Industry reaction to solar RO closure for >5MW in 2015

The Department of Energy and Climate Change (DECC) has revealed plans to remove support for solar developments over 5MW from April 2015.

The department says that the recent growth in the large-scale solar sector, fuelled by RO support, has taken up more budget than the government has anticipated and that the cut was necessary to preserve budgets and control spending. However, the industry has reacted furiously, accusing the government of a “witch hunt”.

Paul Barwell, CEO, STA:

The costs of solar power have kept on falling, in large part thanks to the growth and learning in our successful UK industry. We had forecast solar could be cheaper than onshore wind by 2018, but for this to happen we needed stable policy sustaining a high-volume market. The Government is actually moving to slow down solar’s cost reductions towards grid parity.

The industry will be alarmed by these proposals and surprised to be singled out for harsh treatment. It does look like the Government is seeking to define the energy mix and hiding behind the false excuse of ‘budget management’.

DECC challenged us to work with communities to ensure solar remained popular as the large scale sector developed, and we’ve done just that.  With our ‘10 Commitments’ good practice guidance published last summer, and the National Solar Centre’s biodiversity best practice guidance just last week, the sector has developed high standards and a legacy to be proud of – public support for solar and large scale renewables is the highest it’s ever been. Today’s proposals are no just reward. If these proposals go through they will knock the industry’s extraordinary progress back, and actually reduce healthy competition in the renewables sector.

Seb Berry, head of public affairs, Solarcentury:

Today's announcement is unnecessary and totally at odds with the government's desire to reduce the cost to energy bill payers of delivering the 2020 renewable energy target. Following close behind recent unhelpful media coverage of onshore wind policy, this policy proposal will undermine investor confidence in the entire UK renewable energy sector, by removing at a stroke the short and medium-term policy certainty required for major project investments. It is very surprising that such a deeply damaging policy proposal has been cleared by the Treasury.

It is equally surprising that the government is trying to justify this proposal on cost grounds. Large-scale solar is already significantly cheaper than offshore wind and will be competitive with onshore wind by 2017. In deliberately setting out to strangle the growth of cheaper solar from 2015, Secretary of State Davey can no longer claim that government policy will deliver the most cost-effective mix of technologies by 2020.

It's extremely disappointing that these RO proposals were not tested out first privately with senior industry representatives in the Minister's top level solar strategy group, which includes Solarcentury. The reality is that large-scale solar PV in the UK is one of, if not the major success story of coalition green energy policy since 2010, but now the outlook beyond the end of this financial year is extremely uncertain.

Ben Cosh, TGC Renewables:

DECC’s justification not to let solar PV compete with offshore wind for CFD is not defendable. They cite potential cost reductions in offshore wind of 25-30% by 2030. I.e. from £140/MWh now to £98/MWh by 2030. The government must be being black mailed by the big six who have vested interests in offshore wind.

Juliet Davenport OBE, founder and chief executive, Good Energy:

We will be meeting the Secretary of State today to set out our concerns about any reduction in support for larger scale solar projects. We believe the government should be providing solid, stable support for such developments and not disadvantaging this growing sector.

Today’s announcement from DECC for proposals to close the renewables obligation to all new 5MW developments from April next year is therefore very disappointing. This will undermine growth, investment and jobs in a sector which is helping to introduce more competition and new players into the energy market. This decision will bring further instability and uncertainty to investors, and we will have to reconsider our portfolio of investments as a result.

Solar offers the opportunity for diversifying investment away from the traditional big six, bringing with it the potential for job creation and further investment. Solar developments also help the growth of small-scale new generators as well as communities who want to generate their own clean energy, have viable alternatives to the big six and reduce their energy bills – paving the way for the ‘big 60,000’!

The solar sector needs a stable policy framework from which to grow – we believe if properly supported now, it could compete equally on cost with other technologies by the end of this decade. What it does not need is revised levels of support and political uncertainty, which will serve only to stifle investment, growth, competition and ultimately, the opportunity to make a meaningful low-cost, low-carbon contribution to the UK’s longer-term energy security.

Alasdair Cameron, energy campaigner, Friends of the Earth:

Every time a renewable energy technology starts to do well it gets hit by a wave of government uncertainty, which pushes up costs and threatens jobs and investment.

