DECC consults on closing Renewables Obligation to new 5MW+ solar applications from next April--- Unjustified bias against solar and decentralised energy--- STA rejects budget arguments: solar only accounts for 5% of RO budget

DECC has today proposed closing the Renewables Obligation (RO) to 5MW+ solar farm applications from April 2015 [1]. This proposal follows recent assurances in the Commons from Energy Minister Michael Fallon that no further changes to the RO were planned [2].

For all solar over 5MW, the industry is expected to switch to the new Contracts for Difference (CfD) scheme from next year, but CfDs are far less accessible for the SMEs that are prevalent in the solar sector. Furthermore the CfD proposals contain no minima for solar – as the STA has made clear, solar will not be able to compete with onshore wind until 2017/18. In an own goal, if DECC's proposals go through, they will severely disrupt the solar industry's speed of cost reduction.

There will be no change to the RO for this current year and investments already made by today will receive a one year grace period after the RO closes to 5MW+ solar in April 2015. However, the news still comes as a crippling blow to the future of an industry that has invested 12 months defining and disseminating good practice. The solar farm industry has also brought costs down by 30% over the past two years, and solar was on track to be the cheapest source of low carbon power by 2018.

DECC claims the move is intended to protect the Levy Control Framework (which sets the total budget for renewable power projects under Feed-in Tariffs (FITs), the RO and CfDs) but the latest figures from DECC show that in the year to January 2014, solar power accounted for just 1% of the total RO spend [3]. However, RO registration runs significantly behind deployment, plus deployment is smeared throughout the year. Therefore the STA calculates that current solar capacity of 2.1GW should cost the RO £160 million or roughly 6.5% of last year's RO budget (or 5% of next year's RO/CfD budget). Even if large scale deployment is doubled to 4.2GW this year cumulatively, solar will make up £280 million or 9% of the 2014/15 RO/CfD budget.

The STA is also bitterly disappointed that DECC is not proposing to increase the capacity triggers for Feed-in Tariffs (FITs). DECC merely proposes to hive off ground-mounted solar into a separate band. Despite the Solar Strategy claiming it wanted to see a major increase in roof-mounted solar, DECC is not proposing to correct the major structural problems with FITs, essential to deliver on this goal.

Today's proposals will not affect Feed-in Tariffs (FITs) for household solar installations. The STA has prepared a comprehensive backgrounds briefing for these proposals [4].

STA CEO Paul Barwell said:

"The costs of solar power have kept on falling, in large part thanks to the growth and learning in our successful UK industry. We had forecast solar could be cheaper than onshore wind by 2018, but for this to happen we needed stable policy sustaining a high-volume market. The Government is actually moving to slow down solar's cost reductions towards grid parity.

"The industry will be alarmed by these proposals and surprised to be singled out for harsh treatment. It does look like the Government is seeking to define the energy mix and hiding behind the false excuse of ‘budget management'.

"DECC challenged us to work with communities to ensure solar remained popular as the large scale sector developed, and we've done just that. With our ‘10 Commitments' good practice guidance published last summer, and the National Solar Centre's biodiversity best practice guidance just last week, the sector has developed high standards and a legacy to be proud of – public support for solar and large scale renewables is the highest it's ever been. Today's proposals are no just reward. If these proposals go through they will knock the industry's extraordinary progress back, and actually reduce healthy competition in the renewables sector."

Solar developers can't just switch from fields to rooftops without major reforms to Feed-in Tariffs

The Government's recent Solar Strategy confirmed its intention to reorient support towards roof-mounted solar [5]. RO support for commercial rooftop schemes is not proposed to change. This provides some good news, but the RO is due to close in 2017, potentially disrupting the market if it takes off. DECC has set out a range of measures remove barriers to investment under FITs; however they do not propose to increase the very limited amounts of solar that can be deployed. Claims that the solar industry can grow substantially across rooftops are therefore simply wrong.

The Co-Chair of DECC's Solar Strategy, STA PV Specialist Ray Noble, said:

"The Coalition appears to be playing politics with solar rather than praising its success in delivering significant amounts of much needed power from safe and secure sunlight. The Government should be backing this incredibly popular technology and taking care to understand its exceptional benefits, including the fact that it substantially reduces transmission losses by generating electricity where it is needed."

Government shoots itself in the foot against its own stated objectives

Ø If the proposals go through they will damage new small and medium sized companies who have entered the market, when Government claims to want to encourage more competition with the established ‘Big Six'

Ø DECC will have to incentivise more investment in more expensive forms of low carbon energy, increasing bills for consumers

Ø The industry has been striving to deliver high quality solar farms to maintain the very high levels of public support it enjoys. Today Government is undermining industry efforts to deliver high quality schemes. Responsible solar companies pioneering biodiversity schemes, community ownership and power storage on solar farms will be disadvantaged by premature entry into auctioning.

Ø DECC's Solar Strategy announces a program of 1GW of Government estate solar but it is unclear where today's proposals could leave this program

Ø DECC's Solar Strategy envisages more medium and large scale rooftop projects, but it is not providing an adequate policy framework to enable this.

Leonie Greene, STA's Head of External Affairs, said:

"We'll be pushing back hard against these proposals to ensure good quality solar power is treated fairly. We are astonished that Government is effectively proposing to decide for local communities what renewable energy developments they can or cannot have. By making solar more difficult to deploy at scale than other renewables the Secretary of State is proposing to tilt the whole national playing field against solar power investments. As with every other development decisions should lie with local Government – not central Government.

"The Government says it wants to see a lot of mid-scale rooftops but everyone involved in solar knows the UK policy framework is inadequate. We have been warning DECC they must fix the user-friendly Feed-in Tariffs for medium and large scale projects for nearly a year. Not only would these proposals tilt the playing field against solar power per se, but they also expose the bias against everyday decentralised energy investors. It is long overdue that Government gave communities, businesses and the public sector the same access to renewables as utilities.

"We urge DECC to work with us as soon as possible to deliver fair proposals, including making the new CfDs work for solar, and fixing FITs for the mid to large scale rooftop projects they claim they want to support."

The industry is concerned by the replacement of the RO with CfDs. The proposals are highly complex and will greatly increase risks for smaller SME companies, which are prevalent in solar, compared to big utilities. Without minima, 5MW+ solar will not be able to compete with onshore wind, as DECC knows.

Despite negative comments made by Conservative Ministers on solar farms, a YouGov poll commissioned by the STA last summer showed solar farms are the most popular local energy development [6], and Government's own research published last month found that public support for solar power is the highest it has ever been (85%) – as is the proportion of people who "would be happy to have a large scale renewable energy development in my area" (59%) [7]. Planning approval for solar farms is exceptionally high, averaging 88% since 2009 [8]. The STA has been quick to define good practice through its 10 Commitments [9] and only last week launched biodiversity guidance for solar farms at Kew Gardens with the National Trust, RSPB, Eden Project and other conservation groups [10].

Paul Barwell said:

"This feels like a kick in the teeth for exceptional performance. Our costs have dropped 30% against offshore wind in two years and we have devoted a year to driving good practice throughout the industry. This is not a just reward."