New and additional delays in completing ground-mounted solar farms has necessitated further adjustments by NPD Solarbuzz to the 2014 calendar year estimates for UK solar PV deployment levels.

The latest weekly analysis on UK deployment levels are showing a slower than expected year-end contribution from large-scale solar farms. This is resulting in the latest annual forecast level to be pegged back even more, to the 2.2-2.3GW level; levels that we were originally forecasting at the end of 2013.

This blog reviews the reasons for the latest changes, and highlights the consequences on suppliers of components that had been expecting a large uptick in the final quarter, ahead of the final push leading up to 31 March 2015.

Tracking the annual highs and lows

After the blistering GW-plus deployment in Q1 2014, and in full expectation of a stable RO scheme that was absent of policy changes, the forecasts for the UK back in March were upgraded to levels in excess of 2.5GW. At the time, this appeared broadly accepted by most of the major suppliers and developers. Indeed, some of the key suppliers even went on the record back in April citing the possibility of 2014 calendar year deployment topping the 3GW level: a figure that now appears to be way too ambitious as the year comes to a close.

This all changed in May/June 2014, because uncertainty was introduced to the industry after DECC’s RO change announcement. The uncertainty caused a change in strategy by greenfield developers and those project developers that were intending to subcontract EPCs, for subsequent hold or flip enactment.

Having to work out CfDs, what the grace period conditions were going to be, and whether sub-5MW ground-mount sites would survive the post 31 March 2015 deadline, had the effect of slowing down activity on the ground.

The summer months became re-strategising months, although ground-mount deployment far from halted. It just didn’t progress at the rates that would have occurred had there not been so many issues introduced by the May 2014 DECC announcement.

So, by the end of the summer (in fact up to a few weeks ago), the prevailing wisdom was of a 2014 calendar year market in the UK at around 2.4-2.5GW. This, however, still assumed that the inevitable build-out up to 31 March 2015 was going to start in anger from about September 2014 onwards. While ground-breaking has started, site completion has not.

While there are hundreds of megawatts now ‘under construction’, only a small part of this is going to be completed before 31 December 2014. Rather, January and February is going to be the time period when many of the current sites are completed and energised. For many key suppliers (of modules and inverters), this will represent site delivery. Final energising may then be at the mercy of the DNOs and their availability. Miss your time slot and the consequences could be terminal, with site acquisition clauses kicking in as investors miss portfolio additions on 1 April 2015.

The net outcome of all this is that full year UK solar PV deployment is (as of the start of November 2014) looking like coming in at the 2.2-2.3GW level. It is unlikely annual demand will dip too much below 2.2GW because just last week, the annual figure passed through the 2GW level.

But with under two months left to go, and with no fundamental problem in completion dates slipping into January 2015 for RO system accreditation, the upside potential is greatly reduced. The prospects also of any massive uptick in small-scale FiT deployment before 1 January 2015 are also not being predicted by most of the residential installer base. And, as is still the norm, the commercial rooftop is not really going to feature in the equation too much, other than a small handful of sites that exceed a few hundred kWs.

Figure 1: Changes in forecasts for 2014 UK solar PV deployment by NPD Solarbuzz, made at different points across the year. Expectations of a year-end rush in ground-mount installs under 1.4 ROCs has not materialised, pulling final year forecasts back to the 2.2-2.3GW mark. Source: NPD Solarbuzz, 3 November 2014.

Component suppliers take the real hit

Whether a site gets completed in December 2014 or January 2015 is not necessarily critical for investors. But for module and inverter suppliers, or EPCs deciding on subcontracted headcount, it’s a massive issue.

During the autumn period, some component suppliers kicked off aggressive shipments into the UK, in expectation of the 1.4 ROC build phase getting into full swing during September/October 2014. Some held fire, in part due to corporate HQ caution that shipments needed to be site-specific, not simply to sit in warehouses in the hope of pulldown.

The result will certainly be (greater than expected) UK-held inventory on 31 December 2014, with revenue recognition sitting on the books at corporate at calendar year end (for many fiscal year end also). As many of the public-listed module suppliers cite strong Q4’14 shipments to the UK, it should be noted that a large part of this is not going to hit site delivery (and associated revenue recognition criteria) until 2015.

Expected 2014 closure stats

As shown in the above figure, assuming final deployment in 2014 comes in at the central point of the 2.2-2.3GW range, the wise money is now on the calendar year closing at 2.25GW, with the upside/downside changes across the year a consequence of the ground-mount build uncertainties.

As such, it is probably just about the point where the 2015 forecasts can start. Anyone expecting a flat-line in 2015 forecasting across the next 12 months is likely to be disappointed however. In fact, the variables that will drive new capacity in the UK next year are only more challenging to fully come to terms with, with CfD, grace-period and sub-5MW allocations beyond 31 March 2015 all hanging precariously in the balance today, just six months ahead of a general election.