Analyst concerns mount as inaccurate cost data emerges from DECC

The Department of Energy and Climate Change (DECC) has published a report outlining the projected costs of solar photovoltaics in a bid to work out how to set the future feed-in tariff rates. The Solar PV Cost Update, which was compiled by Parsons Brinckerhoff (PB), was put together in just four days, prompting fears that Government is yet again working with inaccurate cost data.

PB’s 28-page report details future cost projections in light of market views on potential trends in both component and installation costs. However, the findings of the report were largely based on data gathered during the summer of 2011, and are therefore now considerably out of date.

Ash Sharma, Senior Research Director for IMSResearch's PV Research Group said: “My main concern on this report is the rapid nature in that it has been pulled together. It was produced in just four days and is being based on pricing data collected more than six months previously. In the PV industry six months is as good as a lifetime!

“Prices have changed considerably over that time and the prices we see are quite a bit lower than those they’ve collected. The danger is that this rushed report could lead DECC to again underestimate market demand and uptake and thus budgets and tariffs are not set in a sensible way.”

The sources of data used for the report are also being questioned, as current cost values were generated using answers from just 11 UK solar installers as well as “informal discussions” with two developers of larger scale UK projects, supply chain parties and “anecdotal evidence from DECC.”

“For large systems the report is based on very few data points and anecdotal evidence – certainly nothing solid enough to make a reasoned decision on,” commented Sharma.

There is also concern surrounding the definitions used in the report, as the main body of the report speaks about Capex, but the Annex separates again between Fixed and Marginal cost.

Dr. Henning Wicht, Director and Principal Analyst of Photovoltaics at IHS iSuppli, said: “I don’t see this distinction outlined in the text. We can suggest that the ‘fixed cost’ relates to one-off electrician work and connection cost, whereas ‘marginal cost’ relates to modules, BOS and labour per kW. The definitions are just not clear.”

“The other thing I would point out is that the report makes no distinction between the type/quality of modules and inverters being used (it doesn’t appear that when they asked for the quotes they paid attention to the type of module being offered). This ultimately greatly impacts efficiency and yields and hence FiT payments and ROIs. This appears to have been ignored and is major factor,” concluded Sharma.

It is hoped that tomorrow’s announcement on the future of the feed-in tariff scheme will provide more certainty for those working in the UK solar market. If an annual degression model based on capacity is adopted, the cost analysis outlined above could have little impact.