Developers across the UK are currently operating at full throttle in response to the government’s move to remove renewable obligation (RO) support for solar sites over 5MW next year.
Solar Power Portal spoke to Robert Goss, managing director of Conergy UK, one of the top five biggest solar farm developers in the UK, about the state of the market following the Department of Energy and Climate Change’s confirmation that RO support for over 5MW projects will be scrapped.
Contrary to many in the industry, Goss can see the value in revisiting the support mechanism for large-scale solar projects, he said: “As we move towards grid parity it is entirely reasonable to cut back on the support mechanism for solar. In June this year, the average size of a British solar farm was only 4MW, so after the handful of larger projects have been built, it will be business as usual on the many good sites still available.”
Goss believes that there will continue to be a reasonable number of sub-5MW solar projects that will continue to be developed under the RO. He said: “We’ve built a great deal of sub-5MW plants before and we are now building some 5,6,7 and 8MW plants. We are also building some 10, 20, 30MW plants. As far as we know we will be going back and doing some more 5MWs. I know that there isn’t really a massive economy of scale in building a 10MW plant over a 5MW.
“So the 5MWs that are out there with reasonable connection costs we will be busy with. We have to push on through next year with the 5MWs and I guess some projects that might have been 8MW will now become 5MW. The poor farmer won’t get as much money which is a bit of a pity because they need supporting.”
Moving away from the RO, the solar industry has now been forced to adopt Contracts for Difference (CfDs) early, however, Goss anticipates that CfDs could prove to be a better support mechanism for renewables. He explained: “There is a strong argument to suggest that CfDs are a more reliable instrument than ROCs. They are very different from ROCs, in some ways they are more reliable and actually easier to put debt into than ROCs.”
“Looking ahead, CfDs are more attractive to investors than the ROCs, as they offer greater security, and we will bid in the first CfD auction to test the process for our customers and investors,” continued Goss. However, he admitted that the company is only submitting one project to the auction because the company will be “very busy with projects that will finish before March” and the selected project “did not fit the [RO] criteria”.
Rooftop rush?
The government set out a clear will for solar to be deployed at scale on commercial roofs in its official Solar Strategy document. The move has been widely welcomed by the sector but take-up remains disappointingly low. Conergy UK is actively involved in the commercial sector and Goss echoes the government’s ambition for a successful rooftop market. He said: “We’ve had a number of discussions with major players in the sector. We have an ambition for commercial roofs in the UK, we have a strong tradition of commercial rooftop in other countries and we have a few here in the UK.
“It’s not a secret that commercial rooftops cost more to build per MW than solar farms for obvious reasons to do with access and health and safety. We’ve seen the rush towards low price kill off one company already in Renewable Resources, so we have to be careful of that sort of thing.
“We need to do what Conergy always do which is create high yield solar installations which last for the 20/25 years and produce more than the power that we model, thus either investors or owner/occupiers will want to deal with us.”
The sector has faced a number of complex barriers which have hampered deployment but Goss believes that the tide could be set to turn with a concerted effort: “I think there will emerge a strong investor sector but it’s not without difficulties because of the well-publicised challenge that three quarters of buildings in the commercial sector are not owner-occupied they are tenanted buildings.
“It’s a challenge for everybody, what do you do when you have someone who is a major electricity user and they want to get control over the electricity bills, get some certainty over the next 5-10 years, would very much like a solar installations which provides them with electricity at a price that they will know, but they are renting from a large-scale landlord who really hasn’t been motivated, hasn’t been driven to look at solar? I’m not quite sure how that can be unlocked. I don’t see the really large landlords going for this [commercial rooftop] yet.”
Goss added: “We, somehow in the solar industry, haven’t got these large landlords excited about the deal that can be done. That’s the challenge for us, I think that we could do but it also needs more demand from tenants. For the right counter party it wouldn’t be a problem putting cash into the deal, the same people putting money into solar farms would put money into commercial rooftop providing there are decent counter parties and there is scale.”
Goss predicts that the commercial sector won’t gain any significant traction that will allow it to fill the gap left by ground-mount solar next March. He said: “This year, despite the best efforts of many of us, it’s still more negotiation and discussion with a few breakthroughs. Maybe next year. It’s a challenge to just get up to the numbers that ground-mount is at – that seems like a long way away.”
Looking out into the future, Goss remains confident that his company will continue to perform strongly despite predicting a slightly chastening time for UK solar. He said: “There is strong evidence to suggest we’re going to have some maturing of the market, some rather steadying times – which is a chance for those who really know how to do quality installations on complex roofs to win through. It could be very nice for the next five years. I think quietly there is political will, away from the headline grabbing extremists on any party but there is a centre ground pushing for solar. The public like it and we need the energy.
“Overall for the British solar industry, the cost of finance is falling, as is the cost of build and installation, and that is thanks to the strong incentive structures that have been put in place. In distributed generation, falling costs will always be more important than the kinds of incentives and protections sought by the coal, gas, nuclear and wind industries,” concluded Goss.
Conergy UK will be exhibiting on stand G35 at this year's Solar Energy UK