Ian Holyoak
Posted on 24 Apr 2015

Is big solar approaching grid parity in the UK?

The latest figures from DECC for the deployment of 'standalone' solar PV systems in the UK are almost certain to lead to a reduction in the level of the feed-in tariffs (FITs) for such schemes, down to under 4.5 pence per kilowatt hour.  This so-called 'super degression' – equating to a reduction in support of 28%  - has been triggered as a result of almost 100MW of new, standalone solar schemes coming on stream in the first quarter of the year. The change would come into effect for the second half of 2015.  Alongside the early curtailment of support for 'big solar' via the Renewables Obligation (i.e. ROCs rather than FITs) from March 2015 and the shaky start for solar under the new, Contracts for Difference support mechanism, there are clearly challenges ahead for developers of large, ground-mounted schemes.   Taking a step back, though, the industry in the UK has achieved remarkable progress in a relatively short period of time; especially when one considers that the FIT stood at over 30p / kWh for generation by large, standalone solar schemes less than four years ago.

The ability of developers to control their costs and/or work within shrinking margins is finite, however, and the increasing shortage of economically-viable grid connections is pulling in the opposite direction.

Among our developer clients, there is still considerable optimism, although once the current crop of pre-accredited schemes is built out, there does appear to be something of a fallow period looming.  The enthusiasm for smaller (sub-5MW) and/or community schemes with shared connections is not universal and does not appear to us to be likely to result in a sufficient volume of schemes to keep the trend line on an upward trajectory.  But it's worth keeping in mind that grid parity has already been achieved in several parts of the world – typically and unsurprisingly those with lots of sun, good demand and comparatively high prices for traditional sources of energy. Perhaps the relatively small leap now required for solar PV to reach utility-scale grid parity in the UK is within sight.

For more information please contact Ian Holyoak, Partner and Head of the Energy & Renewables team at ian.holyoak@michelmores.com or 01392 687682.