Solar strike prices announced by government

The government has released the strike price that large-scale solar will receive under the new Contracts for Difference mechanism.

From 2014, large-scale solar developers will receive £125/MWh – a rate the government claims is broadly in line with predicted Renewable Obligation funding.

Below are the draft strike prices for solar until 2019:

Year

Draft Strike prices (2012 prices)

Potential 2020 Deployment

Sensitivities (subject to VfM and cost reduction)

2014/15

£125/MWh

 

 

 

2.4 -3.2 GW

2015/16

£125/MWh

2016/17

£120/MWh

2017/18

£115/MWh

2018/19

£110/MWh

For comparison, offshore wind developers will be able to claim £155/MWh from 2014 while onshore wind developers will be eligible for £100/MWh.

Announcing the renewable strike prices, Danny Alexander chief secretary to the Treasury, said: “We set the price at the level we need to bring forward sufficient investment, but not a penny higher. Industry asked for certainty. We’ve given it. So now they need to get on with it.”

Energy secretary Ed Davey echoed Alexander’s sentiments: “The strike prices for renewable technologies announced today aim to make the UK market one of the most attractive for developers of wind, wave, tidal, solar and other renewables technologies, whilst minimising the costs to consumers.

"This will help boost homegrown sources of clean secure energy, and enable us to decarbonise the power sector, with renewables contributing more than 30% to our mix by the end of this decade.”

However, sections of the solar industry have reacted suspiciously to the government's predicted level of potential solar deployment by 2020. In order to meet Greg Barker's stated ambition of 20GW of solar by 2020, industry insiders had assumed that large-scale solar developments would play an integral part in reaching the figure. However, the government's projections that large-scale solar under the CFD will account for for a maximum of 3.2GW up to 2019 cast doubt on the extent that government will support the development of large-scale solar in the UK.

Reacting to the news, Paul Barwell CEO of the Solar Trade Association told Solar Power Portal: "The deployment under electricity market reform [EMR] looks disappointingly low for solar, however, having spoken with representatives from DECC we understand that that this will be in addition to proposed deployment under the RO. 

"So we think it is quite possible, ignoring impact of [Europe's] anti-dumping [measures against China], to have 1.5GW/year under the RO for the next three years, plus the EMR potential meaning we land up with 8-10GW of large scale solar. With the possibility of roof tops under FIT’s through to 2020, that means we can achieve that ambition of 20GW. However, we firmly believe the potential in the UK is even higher than that."

The STA has also expressed concerns over the risk to independent generators under the CfD model. The association is concerned that the increased risk born by independent generators will lead to less attractive Power Purchase Agreements (PPA).

STA head of external affairs Leonie Greene explained: “Because of the additional risk the CfD model presents to independent generators like solar power, we would expect to see the additional cost of risk factored into the strike price.”

“We have been backing the Green Power Auction Market as a solution for independent generators seeking to sell their power under the CfD model, because it is a low risk investment model that would support a lower strike price, and therefore deliver savings for consumers.

“This 'route-to-market' issue for independent generators has yet to be resolved, yet independent generators are expected to deliver up to 50% of the investment we need to 2020. The strike price will need to reflect the risk attached to the solution. We are waiting to engage with Government on a solution to the route-to-market issue that secures the confidence of industry and investors.”