Seeing through the gloom: seeking stability after subsidy cuts

July 27th, 2016, Published in Articles: Energize

 

The UK has entered a highly uncertain period following the vote for Brexit, but uncertainty was a defining characteristic of the outlook for the solar industry even before the EU referendum. 
Seeing through the gloom - cover

Concerns about solar investment will be exacerbated by the country’s decision to leave the European Union (EU) and the expectation of a turbulent period of economic adjustment. Furthermore, the UK’s National Grid recently warned that under-performance in heat and transport means the UK will miss its legally binding EU target of meeting 15% of energy demand from renewables by 2020 [1].

However, it would be premature to reach too many conclusions about the implications of Brexit for solar with so many things yet to be negotiated. The question of the UK’s future access to the single market remains open and some businesses are likely to welcome the chance to remove perceived European red tape. In the year since PwC’s last report with the Solar Trade Association (STA), the UK’s solar capacity has continued to grow but the number of companies in the sector has reduced significantly.

Regardless of Brexit, the industry is already adjusting to a new stage in its evolution following the removal and reduction of state support mechanisms.

Lower feed-in-tariffs (FITs), the winding down of the Renewables Obligation (RO) and the absence of new Contracts for Difference (CfD) have all had an impact. However, while the Paris climate agreement reinforced the world’s need for low carbon power, the “energy trilemma” demands that security of supply and affordability also remain foremost.

A holistic approach is essential if the UK is to meet these varied requirements and the solar sector must prove it is resilient and can continue to make a major contribution. PwC conducted a new survey in conjunction with the STA shortly before the EU referendum to gain greater insight into how the industry looks in 2016 and what its future priorities are.  Key policy decisions over the UK’s commitment to its carbon targets and how these will be achieved need to be made. The creation of the new Department for Business, Energy and Industrial Strategy (BEIS) maybe the catalyst to achieve this.

This report looks at the industry’s key concerns but also features three case studies which showcase different ways in which solar can continue to shine. Innovation will be crucial, and a number of interesting projects and products are being developed.

Solar PV capacity in the UK now exceeds 10 GW according to official statistics [2] while the STA believes the true figure could already be 12 GW, including 8 GW of ground-mounted systems. But the rapid growth seen in 2014 and early 2015 will not be seen again under the current policy environment and while grid parity remains out of reach. That said, the new Mayor of London, Sadiq Khan, has pledged to support rooftop solar across the capital [3] and Scotland is leading the way in terms of new build installations [4].

Key findings

  • A third of solar jobs have been lost in the past year and a third of respondents expect to cut staff in the next 12 months.
  • Diversification into other products and services is the most popular response to policy changes, while almost four in ten firms are considering exiting the solar market completely.
  • Rewarding investment in solar through the tax system is the policy change the sector would most like to see.
  • Only half of respondents still view commercial rooftop as a key sub-market – and the figure is even lower for domestic solar PV.
  • Africa and North America were the main overseas markets UK firms were moving into even before the Brexit vote.

Acknowledgement

The introduction to the report is published here with permission. The full report can be downloaded here.

References

[1] www.solarpowerportal.co.uk/news/uk_to_miss_2020_renewable_energy_targets

[2] www.gov.uk/government/statistics/solar-photovoltaics-deployment

[3] www.solarpowerportal.co.uk/news/sadiq_khan

[4] http://forstergroup.co.uk/sectors/housing

Contact John Dashwood, PwC, john.d.dashwood@uk.pwc.com

 

 

 

 

 

 

 

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