CfDs ‘not the focus’ of investors and developers, says PwC survey

Contracts for Differences will “not be the focus” of solar investors and developers in the year ahead according to a survey conducted by PricewaterhouseCoopers and the Solar Trade Association which also raised concerns over spiralling grid connection costs.

The controversial new subsidy regime replaced Renewable Obligation Certificates at the end of March this year, requiring ‘established' renewable energy projects of more than 5MW in capacity to compete with each other for subsidy support.

However the regime has gotten off to a shaky start with two of the five solar projects to clinch contracts having done so at the uneconomical strike price of £50p/MWh, leading both of them to be cancelled.

The survey concluded that concerns remain within the industry that solar is at risk of becoming a victim of its own success despite what John Dashwood, director of energy and utilities at PwC, said was evidence of solar’s “maturity” as a cost-effective and tested technology.

“Solar has gained trust in the financial community and now represents an important part of the UK economy but recent changes have created industry uncertainty at an important time.

“In particular, survey respondents are yet to be convinced about whether CfDs will work for them. With any renewables technology, viable returns on investment are key and the survey reflects wider industry concerns about costs and support in the new policy environment,” Dashwood said.

The uncertainty over the CfD process was evident in that almost two-thirds of respondents said they would not focus on the regime in the short term, something which STA chief executive Paul Barwell said was a concern going forward.

“Considering this is the only route to market for utility scale installations once the RO closes in 2017, we have our work cut out to ensure smaller businesses can be part of the bidding process in future auction rounds,” Barwell added.

Spiralling costs of grid connections also raised the ire of those surveyed with around 80% having experienced an increase in costs over the last year. Respondents made 254 grid applications in the last six months, but only 34 accepted offers.

James Cadzow of PwC told the audience at an STA-organised event earlier this week: “It will come as no surprise that grid connection was at least partly to blame for all of the projects that were not completed [in time for the RO deadline].

“One company alone, rejected 48 out of 55 approvals due to cost issues around grid connections. I suppose in a time when perhaps you would expect  grid connections to be coming down, four in five developers noticed an increase in costs compared to a year ago.”