An analysis has shown that the standard solar financing method is no longer viable in the UK – STA calls for new auction round for the cheapest renewables to benefit consumers.
A detailed new analysis shows that the standard method for financing large scale solar PV schemes in the UK is no longer economically viable. An estimated two-thirds of the UK’s 12GW solar capacity has been built using this method – known as ‘Power Purchase Agreements’ – where solar farms or large commercial rooftops contract to sell their power to a third party.
The large-scale solar industry, which matches onshore wind for low-cost clean power, had the great majority of its support removed this year and deployment has plummeted. Figures released yesterday by Solar Intelligence show the lowest quarterly deployment of solar power for nearly six years.
However, only modest Government intervention is needed to enable large-scale solar to access the UK market again. The industry is seeking a new auction round so that the cheapest renewables can compete on a level playing field for Contracts for Difference, enabling the best deal for consumers. Modest but urgent reforms are also needed to Feed-In Tariffs, costing only £6million over this parliament, to boost solar deployment on large commercial roof tops. The industry is also seeking fair tax treatment for rooftop solar. Taken together the measures could get the solar industry back on track to zero subsidy by 2020.
Report author and STA Policy Manager David Pickup said;
“The UK solar industry has been challenged to deliver subsidy free solar but, as our detailed analysis shows, this is not yet possible for mainstream projects. Even terrific financial innovation cannot get around hard economics; large-scale solar still needs just a little support from Government to provide consumers with one of the cheapest sources of clean power.
“The industry cannot invest for cost reductions tomorrow without decent market volumes today: a vicious circle. With only a third of the costs coming from panels, local supply chains and skills are vital for bringing costs down further to benefit consumers. The danger is that we risk losing these skills, financial confidence and supply chains that enable us to deliver the cheapest solar power.”
The UK analysis published today forms part of the EU-wide Horizon 2020 PV Financing project which examines how the solar PV market could adapt to a low-subsidy world. The UK analysis was undertaken by the STA with the support of expert financial contributors including Bloomberg New Energy Finance, EY and Bird & Bird. It shows that typical PPAs, that have funded an estimated £15bn of UK solar investments, are no longer economically viable, except in some niche applications.
The report details the costly escalating risk perception amongst investors, not only due to the main support schemes for solar power being rapidly withdrawn, but as a result of Brexit.
There has been massive financial innovation in the solar industry which moved over the past five years from pioneers funding small projects to sophisticated funding models involving mainstream banks and dedicated investors. Schemes grew up to 50MW in size and the market brought in around £22bn of investment. Confidence in the market significantly lowered the cost of financing helping to reduce the overall cost of solar projects. PPAs became the norm for financing these large-scale schemes, with projects able to sell their power for up to 15 years to a third party, but typically offering 3 years of forward fixed pricing.
Three key models of PPA developed which helped solar to sell its output not only to electricity traders into the wholesale market, but directly to commercial companies who did not need to be geographically nearby;
– Wholesale PPAs, where the power output was typically purchased by traders
– Sleeved PPAs, where the power was typically purchased by commercial companies, with additional complex facilitating contracts signed with licensed suppliers
– Private wire PPAs, where the output could be sent direct via a dedicated wire from a ground-mounted scheme to a nearby commercial energy user.
STA CEO Paul Barwell said;
“Solar beautifully answers the energy trilemma of tackling climate change, security and affordability, but it is being cut out of the market and prevented from competing on a level playing field with other technologies. It doesn’t help consumers to inhibit the cheapest source of clean power in the UK and the competitive pressure it can provide right across the power sector. We hope new Ministers will act quickly to open the UK market up again to the cheapest applications of solar power.”
The report also looks at innovative PPA models including ‘Mini Utility’ and ‘Synthetic PPAs’, which have not yet been deployed at scale in the UK. The report does not look at self-funded ‘behind the meter’ smaller scale domestic and commercial schemes, where the unique electricity consumption profiles of individual sites makes economic generalisations harder. Niche private wire PPAs provide the best economics today but due to the many strict requirements these projects have, the report concludes they are unlikely to become mainstream.
