Recent and proposed new changes in support for PV solar in the UK have been controversial. But its future is still bright.

Recent and proposed new changes in support for PV solar in the UK have been controversial. But its future is still bright.

The policy aims of the feed-in tariff scheme were to create more demand, to bring down the price of PV modules, and to increase public awareness of renewable energy. These succeeded beyond expectations. As a result, since 1 August, the tariff rate has been reduced to 16p per kWh for common domestic installations. The costs of modules have also almost halved (although the balance of system costs have not).

Are they still profitable to install? Not as much as they were; but that was silly money which all of us will continue to pay for through increased fuel bills.

In a southern UK climate, an installation with 4 kWp typically produces about 3,400 kWh of electricity per year (at favourable orientation and not overshaded). Assuming a 16p per kWh feed-in-tariff this equates to an income of £544.00.

A 4kWp system might cost around £8,000. This will take around 15 years to pay off at that rate, which represents a simple interest rate of c.6.8%.

This compares well with investing in a bank account, and, for further comparison, is the same as the reported average return on investment in small, onshore windfarms of Triodos Renewables' shares over the previous six years.

However, the further north and east you go, the longer the payback period will be, as the amout of sunshine reduces. In the north of England sunshine levels are around 80% of those on the southern Cornwall coast.

Solar electricity has received far more attention as a result of the feed-in tariffs than solar water heating, which deserves more.

In the UK, solar water heating is supported by the Renewable Heat Incentive (RHI) for the non-domestic sector, at a rate of 8.9p/kWh, which yields a similar rate of return.

Yet the latest figures from the regulator, Ofgem, show that there has been just one solar thermal installation supported under the RHI since the scheme began.

In the previous support scheme for domestic renewable energy run by the UK government, solar water heating was by far the most popular technology. It has proved over the years to be much more successful than solar PV in the UK in terms of value for money, because on the whole it is better suited to the climate.

Anyone with money to invest in solar should therefore consider solar thermal before PV.

Non-domestic solar PV

Non-domestic solar PV is a slightly different story.

It competitive with other renewable technologies supported under the Renewables Obligation (RO). Around 500MW of utility-scale solar is expected to be installed this year. Utility-scale solar PV installations in the UK currently receive support worth 2 ROCs (Renewables Obligation Certificates per MWh).

However, the government is currently consulting over whether to withdraw this support from April 2013 for schemes below 5MW. These would then have to look to the feed-in tariff for support, which has a much lower budget.

The proposed rates are:

2013/14: 1.5 ROCs/MWh

2014/15: 1.3 ROCs/MWh

2015/16: 1.1 ROCs/MWh

2016/17: 0.9 ROCs/MWh.

These rates will apply to all RO projects, including those above 5MW.

The consultation invites comment from the solar industry regarding large-scale solar PV projects, so that it can "get a more complete picture" of the likely costs over the next few years for large-scale projects.

Yet another consultation may be issued in the future regarding the exclusion of new projects up to and including 5MW from the RO system entirely, binding all but the largest of projects to the FiT scheme.

None of this affects the support offered to existing projects.

The Solar Trade Association is concerned that the effect of this would be to greatly limit support for this scale of deployment of the technology, whose developers are quite different from those at the domestic scale, often farmers and other landowners looking to diversify their income.

The UK’s largest solar farm is at Westmill, a community-owned scheme located just outside Swindon: a 5MWp community-owned ground-mounted array financed by the Feed-in Tariff scheme, expected to generate 4.4GWh per year. But this will soon be beaten: Lark Energy is currently developing a 30MWp, 150-acre solar farm at Wymeswold near Loughborough.

More ground-mounted solar farms up to 40MW in size are being planned in the south of England, and were expected to be increasingly popular until this consultation announcement, with up to 1GW expected in the next two years.

The future of subsidies

Subsidies for PV everywhere in the world have suffered much more volatility than for wind power over the last two years, partly due to installed PV capacity rising faster than predicted, causing increased balancing costs for grid regulators to maintain the stability of the grid.

In the recession, governments are also worried about household end-user energy costs and fuel poverty. While high oil and gas prices is the real reason for high energy bills, governments have no control over this but can control subsidies to renewables.

Subsidies for PV come under greater pressure than other renewables because the ratio of subsidy to power output is higher for PV than any other renewables.

In the UK this is even more true than central southern Europe. In Europe, of the €22bn spent subsidising renewables last year, half went to solar PV, but its output constituted less than 6% of renewables’ total output over Europe as a whole.

This means that in the UK climate, PV doesn't give the best value for money if your aim is saving carbon and you have a choice of different power sources. For example, district heating with combined heat and power, wood pellet boilers and several forms of insulation are all at least seven times cheaper and ground-source heat pumps are around five times cheaper per tonne of carbon saved.

So, if PV is expensive, comparatively speaking, then why use it at all?

Why use PV?

Many renewable energy technologies are site-specific. They either depend on the local geography, like an appropriately windy site (wind power), a nearby water course (hydro power) or marine currents (marine current turbines). Or they require a reliable stream of fuel supply such as biomass (wood pellet/chip stoves or boilers), burnable waste (energy-from-waste) or organic matter (anaerobic digestion).

Other technologies, such as heat pumps or bioliquids, don't suffer from this disadvantage.

Silicon or thin film PV is site-specific in the sense of its need for unshaded, appropriately angled locations.

Some such locations may not have any other renewable resource available; for example in urban areas the wind is generally too turbulent to be useful for wind turbines, but there are plenty of empty roof spaces. Here, its use may be welcomed if one is not worried solely about the return on investment but wants to feel better about using a clean source of electricity. There may also be other incentives or legal requirements to cut carbon use.

Despite subsidy reductions, within the next five to eight years, lowering production costs and revolutionary technological innovations will mean that solar electricity will be poised to find even more widespread applications.

Some of these will be distributed grid-feeding installations on many new and retrofit buildings in the business sector in the UK, others will be niche applications.

The future of PV in the UK will always be as a niche filler, but it has its place in the overall mix.


NOTE: This article uses extracts from my new ebook: Solar Photovoltaics Business Briefing, from publisher Dō Sustainability.

Special offer to EAEM readers: Enter code SPB12 for 15% discount when you order this book from
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