As I am lying in hospital during the election post mortem, David Cameron has only just announced Amber Rudd as the next Energy Secretary. With all this unexpected change, I asked for an extension to write this article and two weeks later I am still struggling. And I wish I had never started in the first place. A review of financing should be pretty straightforward. So why is this so difficult? Fundamentally, it’s down to the political landscape and the confusion and uncertainty that is causing.

Ahead of the election, The Times published a piece stating that after the US, the UK is the largest commissioner of “utility scale” solar, with 408 plants. The Times referred to Wiki Solar as its source, which in itself is very worrying – the same as referring to Wikipedia for budget policy. Not good and more than a little inaccurate! One of our group companies, WiseEnergy, manages 1,500 utility scale solar plants – predominantly in Italy where there is over 18,000 MWp installed.

The article ignored both the massive state backed commissioning programme in China and the post-Fukishima solar programme in Japan. It even ignored the 34,000MWp in Germany (growing by 4,000MWp last year). Somebody would have briefed the Times with enough clout to capture column inches during an election. The Times inadvertently highlighted the real problem – that the only viable sources of what is installed is not government – government spends its time being surprised by what the industry has achieved and then engages knee first, brain second.

The other thing to note, very different to government briefings to the Torygraph, is that The Times article was celebratory and came on the heels of other briefings for the protection of apple trees that UKIP and the Conservatives thought would grow so very well in grade 3 and 4 land.

Then we had the election itself. SNP is very pro-renewables, as is Labour (Ed did write the Road Map to the Low Carbon Economy), while UKIP is still the biggest challenge we face. They were promoting (by default) the tooth fairy energy policy (no to nuclear, shale, Europe and therefore the interconnects, wind, anything in their backyard that was not pretty – resulting in lights being turned on by the tooth fairy when nothing else exists). It was the fear of UKIP and its influence on the Tory backbenches that drove a schizophrenic energy policy with rapid degressions, extensive grace periods and confused briefings. But UKIP only got one seat. Right? Maybe, but nothing has changed for the Tories as the backbenches will be cognisant of the 4,000,000 UKIP votes. It doesn’t matter how long you’ve been an MP, you still need constituency votes.

So where does the government find itself? It has an increasingly rapid programme for the decommissioning of coal plants, especially as falling gas prices are bringing back on line gas plants previously mothballed; a stalled nuclear programme, where EDF has released over 200 staff pending negotiations; pressure in parliament where a 12 man majority may not be enough – especially as devolution and EU referendum may be on the cards – and pressure outside parliament as MPs look to their constituencies. Cameron has appointed a renewables supporter to head up the DECC. But she comes with shale baggage, which is not particularly renewable friendly. Her background suggests another minister that understands “big” and how to manage it – like shale, nuclear and offshore wind. The government has a full agenda. To rebuild UK infrastructure, long-term jobs, build industry – this will require investor certainty which may, where subsidies are involved, clash with Austerity 2.0. There is a lot going on here, so what are the government intentions? I don’t know and I don’t know if they know.

The ‘good thing’ the government talks about now is the support for the small business man. Solar is small. The largest sites look massive to us – 49MWp with a budget of what? £55 million? But when compared to an offshore windfarm, solar is small. Which brings me to CfDs. This mechanism is designed for the ‘big’. Big balance sheets, larger teams, large economies of scale. The solar industry is small. Small developers, small EPCs. We may think we are big, but compare the biggest – like SunEdison – to SAIC or AECOM, Westinghouse, GE, EDF or RWE Innogy and the difference in scale is apparent. These are the big EPCs and they play in wind, gas, oil and nuclear. If the government is serious about small businesses, it will need to reform CfD or at least look at the ROC and FiT Programme as the long term model for new solar as opposed to a bridge to a CfD world.

What about the solar industry?

We are ready but are being held back vis-a-vis other technologies for two fundamental reasons; firstly costs. Developers cannot reduce costs unless the Minimum Import Price is removed. A new price of €0.56/kWp sets a hard floor and only so much efficiency can be achieved in balance of systems. The second reason is project right costs. Again, we live in the world of the small, with small developers seeking profit maximisation in an uncertain market. The end of ROCs for larger projects has resulted in a dearth of project rights as developers shift investment and risk to smaller plants. In the short-term this has inflated price to silly levels and as new stock hits the market these prices will reduce but with tariff uncertainty, shovel-ready values could well remain high.

2014/15 has been an amazing year for solar as an investment asset class. The long awaited international money finally appeared with a greater liquidity available in the market. The concept of yield companies developed in the UK, spread over the pond and came back even bigger. The cost of capital and debt came down. All of this has been predicated on certainty. The certainty of value in sterling, UK law, pipeline availability. As long as it remains true that that the UK does not favour retrospective change in law, the money will buy or fund existing assets. The uncertainty exists over new assets and, now with an EU referendum firmly on the cards, uncertainty over the sterling will increase as we get closer to 2017.

This is the crux of the matter. Money is here. Low cost money needs certainty of pipeline and asset values. If the pipeline of new assets is hampered, the money will bid for existing assets and enough of these will emerge in the next few years as EIS and VCT funds mature. Though some, maybe most, initial investors will seek to keep the EIS funded assets through refinancing, the rules are clear; assets must achieve a fair market price for investors and this means a fair and transparent market placement. There will only be so many fair market assessments a consultancy can give, only so much institutional support for sponsors and only so many times a sponsor can run a sales process with buyers to drop out and refinance in-house before HMRC gets involved or is asked by a disgruntled market actor to have a quick look. So there will always be a healthy secondary market.

So what do we see happening during 2015/16? I am hoping that solar will be left alone as government has bigger fish to fry. If it’s not then that is a problem for developers. We, the money, have options to continue growth and one of those is to firmly pass cost reductions back up the line. If solar is left alone, we will see a rebalancing of stock supply and demand, with costs realigning over time. If anything ripples this equilibrium, it will be the international money that seeks growth over total returns and financially engineers the equity returns to match their investment profile. But these buyers need scale, they need pipeline and small 5MWp one off deals will be too expensive for them. So we return to the concept of market equilibrium in what will be a rich, diverse and liquid market.

I am hoping 2015/16 is going to be a great year for solar. We have our own asset class, there is financial liquidity, cost of money is low and cost of assets will achieve equilibrium. Government has a ROC and FiT mechanism in place that maintains investor IRRs and maintains end consumer costs in line with government stated ambitions. So what could upset the apple cart? To quote Harold Macmillan “events, dear boy, events”!

But also to quote the great man “most of our people have never had it so good”.