Are government cuts dimming the lights on solar construction?

Author: Caroline Lockyer - Glenigan utilities sector expert

Glenigan has seen a growing trend in the number of new planning applications for solar farm developments, an increasing number of which are submitted by local communities forging companies for their own green building projects.

Traditionally the flow of solar farm applications is largely concentrated around regions such as the South West and East of England, as counties such as Devon, Cornwall and Norfolk receive the most sunlight hours in a day.

However a rising number of inner towns and villages are using land within their vicinity to progress plans of their own. This is proving a more efficient and effective way at harnessing the sun and keeping bills to a minimum, but the initial investment is proving the biggest stumbling block to getting these projects off the ground.

The solar industry’s funding woes were exacerbated earlier this year when the government announced it was cutting subsidies for large scale installations. The move was immediately condemned by environmental activists and renewable energy companies, with fears that it would affect the UK’s ability to generate low carbon power and green jobs - as well as increase our dependency on fossil fuels.

The subsidy cuts on solar farms is expected to come into force by April 2015, which has led to an influx of solar farm council tenders as developers fast track plans in an attempt to beat the funding cuts. But what effect will this have on the solar industry in the future?

The solar energy sector has not had an easy journey over the last four years due to the coalition `tinkering’ with subsidies, which has brought about a fall in financial support for the industry as a whole.

Solar power is a popular growth area in the renewable energy industry so it makes little sense to reduce subsidies and in the long term it could be putting jobs at risk.

In the UK we currently have approximately 2.7GW of solar energy generation, enough to power about 620,000 homes. The government maintains their proposals would keep the UK on track for new targets of 10GW to 12GW of capacity in 2020. However this is a huge decrease on the estimates set out in 2012 by the Department of Energy and Climate Change, which specified the country could generate approximately 20GW of solar power by the end of the decade.

A ‘large’ solar farm is one which will produce above 5MW of solar energy. It is these large proposals that will take the brunt of the proposed reforms. Instead of receiving a direct payment in relation to the amount of power they generate, the developments will be forced to compete with other sources of renewable energy, which includes onshore wind farms and energy from waste plants, for a limited `pot’ of available cash that is ultimately paid by energy consumers.

This system, known as Contracts for Difference (CfD), is said to be complex and ultimately off putting and could create uncertainty in the market as future returns remain unclear. A number of solar farm developers have already launched legal action against the government alleging that the proposed changes to the subsidy scheme are unlawful and are currently waiting to hear if the courts will hear the case.

However, there is good news for community solar projects as they could double their solar energy projects from 5MW to 10MW under the new Electricity Market Reform. 

In just over 7 months the UK will be voting in the general election, but in the meantime we should continue to ask vital energy market questions. How will these changes affect our low carbon emissions in the long term? Will they further set back our EU energy efficiency targets? And what proportion of the bill for these renewable energy measures will, in fact, be footed by the consumer?

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For further information about environmental and energy issues within the construction industry, contact Caroline Lockyer, utilities sector expert at Glenigan, on 01202 786723.

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