The importance of PPAs may grow even further due to the threat of business rate rises for companies seeking to supply themselves with their own rooftop solar power. Perversely, although two solar projects could be identical, the PPA ownership model rather than a self-owned model significantly reduces the amount of business rates that are due.
New Zealand to Switch to Fully Renewable Energy by 2035
New Zealand’s prime minister-elect Jacinda Ardern is already taking steps towards reducing the country’s carbon footprint. She signed a coalition deal with NZ First in October, aiming to generate 100% of the country’s energy from renewable sources by 2035.
New Zealand is already one of the greenest countries in the world, sourcing over 80% of its energy for its 4.7 million people from renewable resources like hydroelectric, geothermal and wind. The majority of its electricity comes from hydro-power, which generated 60% of the country’s energy in 2016. Last winter, renewable generation peaked at 93%.
Now, Ardern is taking on the challenge of eliminating New Zealand’s remaining use of fossil fuels. One of the biggest obstacles will be filling in the gap left by hydropower sources during dry conditions. When lake levels drop, the country relies on gas and coal to provide energy. Eliminating fossil fuels will require finding an alternative source to avoid spikes in energy costs during droughts.
Business NZ’s executive director John Carnegie told Bloomberg he believes Ardern needs to balance her goals with affordability, stating, “It’s completely appropriate to have a focus on reducing carbon emissions, but there needs to be an open and transparent public conversation about the policies and how they are delivered.”
The coalition deal outlined a few steps towards achieving this, including investing more in solar, which currently only provides 0.1% of the country’s energy. Ardern’s plans also include switching the electricity grid to renewable energy, investing more funds into rail transport, and switching all government vehicles to green fuel within a decade.
Zero net emissions by 2050
Beyond powering the country’s electricity grid with 100% green energy, Ardern also wants to reach zero net emissions by 2050. This ambitious goal is very much in line with her focus on climate change throughout the course of her campaign. Environmental issues were one of her top priorities from the start, which increased her appeal with young voters and helped her become one of the youngest world leaders at only 37.
Reaching zero net emissions would require overcoming challenging issues like eliminating fossil fuels in vehicles. Ardern hasn’t outlined a plan for reaching this goal, but has suggested creating an independent commission to aid in the transition to a lower carbon economy.
She also set a goal of doubling the number of trees the country plants per year to 100 million, a goal she says is “absolutely achievable” using land that is marginal for farming animals.
Greenpeace New Zealand climate and energy campaigner Amanda Larsson believes that phasing out fossil fuels should be a priority for the new prime minister. She says that in order to reach zero net emissions, Ardern “must prioritize closing down coal, putting a moratorium on new fossil fuel plants, building more wind infrastructure, and opening the playing field for household and community solar.”
A worldwide shift to renewable energy
Addressing climate change is becoming more of a priority around the world and many governments are assessing how they can reduce their reliance on fossil fuels and switch to environmentally-friendly energy sources. Sustainable energy is becoming an increasingly profitable industry, giving companies more of an incentive to invest.
Ardern isn’t alone in her climate concerns, as other prominent world leaders like Justin Trudeau and Emmanuel Macron have made renewable energy a focus of their campaigns. She isn’t the first to set ambitious goals, either. Sweden and Norway share New Zealand’s goal of net zero emissions by 2045 and 2030, respectively.
Scotland already sources more than half of its electricity from renewable sources and aims to fully transition by 2020, while France announced plans in September to stop fossil fuel production by 2040. This would make it the first country to do so, and the first to end the sale of gasoline and diesel vehicles.
Many parts of the world still rely heavily on coal, but if these countries are successful in phasing out fossil fuels and transitioning to renewable resources, it could serve as a turning point. As other world leaders see that switching to sustainable energy is possible – and profitable – it could be the start of a worldwide shift towards environmentally-friendly energy.
5 Easy Things You Can Do to Make Your Home More Sustainable
Increasing your home’s energy efficiency is one of the smartest moves you can make as a homeowner. It will lower your bills, increase the resale value of your property, and help minimize our planet’s fast-approaching climate crisis. While major home retrofits can seem daunting, there are plenty of quick and cost-effective ways to start reducing your carbon footprint today. Here are five easy projects to make your home more sustainable.
