“I’m looking forward to writing on renewable energy for The Eco Experts with keen anticipation. The rapid growth in this sector in the 2010s is exciting and development over the next decade and more will be world-changing.”
This is the first article in a series from Gareth looking back at the growth of the solar industry and offering analysis on what we can expect moving forward.
Energy and climate change minister Greg Barker made a bright case for solar panels on householders’ roofs this month, as well he might. In an interview in the Daily Telegraph (February 4th, 2014) he described solar PV (photovoltaics) as a “really attractive financial proposition”, and a better investment for some people than a traditional pension.
His comments came the very day Ofgem announced the Feed-in Tariff (FIT) rate would be cut by 3.5% from April 1st.
Image Source
What is the Reality?
A cynic might conclude that the minister was diverting the media from bad news, that reduction to the FIT. And a quick check of Google’s news tracker showed good coverage for Barker, and scarcely a mention in the national papers for the FIT cut.I’m not sure the media still fall for that old trick, and the truth is that today, early 2014, a light trim to the FIT is not a big issue, The price of panels and the costs of installation continues to fall. Speaking on BBC 5 Live’s Breakfast on Tuesday (Feb 4th) business analyst Mickey Clark said the price of installations had fallen from £13,500 in 2010 to £4,500 today. So it’s hard to the industry, and consumers, to howl in outrage at the latest expression of what is known in beurocratic jargon as quarterly degression - where tariff changes are cut, or not, depending on the uptake of solar over the preceding three months. This latest cut is unlikely to dent what seems to be growing enthusiasm for solar panels.
Energy minister Greg Barker said
“You get a guaranteed tariff for 20 years and if your panel is well-sited, it could yield 8% or more. That is more than an annuity, particularly if you are in your 50s or early 60s.”
Currently the feed in tariff is 14.9p per kWh for homes with an Energy Performance Certificate rating of C or above. Less well insulated properties - bands D or below – are paid 6.61p. From April 1st the FIT paid to domestic users (Installations of less than 4 kW) will fall to 14.38 p. The lower rate for less well insulated properties remains at 6.61p. The tariffs are good for 20 years and are index linked. The income is tax-free.
Band (kW)
Generation Tariff between February 1 and May 1 2013 (p/kWh) Generation Tariff between May 1 and July 1 2013 (p/kWh) Generation Tariff between July 1 and October 1 2013 (p/kWh)4 or less 15.44 15.44 14.9
4 - 10 13.99 13.99 13.5
10 - 50 13.03 13.03 12.57
50 - 100 11.5 11.1 11.1
100 - 150 11.5 11.1 11.1
150 - 250 11 10.62 10.62
250 - 5,000 (or 5mW) 7.1 6.85 6.85
Stand alone 7.1 6.85 6.85
Compare today’s relatively placid FIT landscape with the situation in the spring of 2012, when things looked grim for solar power in the UK. The government had announced deep cuts to the Feed-in Tariff, then at a very attractive 43.8p per kilowatt hour (kWh). Installers and environmentalists warned that this would stall or even smother a promising, emerging industry.
Ministers argued that over-generous payments to homeowners and companies threatened to drain the scheme’s budget.
The industry took the government to court and the decision was ruled unlawful. But the reduction went ahead anyway.
There is no doubt that the sudden cut caused upheaval in the industry, brought job losses and damaged consumer confidence. It now seems, however, that some of the more apocalyptic warnings were overstated. The industry, in part through innovating and adapting, has recovered faster than many had imagined.
What to Expect from Solar Panels in 2014
So two years later is it possible the government was right all along, with the fall in subsidies broadly matched by deep cuts in the cost of making and installing solar panels? Householders fitting them still get a better deal than they would from a bank or building society, even under the now much lower tariff.2014 opened with good news, that the number of installations was approaching half a million. Around 478,875 of those schemes were on domestic roofs. In hot and sunny weather, such as the heat wave of July 2013, solar power can generate around 2% of UK demand over a 24-hour period. But because solar panels produce electricity in peak daylight hours, this comes to around 6% of all electricity needed in Britain between 10am and 5pm.
Now a Report by researchers from the Grantham Institute, Imperial College, ) suggests solar energy could be in for a massive expansion in the UK, with the prospect of panels on 10 million homes by 2020.
Solar power has certainly come a long way in the UK in this millennium. It started from a very low base. The rate of solar domestic installations, negligible around 2000, then rose slowly through the 2000s.
The big advance for solar in the UK has come entirely in the period of the current Parliament. The first key date was April 2010, with the introduction of the FIT, paid to homeowners, business and organisations such as schools and community groups that generate their own electricity through small-scale green energy schemes, including solar panels. This was a decision by the previous, Labour, government, retained by the Coalition. It was to help the UK government to meet a EU target to generate 15% of electricity from renewables by 2020.
What Have we Learnt?
From the outset it was a highly attractive deal and it triggered a boom in installations. Home owners received 43.8p for every kilowatt hour generated from their solar panels in schemes under 4kW capacity (generation tariff). And an extra sum for an estimated net amount exported to the National Grid (export tariff).Making full disclosure, I was one of those early adopters. We are estimated to recoup our outlay within another five years. Thereafter it is all profit. Clearly this “golden egg” situation couldn’t last.
Paralleling the fall in subsidies, down 65% in three years, the cost of an average domestic solar power installation is estimated to have fallen around 50 per cent between 2010 and 2012 (in part because of the massive production expansion in China), according to the Department of Energy & Climate Change (DECC) - UK Solar PV Strategy Part 1: Roadmap to a Brighter Future, October, 2013.
(Returns still vary widely among households, depending on location and domestic energy use – more energy used at home means less to export to the grid, and so a lower export tariff.)
There is an extra dimension to FIT. The tariffs are paid through a levy on energy bills, not from the public purse. This became a big issue at the end of 2013, when the media and the Big Six energy companies campaigned to have this cost removed. However it was not affected by the December 2013 Autumn Statement.
It would seem that the industry has weathered some very politically cloudy conditions, with solar energy attractive once more to homeowners and small businesses alike. Indeed, the only area where you tend not to see many solar panels is on new, private housing. The big builders appear reluctant to add even a small cost to the price of the houses, even though there would be economies of scale, and many of those buyers would be able to recoup the additional outlay within a few years.
So What of the Future?
First, solar is popular. In UK Solar PV Strategy, DECC notes: “Recently solar received the highest public approval rating of all renewable energy technologies at 85 per cent.”Setting targets is full of uncertainties. One big player in the industry once predicted solar prices would be on a par with energy produced by fossil fuels by 2013. Most analysts believe this won’t now happen now much before 2020.
One way or another, with the industry trading under calmer skies, solar energy could be in for a massive expansion in the UK. Ten million homes in the UK could have their roofs fitted with solar panels in the next six years, according to researchers at the Grantham Institute at Imperial College London.
That number - with more than a third of households generating energy from the sun - would allow the UK to produce about 6% of its overall annual electricity needs from solar power, with as much as 40% of that requirement coming from the panels on sunny days in summer, by 2020. And our notoriously gray and grim weather does not make the UK an unsuitable place for solar power, as solar panels work on daylight, not necessarily direct sunlight.
However achieving that target would require the government to put in place policies to encourage the installation of so many more panels on British rooftops, says the Grantham Institute. (It isn’t as if there are planning restraints. Under ‘Permitted Development Rights’ solar panels are not subject to planning permission on the majority of houses. However permission might be required in conservation areas or on listed buildings.)
