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UK Cuts Out Cheapest Clean Power Method

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Img20100504_112110 by Lilly, Viktor, Kim & Gitte Andersen via flickr

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.

Energy

Are the UK Governments Plans for the Energy Sector Smart?

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The revolution in the energy sector marches on, wind turbines and solar panels are harnessing more renewable energy than ever before – so where is it all leading?

The UK government have recently announced plans to modernise the way we produce, store and use electricity. And, if realised, the plans could be just the thing to bring the energy sector in line with 21st century technology and ideologies.


Central to the plans is an initiative that will see smart meters installed in homes and businesses the length and breadth of the country – and their aim? To create an environment where electricity can be managed more efficiently.

The news has prompted some speculation about how energy suppliers will react and many are predicting a price war. This could benefit consumers of electricity and investors, many of whom may be looking to make a profit by trading energy company shares online using platforms such as Oanda – but the potential for good news doesn’t end there.

Introducing New Technology

The plan, titled Smart Systems and Flexibility is being rolled out in the hope that it will have a positive impact in three core areas.

  • To offer consumers greater control by making smart meters available for all homes and businesses by 2020. Energy users will be able to monitor, control and record the amount of energy they use.
  • Incentivise energy suppliers to change the manner in which they buy electricity, to offer more smart tariffs and more off-peak periods for energy consumption.
  • Introduce new standards for electrical appliances – it is hoped that the new wave of appliances will recognise when electricity is at its cheapest and at its most expensive and respond accordingly.

How the Plans Will Affect Solar Energy

Around 7 million houses in the UK have solar panels and the government say that their plan will benefit them as they will be able to store electricity on batteries. The stored energy can then be used by the household and excess energy can be exported to the national grid – in this instance lower tariffs or even payment for the excess energy will bring down annual costs significantly.


The rate of return on energy exported to the national grid is currently between 6% and 10%, but there are many variables to take into account, such as, the cost of battery storage and light levels. Still, those with state-of-the-art solar electricity systems could end up with an annual profit after selling their excess energy.

The Internet of Things

Much of what the plans set out to achieve are linked to the now ubiquitous “internet of things” – where, for example, appliances and heating systems are connected to the internet in order to make them function more smartly.

Companies like Hive have already made great inroads into this type of technology, but the road that the government plans are heading down, will, potentially, go much further -blockchain technology looms and has already proved to be a game changer in the world of currency.

Blockchain Technology

It has already been suggested that the peer to peer selling of energy and exporting it to the national grid may eventually be done using blockchain technology.

“The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”

Don and Alex Tapscott, Blockchain Revolution (2016)

The upshot of the government’s plans for the revolution of the energy sector, is that technology will play an indelible role in making it more efficient, more flexible and ultimately more sustainable.

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Energy

4 Case Studies on the Benefits of Solar Energy

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Demand for solar energy is growing at a surprising rate. New figures from SolarPower Europe show that solar energy production has risen 50% since the summer of 2016.

However, many people are still skeptical of the benefits of solar energy.Does it actually make a significant reduction in our carbon footprint? Is it actually cost-effective for the company over the long-run?


A number of case studies have been conducted, which indicate solar energy can be enormously beneficial. Here are some of the most compelling studies on the subject.

1.     Boulder Nissan

When you think of companies that leverage solar power, car dealerships probably aren’t the first ones that come to mind. However, Boulder Nissan is highly committed to promoting green energy. They worked with Independent Power Systems to setup a number of solar cells. Here were the results:

  • Boulder Nissan has reduced coal generated electricity by 65%.
  • They are on track to run on 100% renewable energy within the next 13 years.
  • Boulder Nissan reduced CO2 emissions by 416,000 lbs. within the first year after installing their solar panels.

This is one of the most impressive solar energy case studies a small business has published in recent years. It shows that even small companies in rural communities can make a major difference by adapting solar energy.

2.     Valley Electric Association

In 2015, the Valley Electric Association (VEA) created an 80-acre solar garden. Before retiring from the legislature, U.S. Senate Minority Leader Harry Reid praised the new project as a way to make the state more energy dependent and reduce our carbon footprint.


“This facility will provide its customers with the opportunity to purchase 100 percent of their electricity from clean energy produced in Nevada,” Reid told reporters with the Pahrump Valley Times. “That’s a step forward for the Silver State, but it also proves that utilities can work with customers to provide clean renewable energy that they demand.”

The solar energy that VEA produced was drastically higher than anyone would have predicted. SolarWorld estimates that the solar garden created 32,680,000 kwh every year, which was enough to power nearly 4,000 homes.

This was a major undertaking for a purple state, which may inspire their peers throughout the Midwest to develop solar gardens of their own. It will reduce dependency on the electric grid, which is a problem for many remote states in the central part of the country.

3.     Las Vegas Casinos

A number of Las Vegas casinos have started investing in solar panels over the last couple of years. The Guardian reports that many of these casinos have cut costs considerably. Some of them are even selling the energy back to the grid.

“It’s no accident that we put the array on top of a conference center. This is good business for us,” Cindy Ortega, chief sustainability officer at MGM Resorts told Guardian reporters. “We are looking at leaving the power system, and one of the reasons for that is we can procure more renewable energy on the open market.”

There have been many benefits for casinos using solar energy. They are some of the most energy-intensive institutions in the world, so this has helped them become much more cost-effective. It also helps minimize disruptions to their customers learning online keno strategies in the event of any problems with the electric grid.

4.     Boston College

Boston College has been committed to many green initiatives over the years. A group of researchers experimented with solar cells on different parts of the campus to see where they could produce the most electricity. They discovered that the best locationwas at St. Clement’sHall. The solar cells there dramatically. It would also reduce CO2 emissions by 521,702 lbs. a year and be enough to save 10,869 trees.

Boston College is exploring new ways to expand their usage of solar cells. They may be able to invest in more effective solar panels that can generate far more solar energy.

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