Solar-energy companies are applying to build the U.K.’s biggest projects, sidestepping a cut in state subsidies aimed at limiting new power plants by relying on a decade-old incentive program and tumbling panel prices.
The market for utility-scale projects, stymied since the U.K. lowered feed-in tariffs paid to generators in August, may as a result see as much as 600 megawatts of plants built through April, the Solar Trade Association said. That’s about four times the level of such installations now operating in the country.
“It’s kind of ironic,” Jeremy Leggett, chairman of the London-based installer Solar Century Holdings Ltd., said in an interview in the city. “The government tried to avowedly kill large ground-mounted solar last year and now it’s back.”
Inazin Power Ltd. and Hive Energy Ltd. are among companies proposing plants using Renewable Obligation Certificates first introduced in 2002 and previously only employed in generation such as wind farms. Their use of the incentive program, which gives lower returns compared with the tariffs they used to get, encourages developers to build bigger for economies of scale.
The ROCs, which only make sense for solar companies because prices of panels have fallen by half, also aren’t limited to facilities of 5 megawatts or less like the feed-in tariffs.
The certificates pay some of the lowest rates for solar power in Europe. A megawatt-hour of solar energy qualifies for two tradable certificates over 20 years, the same as offshore wind. They now trade at about 42.5 pounds ($67) a certificate.
Eight Times
On the other hand, the cuts in tariffs have throttled their appeal for developers, with the guaranteed payments set to fall to 71 pounds a megawatt-hour for 20 years from August, compared with 85 pounds for 25 years now, and 293 pounds last year. The ROCs support larger projects by rewarding each megawatt-hour with certificates that electricity distributors need to buy.
Proposed solar plants are as much as eight times the size of the largest so far built in the U.K. Inazin, formerly Low Carbon Developers Ltd., is seeking approval for a 40-megawatt park at a disused airfield. The U.K.’s Hike Energy plans a 40 million-pound, 25-megawatt site with Moser Baer India Ltd. (MBI)
Lark Energy, a unit of housing group Larkfleet Ltd., has also sought permission to construct a 30-megawatt facility.
In comparison, the largest operating solar parks are 5 megawatts due to the limit on the size of facilities eligible for feed-in tariff support. About 133 megawatts of utility-scale plants, which are those with 1 megawatt or more, were completed using the incentives, according to Bloomberg New Energy Finance.
“The economics with ROCs now works,” Leggett said.
Collapsing Costs
That’s mostly down to a collapse in the cost of technology, with panel prices declining by half in the past year.
“Developers and investors are talking about hundreds of megawatts in utility-scale solar plants in the next few years,” Daniel Guttmann, PricewaterhouseCoopers LLP’s head of renewable energy strategy, said by e-mail. The “extreme” drop in costs means ROC is becoming attractive for photovoltaic, he said.
One potential danger for companies hoping to ride a wave of installations is the U.K.’s record of removing industry support.
The state announced another lowering of feed-in tariffs for projects on May 24 and is reviewing the renewable obligation system. A decision on the number of certificates for each renewable technology from April 2013 is expected this month, the Department of Energy and Climate Change said by e-mail.
“There’s a lot of interest in large solar plants using ROCs and we will play a part,” Solar Century’s Leggett said. “But how long will it go on for if people start building at the multiple-gigawatts scale in the U.K.?”
Following Money
The disincentive of lower rates on certificates is partly countered by cheap panels and reduced opportunities in mainland Europe, where support for large-scale solar is being reined in.
Germany introduced a cap of 10 megawatts for developments in April, Italy is prioritizing rooftop developments and Spain temporarily halted subsidies altogether in January.
“Money follows the opportunity,” Guttmann said. “Many European countries have revised their feed-in tariffs, often restricting utility-scale solar parks.” Such plants can be built for less than half the cost of 18 months ago, he said.
Germany’s Kronos Solar plans to build a 13-megawatt park in Wales for 20 million pounds, while Dublin-based BNRG Renewables Ltd. plans five projects totaling 25 megawatts. “There will be a lot of desperate German companies coming to Britain trying to stay alive with very, very low margins,” Leggett said.
They will compete with U.K. developers. Inazin expects to complete more than 100 megawatts of large-scale solar projects this year and Anesco Ltd., backed by Scottish utility SSE Plc (SSE), plans 50 megawatts. Hike Energy expects to develop at least 200 megawatts this year, Chief Executive Officer Giles Redpath said.
TGC Renewables Ltd. is also building two multi-megawatt plants and expects to construct another 25 to 30 megawatts, according to the company’s Managing Director Ben Cosh.
“The Renewables Obligation is designed to encourage large- scale renewable projects including solar farms,” the energy department said in its e-mail. “Solar can play a role.”
