Sunshine on solar, despite political clouds

The solar industry is in rude health, but political challenges are starting to build in the run up to the UK election this year.

Solar Energy UK CEO Chris Hewett described the political situation as “complicated”, speaking this week in London.  

“There’s political consensus for 70 GW by 2035, Labour has set a target of 50 GW by 2030 and Scotland is aiming for 4-6 GW. At that level, there’s absolute commitment,” Hewett said, at the Solar and Storage conference. As of the end of 2023, the UK had around 15.7 GW of solar capacity.

“I do have concerns that those ministers who get the industry are starting to be overruled and are being held back by those who are really only interested in politics. The politics of net zero are getting quite toxic,” he said.

He noted that of those people who live close to solar farms, some 10% are opposed to it. Offsetting this, though, 40% are in favour.

“That [negative] voice is becoming stronger. It’s a minority but it’s loud.” Hewett noted the appeal of the anti-net zero narrative to “a certain type of Conservative MP and the right wing media”.

These political challenges have contributed to delays for nationally significant infrastructure projects’ (NSIPs), Hewett said. Solar farms with more than 50 MW of capacity require consent from the Secretary of State for Energy Security and Net Zero.

Diversity of supply

The Labour Party, on the other hand, is more supportive of the energy transition, he said. “They see it as an opportunity to be grasped. The one dissenting voice, from our perspective, is from the trade unions who represent the oil and gas sector. They’re openly anti electrification and pro hydrogen.”

Hewett called for an acknowledgement that, for the UK to make progress on its clean energy goals, it must back solar. “It’s the speed of delivery and decentralising energy. To deliver at the timescale needed, by 2030, it needs to be cost effective and fast.”

The Solar Energy UK official was speaking this week, while turmoil in the Scottish government was spreading. Hewett raised the concern that, with the resignation of Humza Yousaf, Scotland was moving “closer to fossil fuel interests. At the moment, all bets are off.”  

For the time being, though, the commercial and residential markets are “very healthy”, he said.

“The solar farm pipeline is incredible. 4 GW have [contract for difference] CfD contracts, which will be built this year or next. 11 GW of solar farms have planning permission and will be bidding into the CfD auction or power purchase agreements [PPAs]. There’s another 14 GW in the planning process at the moment, most will come through, but 10% will be refused.”

Overall, he said, there should be another 30 GW of solar capacity built over the next five years.

The storage market has also made progress alongside this growth in solar. Hewett said 4 GW of batteries were co-located with solar and another 4 GW looking for planning permission. “As the grid gets greener … those batteries will save excess renewable power. That’s effectively another zero carbon power source.”

Connecting it up

As always, the topic of the grid underscored all discussion.

Hewett noted there was a “genuine attempt” under way to tackle the problems with securing a connection to the grid. However, any such changes will take time to sort through.

Alec Whiter, partner at Burges Salmon, also speaking at the London conference, said there were “275 GW in the connection queue and there’s 20 GW being added every month. Something needs to be done and something is being done.”

Xander Penny, from solar developer Alight, said that the top problem for the sector was grid connection. “What we currently advise customers is to size [projects] just below 1 MW to get through the grid queue quickly.”

Such a move, he explained, allowed the decision on grid connection to rest with the distribution network operators (DNOs), rather than the electricity system operator (ESO). “Over 1 MW, you’re in project progression and that may take to 2034? 2035?”

Penny, and others, called for the grid operators to take a slightly more pragmatic – and less risk averse – strategy.

Solar over water

One challenge for the grid is the move to intermittent supply. There may be possibilities ahead in combining solar and offshore wind plans. Netherlands-based SolarDuck is working on a plan to install floating structures in the North Sea with solar panels.

Presenting at the EIC’s North Sea Decarbonisation Conference this week, SolarDuck’s Roderick Buijs talked through some plans.

“There is a hybrid opportunity for both wind and floating solar”, Buijs said. The company is also planning standalone structures in other areas, such as the Mediterranean Sea and Asia, where there is less wind resource.

SolarDuck’s triangular structure is designed to withstand the high load and tensile stresses of the North Sea, with the ability to handle waves up to seven metres.

The use of space in the North Sea is becoming more critical. It looks open, but looking at marine traffic it is really crowded. Deploying offshore wind is the first step towards achieving offshore energy parks.” SolarDuck believes it could install 1 GW of solar in 5% of the surface space required for 1 GW of wind and 25% of the seabed area.

“There is good complementarity between wind and solar power,” Buijs said. Installing solar along with wind – and possibly wave – “could increase the capacity factor of the power cable by 19%.”

SolarDuck is building a test project, the 0.5 MW Merganser, which it will deploy in the North Sea. It is working with RWE on plans, while the Netherlands has set out the ambition of reaching 3 GW of floating solar by 2030. The Dutch government looks favourably on plans by offshore wind developers to co-develop floating solar under tender rules.

PPA plans

Alight focuses on corporate PPAs. It had previously been a developer but evolved into an independent power producer (IPP) in 2022, with backing from DIF Capital Partners.

The company works across Europe, but Penny noted appeal in the UK around reducing costs for offtakers by providing power. Customers can secure prices, under PPAs, for 15-20 years at under 10p per kWh.

“Commodity prices have spiked across Europe. The onsite business case works in most of our core markets and the UK is mature,” the Alight official said.

Alight uses the 150 million euro (£128mn) capital injection from DIF Capital to fund its construction projects. It then sells the power to customers.

The company “will at some point look to debt finance. We plan to bundle the assets into a portfolio and then partially debt finance, which frees up more equity for further investments”, Penny said. It has the aim of reaching 5 GW of capacity across Europe by 2030, with a current pipeline of 2 GW.

The solar industry is in an “incredibly strong position with multiple routes to market”, said Mark Sommerfield, deputy director of policy at the REA. The market has matured, he said, with CfDs and corporate PPAs. The latter is “developing quite quickly in the UK, but it still remains quite difficult for a corporate entity to enter into a long-term contract when so much is changing in the energy industry”.

Sommerfield said the government was working on a number of plans at the moment. A CfD “derisks that revenue, it’s highly bankable and backed by government. But that shouldn’t dissuade people from looking at other routes to market and working out what’s best for your project.”

Solar price pressure

One positive for solar plans are low costs, which have helped drive significant interest.

Head of market research at Solar Media Finlay Colville explained the “solar industry doesn’t work on prices going up. It works on the industry growing.” Even challenges such as reporting on carbon in supply chains is unlikely to have an impact on the trade, he said.  

Prices for solar photovoltaic have fallen incredibly over the last 10 years and there are no signs of this changing. “There’s a large oversupply of panels in Europe and that’s expected to continue for at least the next two to three years,” Penny said. “There’s also a lot of innovation in N-type models. So, even if the price stays the same, the yield improves.”

Not every country is happy with China’s dominance of the solar panel market, though. The US has brought in tariffs on Chinese supplies.

A US group has recently petitioned the Department of Commerce to impose anti-dumping duties on Vietnam, Malaysia, Thailand and Cambodia’s solar exports. The complaint alleges – with some justification – that Chinese manufacturers simply moved facilities out of China, in order to continue exports to the US.

In Europe, there is not quite the same drive, Penny said. “What we’ve seen is not so protectionist in solar as we don’t have the capacity to produce. There is a risk of change, but it’s not an imminent issue.”

There are likely to be continued pot shots at solar plans – and other parts of the energy industry – in the run up to the election. With grid reforms in the works, and growing corporate interest in decarbonised and predictable energy supplies, it seems the sun will continue to shine on solar.