will not be several more supply bottlenecks to the UK, especially if the EC starts to set dates for declines in floor prices of imported modules and it becomes economically viable to hold off project completion to benefit from lower component pricing.
In addition, uncertainty in government renewable policies and legal frameworks, within which the UK PV industry can plan against, can certainly impact quarterly phasing.
However, caveats aside, Figure two clearly shows the year on year increase in new solar PV within the UK since the market took off at the start of 2010. During the three-year period illustrated in the graphic here, first half PV demand has grown with a CAGR above 200%. That’s a statistic few other countries can lay claim to within the PV industry.
Figure two: New solar PV in the UK has grown each year since the industry kicked off in 2010, with a three-year CAGR in excess of 200%.
Tracking the UK solar PV landscape in 2013
Gaining a precise handle on the size of the UK solar PV industry today requires an altogether different analytical model, and forms the basis of the market sizing for the first quarter of 2013 at 520MW and 282MW at the second quarter of 2013.
Prior to the solar UK industry taking off in 2010, there had been few reasons for any government body to precisely track the deployment of solar in the UK. Furthermore, within the context of global solar PV adoption, allocating dedicated resource to track PV sizing was outranked by the multi-GW status of countries such as Japan, Germany, Spain and Italy.
When the FiT scheme was implemented in 2010, the use of official data became essential in what was a residential-dominant end-market. In fact, to this day, the government data from Ofgem/DECC forms the basis of residential and small commercial installations, albeit with known time lags in actual installations with official recorded data.
The use of government statistics (while reported after the event) were largely fit-for-purpose until the middle of 2012. However, since then, Ofgem/DECC data (pulled from a variety of internal sources) has not caught up with the rapid deployment of solar PV accredited within the ROC framework.
Before 2013, this had a minimal adjustment on DECC reported figures for UK solar PV, but during 2013 this situation has almost been reversed. During 1H 2013, the majority of solar PV installed in the UK has been under ROCs. This is confirmed in Figure Three.
Figure Three: Almost three-quarters of the 802MW of solar PV installed in the UK during 1H 203 has been through ROCs, with the remainder incentivised through the legacy FiT scheme.
The fact that the Ofgem/DECC solar PV capacity data has yet to catch up with actual UK deployment only becomes an issue when people cite that data as representative of total country figures. To everyone involved in the UK solar industry (legislators, politicians, civil servants, project developers, installers, component suppliers, etc.), this is hardly breaking news.
From a solar PV market analyst perspective, this type of situation is not unusual. Scanning across most countries that have succeeded in developing a vibrant solar PV end-market over the past 20 years, there have rarely been protocols or registers in place to enable real-time end-market tracking. And in many cases – like the UK – when strong market demand extends across both residential and large-scale application segments, the released data from the government databases has often been partially useful or subject to time lags of up to 12 months.
The solution here is effectively to resort to a back-to-basics means of undertaking fundamental market research, by tracking both supply and demand from a bottom-up perspective.
From a PV end-market demand sizing perspective, this equates to real-time tracking of PV-related components being shipped to the UK, monitoring the progress of projects going through planning application/approval/financing and built-out, and - where value added - accessing the relevant official documentation.
Consequently, with large-scale deployment under ROCs dominating PV demand, sizing the solar PV market in the UK on a (real-time) quarterly basis requires the use of bottom-up database tools. For anyone that has been in a field sales position utilising CRM tools for forecasting and reporting, this type of real-time opportunity tracking should sound familiar.
Analysing the NPD Solarbuzz UK Deal Tracker database
The NPD Solarbuzz UK Deal Tracker database includes comprehensive details on >950 different solar PV projects (completed and pending) that are greater than 100kW, extending back to 2001. In total, this includes project specific coverage of over 98% of all completed non-residential installations in the UK in excess of 100kW (by MW volume) forming a comprehensive data resource that enables full analysis of the UK PV landscape presented in this article. (The total number of non-residential projects tracked is close to 2,000.)
Through analysing projects in the pipeline (large-scale projects at various stages from pre-planning screening to ground-breaking/under-completion), this provides a means of forecasting short-term demand. Figure four shows segmentation by MW and project number for all installations in excess of 250kW, including both completed and pipeline-assigned. A total of 650 projects fall into this category, adding to approximately 4 GW of volume.
Within this 4GW figure, just under 1GW (295 projects) is completed, with the remaining 3GW assigned to the pipeline. Here, the pipeline is confined to the large-scale ground-mount segment and excludes the smaller rooftop installations that are not possible to forecast from any bottom-up analysis. 164 large-scale ground-mount projects have gone through planning approval and are at various stages of build-out. These projects account for 1.25GW of ground-mount projects, many of which are seeking to meet the 31 March 2014 ROC degression deadline.
A further 191 large-scale ground-mount projects (1.83GW) have yet to secure planning approval at the local district council level. For completeness, even projects that have seen planning rejected, or have been mothballed from the early FIT-driven ground-mount application phase of 2011, are retained in this grouping. Experience from many countries during ground-mount PV growth phases confirms the likelihood of many historic applications being resurrected by new parties when different incentives become available or legacy barriers-to-approval are removed.
Figure four: An analysis of the 650 largest non-residential UK PV projects (completed and pipeline) covers 4GW of installations, with the pipeline in excess of 3GW.
Finlay Colville will be speaking at this year’s Solar Energy UK. His speech, ‘The analyst’s perspective: market insight, pricing and regulatory impact for large-scale in the UK’ will take place in the Solar Business Seminar Hall on Tuesday 8 October. Tickets can be booked here.