SOURCE: http://www.businessweek.com/news/2012-06-18/u-dot-k-dot-solar-industry-sidesteps-tariff-cut-to-build-biggest-plants
The market for utility-scale projects, stymied since the U.K. lowered feed-in tariffs paid to generators in August, may as a result see as much as 600 megawatts of plants built through April, the Solar Trade Association said. That’s about four times the level of such installations now operating in the country.
“It’s kind of ironic,” Jeremy Leggett, chairman of the London-based installer Solar Century Holdings Ltd., said in an interview in the city. “The government tried to avowedly kill large ground-mounted solar last year and now it’s back.”
Inazin Power Ltd. and Hive Energy Ltd. are among companies proposing plants using Renewable Obligation Certificates first introduced in 2002 and previously only employed in generation such as wind farms. Their use of the incentive program, which gives lower returns compared with the tariffs they used to get, encourages developers to build bigger for economies of scale.
The ROCs, which only make sense for solar companies because prices of panels have fallen by half, also aren’t limited to facilities of 5 megawatts or less like the feed-in tariffs.
The certificates pay some of the lowest rates for solar power in Europe. A megawatt-hour of solar energy qualifies for two tradable certificates over 20 years, the same as offshore wind. They now trade at about 42.5 pounds ($67) a certificate.
Eight Times
On the other hand, the cuts in tariffs have throttled their appeal for developers, with the guaranteed payments set to fall to 71 pounds a megawatt-hour for 20 years from August, compared with 85 pounds for 25 years now, and 293 pounds last year. The ROCs support larger projects by rewarding each megawatt-hour with certificates that electricity distributors need to buy.
Proposed solar plants are as much as eight times the size of the largest so far built in the U.K. Inazin, formerly Low Carbon Developers Ltd., is seeking approval for a 40-megawatt park at a disused airfield. The U.K.’s Hike Energy plans a 40 million-pound, 25-megawatt site with Moser Baer India Ltd. (MBI)
Lark Energy, a unit of housing group Larkfleet Ltd., has also sought permission to construct a 30-megawatt facility.
In comparison, the largest operating solar parks are 5 megawatts due to the limit on the size of facilities eligible for feed-in tariff support. About 133 megawatts of utility-scale plants, which are those with 1 megawatt or more, were completed using the incentives, according to Bloomberg New Energy Finance.
“The economics with ROCs now works,” Leggett said.
Collapsing Costs
That’s mostly down to a collapse in the cost of technology, with panel prices declining by half in the past year.
“Developers and investors are talking about hundreds of megawatts in utility-scale solar plants in the next few years,” Daniel Guttmann, PricewaterhouseCoopers LLP’s head of renewable energy strategy, said by e-mail. The “extreme” drop in costs means ROC is becoming attractive for photovoltaic, he said.
One potential danger for companies hoping to ride a wave of installations is the U.K.’s record of removing industry support.
The state announced another lowering of feed-in tariffs for projects on May 24 and is reviewing the renewable obligation system. A decision on the number of certificates for each renewable technology from April 2013 is expected this month, the Department of Energy and Climate Change said by e-mail.
“There’s a lot of interest in large solar plants using ROCs and we will play a part,” Solar Century’s Leggett said. “But how long will it go on for if people start building at the multiple-gigawatts scale in the U.K.?”
Following Money
The disincentive of lower rates on certificates is partly countered by cheap panels and reduced opportunities in mainland Europe, where support for large-scale solar is being reined in.
Germany introduced a cap of 10 megawatts for developments in April, Italy is prioritizing rooftop developments and Spain temporarily halted subsidies altogether in January.
“Money follows the opportunity,” Guttmann said. “Many European countries have revised their feed-in tariffs, often restricting utility-scale solar parks.” Such plants can be built for less than half the cost of 18 months ago, he said.
Germany’s Kronos Solar plans to build a 13-megawatt park in Wales for 20 million pounds, while Dublin-based BNRG Renewables Ltd. plans five projects totaling 25 megawatts. “There will be a lot of desperate German companies coming to Britain trying to stay alive with very, very low margins,” Leggett said.
They will compete with U.K. developers. Inazin expects to complete more than 100 megawatts of large-scale solar projects this year and Anesco Ltd., backed by Scottish utility SSE Plc (SSE), plans 50 megawatts. Hike Energy expects to develop at least 200 megawatts this year, Chief Executive Officer Giles Redpath said.
TGC Renewables Ltd. is also building two multi-megawatt plants and expects to construct another 25 to 30 megawatts, according to the company’s Managing Director Ben Cosh.
“The Renewables Obligation is designed to encourage large- scale renewable projects including solar farms,” the energy department said in its e-mail. “Solar can play a role.”
SOURCE: http://www.businessweek.com/news/2012-06-18/u-dot-k-dot-solar-industry-sidesteps-tariff-cut-to-build-biggest-plants
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