Attacking large-scale solar parks, while doing almost nothing to boost rooftop systems, is another sign of this government’s piecemeal approach to policy making. Solar power is cheap, popular and essential for tackling climate change and energy security. 

UK renewables should be the cornerstone of future UK energy policy – not fracking.  But yet again the government has totally underestimated its potential.

Jonathon Porritt, Nick Boyle and Ray Noble at Solar Media’s Large Scale Solar UK conference:

Dr Doug Parr, chief scientist, Greenpeace:

Solar is hugely popular in the UK, costs are falling faster than for any other energy source, and the latest technology is on track to beat nuclear on price. Sowing uncertainty for a key source of clean, homegrown energy, as ministers are doing, makes no economic, political, or strategic sense.

Far from hitting the big energy companies this compulsive policy tinkering sucks confidence out of independent generation and leaves the future of community solar projects up in the air – yet independent producers are our best hope to challenge the big six’s stranglehold on the market.

The fracking industry makes wild claims about getting us off energy imports and gets everything it wants from Government even though it’s locally unpopular and production is a decade away. Instead an industry like solar that enjoys strong public backing and is delivering electricity and jobs right now has to keep reacting to routine cycles of uncertainty and reviews.

Ray Noble, Co-Chair of DECC’s Solar Strategy, STA PV specialist:

The Coalition appears to be playing politics with solar rather than praising its success in delivering significant amounts of much needed power from safe and secure sunlight. The Government should be backing this incredibly popular technology and taking care to understand its exceptional benefits, including the fact that it substantially reduces transmission losses by generating electricity where it is needed.

Karl Harder, co-founder and joint managing director, Abundance Generation:

Solar power is not only a new, clean energy source supported by 85% of the UK public, but it's one that's being invested in too. The key to diversifying our energy supply, keeping prices down and cutting emissions is ensuring stability for this growing industry - not stop start policy changes. Ultimately investment will continue, and flow into rooftop solar, such is the demand we're seeing, but really - what kind of hovernment would stop the most democratic, clean energy source from thriving?

We must separate decisions on energy from political whims once and for all. If politicians cannot be trusted to not put winning short term votes ahead of sensible energy policy then we should vote to take such decisions away from them. Similar to Gordon Brown’s transfer of interest rates policy to the Bank of England, renewable energy tariff decisions should be dealt with by a non-political body. The British public has moved on, they're looking for win-win investments and old school government thinking is being left behind.

Adrian Scholtz, head of renewables, KPMG

The latest proposals to limit the subsidies paid to large-scale solar farms should come as no surprise to the industry, given the recent rhetoric from DECC. This reinforces the government’s desire to move away from solar PV installations on agricultural land and move towards commercial rooftop installations. 

There is already a strong market for solar PV in rooftop applications and low-cost capital is increasingly being directed at these projects. Investors are attracted to the more steady energy output profile that solar PV achieves in comparison with wind energy.

Nick Boyle, CEO, Lightsource Renewable Energy

Firstly it is important to understand that the proposed changes announced today are nothing whatsoever about government wanting to prevent solar farm deployment as they are well aware that solar remains the most popular of all energy technologies. We are at the cusp of a solar revolution that will deliver much needed energy security to Britain and government recognise that the large scale application of solar is currently the most efficient and cost effective form of electricity generation that we have.

Following a meeting with the Secretary of State Ed Davey today, we are considering our position as clearly the challenge for us and the entire solar industry in the UK is within the detail of the CFD regime itself; which solar is now being forced into and more specifically, how this system is going to be implemented for solar; which clearly has different considerations to other technologies.

Roy Bedlow, chief executive and co founder, Low Carbon

The UK government has committed to a challenging climate change goal of an 80% reduction in greenhouse gas emissions by 2050. While this should be encouraging investment in and support of renewable energies, recent actions such as DECC’s Consultation on changes to financial support for solar PV demonstrate a continuing hesitancy to fully support large scale solar energy generation in the UK. We feel that this is a mistake, as the solar industry represents a strong opportunity for the UK to plan for the future while diversifying its energy supplies. In an age where energy security can never be fully guaranteed, especially with recent events in the Ukraine and Russia, the UK increasingly needs to safeguard its energy supplies by developing alternative sources and reducing dependence on fossil fuels.

