UK Government must adjust either De Gucht solar plan or UK policy framework

Prices fixed by Brussels bureaucrats for 2.5 years risk leaving non-domestic solar out of kilter with UK policy framework

EU Trade Commissioner Karel De Gucht today confirmed media reports over the weekend that the deal reached with China over the EU-China solar trade dispute will result in a minimum price for Chinese solar imports. This is believed to be €0.56 per Watt but the STA understands this is not finalised. A cap on the volume of solar imported from China at 7GW per annum is also to be applied.

Last year the market for solar in Europe was around 17GW, meaning the Chinese market share under the new proposals will satisfy less than half the EU market, and the deal does not appear to allow for growth.

The deal has left the German manufacturers that brought the case threatening legal action. De Gucht made clear that for the remaining market share, German manufacturers will have to compete with other manufacturers, including from Japan and Korea, along with further Chinese imports to which a levy of 47.6% will be applied. The Commissioner believes the deal will give German manufacturers the space to become more competitive.

The STA has been very active in mobilising EU solar trade associations to oppose the 47% solar tariffs threatened by the European Commission. The STA has been clear the levies pose a major threat to the large UK downstream solar industry and to UK manufacturers reprocessing Chinese cells into innovative solar PV products.

STA Chief Executive Paul Barwell said:

"Thank God we've moved a long way from the original proposals, which were truly appalling and without justification. However, we're concerned the deal reached by China and the Commission will ultimately achieve little, as German manufacturers are unlikely to be able to compete long-term with the Asian giants. Meanwhile in the short term, the proposals could do real damage to the UK downstream solar industry and to national deployment levels. They leave the UK non-domestic solar industry in a very difficult position, when in fact the UK is one of the major EU growth markets, and ought to remain so."

The STA believes, even if the deal goes ahead, the domestic solar industry should be relatively unharmed, but it will be important to consider future cuts to the Feed-in Tariff under the ‘FITs degression' mechanism. This is because solar panels make up an increasingly small share of the total installation costs. The cost of inverters is also reducing modestly.

However, the economics of large-scale solar in the UK are already extremely tight and the minimum price of €0.56/W risks making existing projects uneconomic. The Renewables Obligation, the main support scheme for large-scale solar, is due to reduce year on year. It will reduce to just 1.4 ROCs next April, making the finances extremely difficult. The Feed-in Tariff system already fails to work for most non-domestic solar in the UK, a situation the EU-China deal will further compound. The STA has been pressing for the UK FIT scheme to be fixed for non-domestic solar.

STA PV Specialist Ray Noble said:

"We urge the UK Government to amend this proposal by calling for a shorter duration for this deal, fluctuating or lower minimum prices, and allowing for volume growth and cost reductions. Otherwise the UK policy framework will be increasingly out of kilter with real world costs. In these circumstances we need the UK Government to adjust its solar support framework. Otherwise we will see little solar deployment in the UK, even though large-scale solar is cheaper than other energy sources like offshore wind, biomass CHP, wave and tidal.

"It would make little sense from a public value-for-money perspective for the UK Government to allow the solar industry to grind to a halt because of Brussels meddling."

The STA will be collecting further feedback from members on pricing, including at a workshop on 13th August. We will be commenting in further detail in due course on the policy implications of this proposal.

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