The IEA has warned that the UK’s large-scale solar sector faces an uncertain future once the renewable obligation (RO) scheme closes at the end of March next year.

Speaking at the launch of the energy watchdog’s annual 'Medium Term Renewable Energy Market Report', it said predicting utility-scale solar’s prospects beyond the immediate future was difficult.

“The UK is right now the fastest growing utility-scale PV market in Europe due to the strength of the short-term incentives under the RO. We see that playing out in the next year but we see significant uncertainty over how durable that utility-scale forecast is,” said Greg Frost, head of public affairs at IEA during a conference call with journalists. Frost added that the cost of solar was slightly higher than in other parts of Europe.

Projects over 5MW seeking connection after 1 April 2015 will have to apply for the contracts for difference (CfDs) scheme. The competitive system pits solar against onshore wind and the first auction takes place in the Autumn, despite some details of the policy remaining unknown.

“It remains to be seen how the implementation details of the CfD will be adapted through the state aid guidelines of the EU and the higher political decisions made on the 2030 [EU climate and energy] framework,” said Paulo Frankl, head of renewable energy, IEA.

“At the moment I would say it is clearly an important incentive in the UK…but, it is not the sunniest place in the world. I see an upside potential for distributed UK but limited potential for utility-scale,” added Frankl.

Leonie Greene, head of external affairs at the Solar Trade Association (STA) said there was still work to be done to improve the new policy.

“It seems the IEA share our serious concerns about the suitability of CfDs for utility solar. The renewables industry has wider concerns about their suitability for SMEs in general. This is clearly a mechanism that favours big utilities that can shoulder big risks,” said Greene.

“The STA is continuing to engage DECC officials and ministers on a series of fixes, including more regular auctions and legal clarity on the requirement for a grid ‘agreement’, which is in fact just a grid offer. It is in all our interests for government to provide effective support for solar – we need just one final push to achieve subsidy-free solar and total solar independence. But we will only get there if we are given stable and effective support,” she added.

The government has signalled a preference to drive growth in the commercial rooftop sector. The UK's largest developer, Lightsource Renewable Energy, has established a commercial-scale unit.

Additional reporting by Andy Colthorpe.