1. Weather stripping
If you’re looking to make your home more energy efficient, an energy audit is a highly recommended first step. This will reveal where your home is lacking in regards to sustainability suggests the best plan of attack.
Some form of weather stripping is nearly always advised because it is so easy and inexpensive yet can yield such transformative results. The audit will provide information about air leaks which you can couple with your own knowledge of your home’s ventilation needs to develop a strategic plan.
Make sure you choose the appropriate type of weather stripping for each location in your home. Areas that receive a lot of wear and tear, like popular doorways, are best served by slightly more expensive vinyl or metal options. Immobile cracks or infrequently opened windows can be treated with inexpensive foams or caulking. Depending on the age and quality of your home, the resulting energy savings can be as much as 20 percent.
2. Programmable thermostats
Programmable thermostats have tremendous potential to save money and minimize unnecessary energy usage. About 45 percent of a home’s energy is earmarked for heating and cooling needs with a large fraction of that wasted on unoccupied spaces. Programmable thermostats can automatically lower the heat overnight or shut off the air conditioning when you go to work.
Every degree Fahrenheit you lower the thermostat equates to 1 percent less energy use, which amounts to considerable savings over the course of a year. When used correctly, programmable thermostats reduce heating and cooling bills by 10 to 30 percent. Of course, the same result can be achieved by manually adjusting your thermostats to coincide with your activities, just make sure you remember to do it!
3. Low-flow water hardware
With the current focus on carbon emissions and climate change, we typically equate environmental stability to lower energy use, but fresh water shortage is an equal threat. Installing low-flow hardware for toilets and showers, particularly in drought prone areas, is an inexpensive and easy way to cut water consumption by 50 percent and save as much as $145 per year.
Older toilets use up to 6 gallons of water per flush, the equivalent of an astounding 20.1 gallons per person each day. This makes them the biggest consumer of indoor water. New low-flow toilets are standardized at 1.6 gallons per flush and can save more than 20,000 gallons a year in a 4-member household.
Similarly, low-flow shower heads can decrease water consumption by 40 percent or more while also lowering water heating bills and reducing CO2 emissions. Unlike early versions, new low-flow models are equipped with excellent pressure technology so your shower will be no less satisfying.
4. Energy efficient light bulbs
An average household dedicates about 5 percent of its energy use to lighting, but this value is dropping thanks to new lighting technology. Incandescent bulbs are quickly becoming a thing of the past. These inefficient light sources give off 90 percent of their energy as heat which is not only impractical from a lighting standpoint, but also raises energy bills even further during hot weather.
New LED and compact fluorescent options are far more efficient and longer lasting. Though the upfront costs are higher, the long term environmental and financial benefits are well worth it. Energy efficient light bulbs use as much as 80 percent less energy than traditional incandescent and last 3 to 25 times longer producing savings of about $6 per year per bulb.
5. Installing solar panels
Adding solar panels may not be the easiest, or least expensive, sustainability upgrade for your home, but it will certainly have the greatest impact on both your energy bills and your environmental footprint. Installing solar panels can run about $15,000 – $20,000 upfront, though a number of government incentives are bringing these numbers down. Alternatively, panels can also be leased for a much lower initial investment.
Once operational, a solar system saves about $600 per year over the course of its 25 to 30-year lifespan, and this figure will grow as energy prices rise. Solar installations require little to no maintenance and increase the value of your home.
From an environmental standpoint, the average five-kilowatt residential system can reduce household CO2 emissions by 15,000 pounds every year. Using your solar system to power an electric vehicle is the ultimate sustainable solution serving to reduce total CO2 emissions by as much as 70%!
These days, being environmentally responsible is the hallmark of a good global citizen and it need not require major sacrifices in regards to your lifestyle or your wallet. In fact, increasing your home’s sustainability is apt to make your residence more livable and save you money in the long run. The five projects listed here are just a few of the easy ways to reduce both your environmental footprint and your energy bills. So, give one or more of them a try; with a small budget and a little know-how, there is no reason you can’t start today.