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Solar Could Be First Energy To Be Free Of Subsidy In UK

A new report claiming to be the “most authoritative report to date on the future of solar” in the UK has concluded that solar could be the first renewable technology to be free of subsidy.

The report follows in the wake of several moves by the UK Government to remove solar and wind from accessing the country’s Renewable Obligation financial support subsidy. Following the re-election of the UK’s Conservative Party and Amber Rudd’s appointment to Energy and Climate Change Secretary, the Government announced its plans to cease allowing onshore wind farms access to the country’s main renewables subsidy scheme, which will begin August 1, 2016. A month later, the UK Government announced that it would begin consultations on possibly expanding the subsidy cuts to include solar, and accreditation changes to the Feed-in Tariff scheme.

REA-1In timely response, the Renewable Energy Association (REA), the largest renewable energy trade association in the UK, in conjunction with leading advisory firm KPMG, released its UK Solar Beyond Subsidy: The Transition report, which demonstrates — among other things — that solar PV’s popularity and increased deployment will help it to become the first renewable technology to achieve “grid parity”.

The cost of solar technology has been dropping considerably over the past decade, and the report models how solar would reach grid parity in the next five years. However, importantly, the report is also clear to detail the need for support to continue so that small and medium enterprises can continue to grow and reach grid parity themselves.

“We need to get to the low carbon economy in the most cost effective way, but to do that government and industry have to work together,” said Dr Nina Skorupska, Chief Executive of the REA. “Clear and stable policy leadership is vital, and as robust as solar is, it can still be held back just short of the finishing line by misguided government interventions.

“This report shows how close solar is to competing with traditional power generation, and with positive government decisions we can ensure the smooth transition from subsidy to business as usual”

The report provides three key recommendations:

  • A national energy strategy is needed, incorporating energy storage alongside solar and giving a coherent overview of the grid.
  • There is an opportunity to review the FiT and ensure tariffs are set at a level that allows acceptable returns and degressions are clearly set out.
  • There needs to be a review of alternative ways to support the solar industry, including for example the tax regime and net-metering to allow a smooth transition away from subsidies.

Additionally, the authors of the report explain that “phasing out subsidies for PV requires a transition plan” to avoid the technology falling off the “cliff edge.” They suggest a five year transition plan the UK Government needs to consider rather than the immediate cessation currently under consultation. The authors of the report propose the following policy options:

  • A combination of net-metering and enhanced building regulations in the residential sector. This would help to create demand for PV on both new build and retro-fit houses.
  • An improved tax regime for nondomestic properties taking into account business rates, capital gains allowance and corporation tax alongside clear rules on required EPC ratings for leased properties would help drive growth in this sector.
  • A strategy to transition and integrate PV into energy markets and distributed energy systems

“It is now time for the UK to capitalise on the subsidies paid so far and the deployment achieved, and start planning for the post parity world, so that the industry can avoid a potential ‘cliff edge’ phenomenon,” the authors conclude. “The 20GW scenario that we have considered provides the ongoing momentum to allow Government and industry to work together to achieve a plan for transition to the post subsidy world.”

However, despite the valid points put forward by the report, there is little hope. “My priorities are clear,” said Energy and Climate Change Secretary Amber Rudd. “We need to keep bills as low as possible for hardworking families and businesses while reducing our emissions in the most cost-effective way.” She added that the UK’s “support has driven down the cost of renewable energy significantly. As costs continue to fall it becomes easier for parts of the renewables industry to survive without subsidies. We’re taking action to protect consumers, whilst protecting existing investment.”

Responding to the Government’s consultation on the closure of the RO for solar, Nina Skorupska explained that “the industry is at a critical point as it seeks to reach grid-parity as quickly as possible yet retain the size and scale necessary to become a key contributor to the UK economy.”

 
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