Ground mounted stand-alone solar PV "farms" have been tremendously successful. Solar PV generally has out-paced the "slow and steady" deployment that incentive levels agreed in the last RO banding review were intended to support [1]. The Government, which must comply with Levy Control Framework annual limits on renewables spend, is concerned that this will prejudice deployment of other renewable technologies. It is also concerned that, as "stand-alone" and "other" PV fall within the same Feed-in-Tariff (FiT) band, the success of stand-alone technologies will reduce support available to the roof-mounted industry - as levels of subsidy degress for the band as a whole.

On the basis of impact assessments for both scenarios, the Government issued a consultation on 13 May 2014 on changing financial support for solar PV setting out its preferred option, and a number of alternatives, to address these concerns. The consultation stresses that the final solution is subject to on-going negotiations with the EU Commission on state aid for energy projects, and that stricter controls may be imposed on solar if subsequent market changes pose a bigger budgetary threat than that assumed in the consultation.

DECC's preferred option is to close the RO to > 5 MW solar PV projects (both ground and building mounted) from 1 April 2015. Projects can apply for a one year grace period (to 31 March 2016), if (no later than 13 May 2014 - the date of the consultation):

  • preliminary accreditation under the RO has been obtained,
  • a grid connection offer has been received and accepted, and date for connection is estimated at on or before 31 March 2016,
  • relevant planning and Electricity Act consents are in place (or confirmation provided that approval is not required),
  • development site has been purchased (option to purchase not sufficient),
  • the project has already incurred pre commissioning costs of at least £100,000 per MW/h of expected consented capacity, or material equipment contracts have been entered into for the project, and
  • the project will be commissioned and accredited by 31 March 2016.

Is this achievable? DECC is asking for responses by 7 July 2014.

If not, the new Contract for Difference (CfD) is perceived to be a more cost effective mechanism than the RO. If feedback on the alternative approaches (cap on new build solar, solar capped within suppliers total RO, solar specific RO banding review) is not convincing, solar PV projects will face a new market dynamic which allows:

  • >5MW solar PV projects (and additional capacity projects enhancing plant to >5MW) to apply for a CfD in 2015/16 and 2016/17 - the first allocation round is expected to open in October 2014. The choice between applying for RO or CfD support until 2017 will no longer apply.
  • ≤5MW projects to continue to apply for RO accreditation
  • Continuing FiT support for small scale solar - with new degression bands for "stand-alone" and "other than stand-alone" technologies operating from either January 2015 or October 2014 (depending on stand-alone deployment figures for the 2014 Solar Deployment Period). See DECC's impact assessment here for the proposed "split" degression triggers.

A number of other consultations were issued alongside the solar consultation. A response on competitive allocation confirms that solar PV is classified as a "Group 1" technology, and will be subject to an auction process for CfD allocation - "first come first served" is no longer available. The final CfD allocation framework (draft published in April 2014) will be issued in June, and at the same time, the indicative CfD budget will be made available to National Grid. Other stakeholders are promised at least three months' visibility of the budget prior to auction. Save for wave and tidal technologies, a further consultation proposes that there will be no minimum/maximum allocations within the budget as a whole during the first Delivery Plan period - responses by 10 June 2014.

So the process is shaping up but, compared with the RO, stakeholders are understandably concerned by the uncertainty posed by increased allocation risk within the CfD process. By continuing to work within the RO, other renewable technologies can choose to shun that risk until 2017.

Can large scale solar PV profit from early entry to the CfD market?

Time will tell!