Stakeholders from across the sector gathered in Bristol today for the first day of Large-Scale Solar UK.

Given the backdrop of a miserable contract for difference (CfD) performance for solar, where only five projects managed to successfully snag support, a general air of optimism was still noticeable throughout all of the first day’s speakers. It appears that the sector has come to terms with the way that the CfD scheme works and recognises that it is likely to be around for some time yet. But the reality of the structure and operation of the scheme still limit solar’s potential to deploy at scale.

One aspect of the scheme that came in for criticism was the current mechanism for penalising companies who win a contract but fail to take it up. The first allocation round saw two PV companies ‘successfully’ win CfDs at the unrealistic strike price of £50/MWh. Alan John, partner at Osborne Clarke questioned whether the current mechanism to dissuade companies from speculatively bidding was robust enough. He said: “Those parties that were successful in obtaining a CfD will face a penalty if they fail to take up that CfD. This is highly relevant because two projects were offered CfDs but chose not to take them on.

“The question is what happens next? The answer is that you’re not allowed to go back into the CfD for 13 months – that’s the disincentive. Some quarters have questioned if that’s tough enough. One of the PV projects that was successful but did not take up a CfD actually bid in £1/MWh, hoping that in the mix they would be massaged up to the next competitive price – that didn’t work for them.

“Should there be something more than the current outcome which bans you from reentering the project for 13 months? There have been a number of developers who have suggested bid bonds,” said John.

Bid bonds have been used in similar auctions across the world and effectively attach serious financial liability to a bid which would, in theory, dissuade companies from entering speculative bids. During a developer's’ roundtable session with Solar Power Portal, a number of high profile industry members expressed support for the introduction of bid bonds. However, the point was stressed that it would represent yet another hurdle for SMEs to overcome if they are to take part in the CfDs – a scheme that is already incredibly challenging for smaller entities to enter and compete in as it is.

The call from the solar sector to hold more frequent CfD allocation rounds enjoyed almost universal support. Currently, the Department of Energy and Climate Change (DECC) will only run one allocation per year. The solar industry argues that, because the sector is capable of installing at scale with such short timelines, the industry is missing out on delivering the largest amount of lowest-cost electricity as possible. Jonathan Selwyn, managing director for Lark Energy, suggested that a bi-annual allocation round would be more suitable.

Nick Boyle, CEO of Lightsource Renewable Energy also called on the government to extend the lifetime of CfD projects from 15 to 20 years while also switching from CPI indexing to RPI. He said: “Surely the idea of the scheme is to give the government the biggest bang for its buck? Why are they using CPI when no one in the finance industry works with CPI?”  

Despite attendants’ myriad suggestions for ways in which the CfD could be improved, the general attitude towards the scheme was one of optimism: if the government can make a number of tweaks to the system, the CfD could represent a strong support scheme for the solar sector.

Tess Sundelin, managing director of Green Hedge explained: “We need to ensure that the changes that we are asking for are manageable and achievable in a suitable time frame, without breaking their back to do it.”

Sundelin outlined her belief that the sector should be pushing for a reallocation of budgets as a priority – putting forth the argument that more money in the ‘competitive’ CfD pot would result in cheaper electricity for the energy bill payer.

Ultimately, the suitability of the CfD scheme to support utility-scale solar will largely depend on how effectively the industry can lobby the government to enact the changes outlined above. Given the industry’s poor history of successful lobbying, the sector must ensure that it is engaging with the government with a unified voice — a critical aspect the solar industry is sorely missing.