What we would like to see is greater consistency in policy definition in this area. This will ultimately allow for continued investment to flow into the solar and renewable energy industry as a whole in the UK. It is a disappointment to today see large-scale solar fall foul of government policy.

We believe that a low-carbon economy will only be achieved by way of an energy market in which use of traditional fossil fuels is supplanted by renewable technologies. The government should therefore take all necessary measures to support this vision for the benefit of the UK economy

Merlin Hyman, chief executive, Regen SW

The growth of solar energy has been a success story in the south west, creating thousands of jobs and secure local power for thousands of houses.

The government’s decision to propose changing the support system from next year will be painful for a sector which has already seen rapid policy change and who need clear long term policy framework in which to operate. These regular policy shifts create increased risk for the investors and will make it hard to raise the investment we need in UK renewables that we need to deliver on our targets.

However, we think the solar sector will adapt. There is still a support system provided by the Contracts for Difference regime that developers can work with on larger projects. There is also the opportunity to focus on rooftop solar where government support remains strong.

Perhaps most significantly the government has also proposed enabling community groups to develop solar projects up to 10 MW under the much simpler Feed in Tariff. This points towards a partnership between developers and community groups at the heart of the future of renewable energy development.

Regen SW believes there continues to be a bright future in the south west for this revolutionary technology.

Dr Nina Skorupska, chief Executive, REA:

Clear, stable policy attracts investment, creates jobs and drives growth and cost reductions in renewable energy technologies. However, there is not much clarity or stability on show today. The piecemeal approach to the CfD scheme leaves a lot of questions still unanswered, and the lack of capacity ring-fencing for most technologies compounds that uncertainty. Without knowing what DECC intends to do in terms of setting out the budget, making sense of CfD proposals is like trying to complete a jigsaw puzzle without seeing the picture on the lid.

Solar power meanwhile is subjected yet again to devastating instability. Government must ensure that policy drives and rewards technology cost reductions with a stable trajectory of gradually declining financial support, not the cliff edge the Government is proposing for solar.

Robert Goss, managing director, Conergy UK:

Let’s wait on the results of the consultation but DECC’s proposals are more of a gradual recalibration than an earthquake for British solar. Rather than disappearing overnight, we would just select sites in a different way. Many large projects would still be built under the CFDs, and ROCs would remain in force in Northern Ireland, where development would become very competitive. In other parts of the UK there would be a downsizing of the scale of many new solar farms, which is politically attractive, but offers encouragement for sites that have been neglected over the last few months

Dane Wilkins, head of Renewable Energy Capital, JLL:

The headline subsidy announcement is a shock for the industry and puts into doubt all projects in the pipeline with expected commissioning dates post April 2015. In proposing to remove the Renewables Obligation (RO) support level for solar project greater than 5MW from April next year the Government has effectively slammed the brakes on large scale solar in the name of safeguarding the levy control framework budget.”

While developers of large scale solar will still have the option to apply for Contracts for Difference under the new Electricity Market Reform allocation process this is an untested route to market and will need to be scrutinised in much greater detail before investors will commit to this new subsidy mechanism.”

The effect of this announcement will be strongly felt by the UK solar industry in the short term particularly for developers who have projects that may not satisfy the onerous criteria enabling them to be considered for support under the RO beyond March 2015. The Government should seriously consider its position on this front to ensure developers who have invested significant time and money in developing projects are not left high and dry in the wake of this unexpected announcement.

Toddington Harper, CEO, BELECTRIC UK:

Solar power has the potential to make a major contribution to Britain’s energy mix. Yesterday’s announcement by DECC presents some challenges for the development of solar which BELECTRIC UK is committed to overcoming in partnership with industry and government to deliver on the promise of solar for Britain’s energy future.

Solar needs a stable subsidy regime to attract investment. We look forward to responding to DECC on the detail of the proposed CfD arrangements for projects over 5MWp. We’re also keen to work closely with DECC to help remove complexities associated with community projects, to help maximise their uptake and deliver the government’s Community Energy Strategy.

Solar Power Portal will continue to update this post with all the latest reaction as the story progresses.