Up to 10% of large-scale solar projects rushing to connect to the grid by March 31 could be at risk of missing out on renewable obligation funding, according to research carried out by business rescue specialist, McTear Williams & Wood.
The company warns that developers struggling to meet the April renewable obligation deadline for solar projects over 5MW will result in business failures.
McTear Williams & Wood explains that projects which fail to connect to the grid in time to receive RO support will be forced to apply for funding under the Contracts for Difference (CfD) regime which offers no guarantee of subsidy as contracts are awarded on an auction basis.
The company adds that “no investor” will be interested in these solar farms that fail for RO support without a CfD contract behind it, something that will put many developers in financial difficulty. The company also forecasts that capital values will be around 20% less under the CfD regime compared to the RO.
Commenting on the research, Andrew McTear of McTear Williams & Wood said: “Over the past couple of years we have seen several high profile failures with developers unable to complete projects ahead of scheduled subsidy reductions. That has triggered onerous penalties which have driven some into insolvency. This time it is likely to be a lot worse.”
The previous drop in RO support from 2 to 1.6ROCs saw McTear & Williams & Wood appointed as administrator for SAG Solar UK who failed to connect the 5MW Ford Farm in time. The company managed to bring in new financial backers which enabled the project to continue, with the project now operating successfully.
McTear added: “We expect there will be a number of players in difficulty in the run up to the March deadline. Many developers seem to have been over-ambitious in what they can deliver and face onerous penalties for failure.”