by Finlay Colville, Vice President

One of the most popular events occurring on the fringe of the Intersolar PV show in Munich last week was a half-day session on the future prospects for PV deployment within the UK, organized by Solar Media, Ltd. under the banner of ‘Doing Solar Business in the UK.'

Currently, national pride is gripping the UK, with 2012 preoccupied with the Queen's Diamond Jubilee celebrations and the pending London Olympics. Indeed, the Olympic torch is presently undergoing a domestic publicity 'tour' whose itinerary has been planned to ensure that the flame will come within ten miles of 95% of all people living in the UK.

However, equally impressive are the recent top-line numbers being cited by various parts of the UK PV industry that the UK will have accumulated 22GW of PV installations by 2020. But to reach this landmark occurrence, will PV in the UK be required to reach the same level of exposure as the Olympic torch?

Assessing the impact of 22GW in the UK

While it was a marathon effort for the UK to reach a total PV installed base of 30-MW at the start of 2010, the subsequent events of late 2011 and early 2012 seemed more like a frantic sprint to the finish, with FIT deadlines impacting first the ground-mount segment and then the residential (retrofit) market.

Having installed over 400MW in each of Q4'11 and Q1'12, the climate today is one of recovery after the period of stop/start legal wrangles that gripped the UK PV industry until a broadly acceptable solution was unveiled in the DECC (UK Department of Energy and Climate Change) Impact Assessment of May 2012.

Even though the Impact Assessments of February and May - and the subsequent capacity-based automatic baseline degression model - revealed a more manageable mechanism for subsequent FIT revisions, it was inevitable that some of the top-line numbers would be showcased in public,  particularly the fact that the UK ‘could’ have 22GW of cumulative PV installed by 2020.

This figure would imply that over 20GW of PV capacity (equivalent to 70% of the global PV installed during 2011) will be added in the UK over the next 8 years. Does this sound plausible?

Long-term forecasts are still required

It is not the first time politicians have sought to use renewables or PV as a platform, by citing impressive installed target levels by 2020. However, given the (global) frequency of these announcements in recent years (not to mention that the lifetime of a solar panel is usually longer than the lifetime of the politicians making the claims), cynicism regarding any long term (2020) claim is not entirely unfounded.

Scrutinizing the precise methodology used as the basis of the target levels set is a somewhat academic exercise. For the record however, '22GW' was the initial 'central' or baseline estimate cited by DECC in February 2012. By May, the central estimate was pegged back to 11.9GW with an upper/lower bound that ranged from 3.5GW to 21.1GW.

Whether it should be the 21.1GW or 22GW number that is cited (as the ‘big’ number) is somewhat immaterial. And while the road to this 'big' number may not be entirely obvious, it does beg the questions: Are these figures highly-enterprising or mildly-conservative? Or, is it relevant to question forecast assumptions that use a ‘learning-rate-formula’ (linked simply to PV ‘capacity’ levels) from 2014 onwards, or domestic UK system price trends as a viable long-term indicator?

Rather, it is important to remember that the UK PV market has itself been through a rapid learning curve, moving from a run-rate of 2MW per annum until 2010, to installing over 750MW during 2011. And if rankings have any merit, the UK ranked as the 8th largest PV country last year.

However, the UK only comprises between 2-3% of global demand for each of 2011 and 2012, and in this respect, it would be rather naïve to forecast UK growth projections based only on activity within the UK. By the end of 2012, approximately 1.5% of cumulative global PV will be installed in the UK.

Using ROCs as a stepping stone

Currently, much of the UK PV industry is turning to Renewable Obligation Certificates (ROCs) as a means of re-stimulating the ground-mount sector. Not originally thought as a viable candidate for PV, ROCs date back to 2002 and were intended primarily for other forms of renewables. Accessing two ROCs, PV ground-mounts at the MW+ level now become more attractive than current FIT rates on offer.

However, banding reviews are pending on ROC subsidies (April 2013). And ‘once-bitten-twice-shy’, the UK PV industry has now learned that rapid and unexpected uptake of subsidies beyond originally intended levels is typically not left unnoticed.

But what would happen if we remove FITs and ROCs from the entire picture? Whereas the FITs were envisaged as a process to stimulate a (micro-generated) domestic industry infrastructure (with idealistic motives to reduce fuel poverty), are ROCs now just a stepping stone until positive return-on-investment on any PV install becomes simply an accounting exercise?

The PV industry is moving and changing at a rate many have not woken up to. Attempts by various governments to ‘control’ PV deployment to ‘sustainable’ levels have rarely worked. Typically, the most attractive FITs have been met with uncontrollable pre-deadline deployment. Conversely, unattractive FITs (or retroactive cuts) have typically killed off a market. Creating a ‘sustainable’ GW-per-year market from 2012-2015 may be a tall challenge; but perhaps not if the discussion is extended beyond budget-constrained FIT limitations.

As consumer confidence returns, the residential UK market should benefit from the existing infrastructure created by the 2011 market growth. And if investors continue to prioritize the UK as a low-risk opportunity, then activity in the commercial rooftop and ground-mount segment could see strong (potentially unconstrained) growth.

Indeed, this may well see the 21-22GW targets being obtained, within a 200+ GW global PV industry in which the UK provides demand at the 5GW level. But to achieve these goals, the UK industry will soon be required to look beyond the short-term FIT rates to an environment where grid-connection and utility-company participation become the ultimate barriers-to-entry.

Source: NPD Solarbuzz European PV Market Quarterly