For many observers, solar power is regarded as the energy source of the future – it is improving in efficiency, falling in cost, relatively quick and easy to install and generally has minimal environmental impacts other than visual.
Wales is well placed to exploit this potential and enjoys good levels of solar irradiation, particularly around the coastal zones, where it is comparable to the south-west of England. However, until now the establishment of large systems with electricity outputs significantly greater than domestic scale has tended to be focused in south Wales, with very little deployment through the central areas.
One of the main barriers to nation-wide progress is a lack of capacity for connecting new solar projects in the local electricity distribution network in Wales – the Grid.
The prior UK Government pointed out in its 2003 Energy White Paper, Our Energy Future – Creating a Low Carbon Economy, that ‘the nationwide and local electricity grids, that were created for a world of large-scale, centralised power stations, will need restructuring over the next 20 years to support the emergence of far more renewables and small-scale, distributed electricity generation.’ Government policy since then has promoted the concept of distributed or decentralised energy generation sourced from various renewable technologies, with generating plants located close to the point of use.
Since 2010, the deregulation of energy generation and support for smaller-scale installations has also made it easier for new entrants and, in a period of economic recession, the solar PV sector has attracted a significant amount of business activity and inward investment for the deployment of solar in Wales.
That said, deployment on private housing stock also appears to have been limited by the drastic cut in the Feed-in-Tariff support for solar in 2011, and the squeeze on household spending. Deployment on commercial rooftops has not taken off either, largely down to the preponderance of commercial premises that are occupied by short-term tenancies – meaning that the most significant area of deployment has been in ‘utility-scale’ solar farms of anything from 1MW to 30MW installed generating capacity.
It appears that the distribution network operators (DNOs) had not anticipated the increase in demand for new connections and have ‘not planned sufficient upgrades to the distribution networks to accommodate the rapid uptake of renewables, particularly in south Wales – an issue that now represents a serious constraint on any significant deployment over the next three to five years.
The solar sector has been criticised for the impact of development on the landscape. However, this reaction seems to have been less-marked in Wales where, at present, planning policy is being interpreted as more supportive of renewable energy schemes than is the case in England. It is now ‘clearly important’ to the industry that public support should be maintained through effective communication of the benefits of renewables, the case for decentralised energy generation and an understanding of the inevitability of the resulting change in the landscape.
There are also some indications that imminent changes to Welsh planning policy could help to improve the prospects for the solar sector. In October 2014, the Planning (Wales) Bill was introduced and this will give Welsh Ministers far reaching powers to change the ways that local planning authorities operate and alter role of the WG in taking planning decisions on some applications.
The Planning Bill will introduce more consistency into the planning process and enable companies that seek planning consent to more easily understand the way that decisions are being made throughout Wales, rather than the large variation in practice that is currently in place”.
Until now, the development of the solar sector in Wales has been largely led by commercial developers allied to end-buyers accepting relatively modest returns on investment, typically ranging between 7% and 10%. The fact that this return includes the guaranteed government subsidy support through either the Feed-in-Tariff or Renewable Obligation schemes has been crucial for investors to secure bank debt. Without that guaranteed Government financial support it is uncertain that investment of any significant scale will continue to be forthcoming.
However, there are still significant opportunities for the further deployment of solar PV systems in Wales at all scales and, providing a reasonable, relatively secure return on investment can be maintained. Furthermore, there is enough ‘entrepreneurial capital’ available to support the activities of businesses in Wales in the solar sector.
Where this activity will be focused is difficult to predict at the moment, especially in light of uncertainty over the outcome of the UK general election and the direction of future energy policy. Since the Electricity Market Reform White Paper in 2013, and the introduction of Contracts for Difference (CfD) for energy generation which promotes large-scale generation projects, it is also unclear if there is still a consensus across the main parties to provide continued support for the deployment of smaller-scale renewables as part of a dispersed and decentralised energy strategy – meaning that, at present, the introduction of CfD is generally being viewed with uncertainty by the solar sector.
With the announcement in late February of the devolution of energy policy to the Welsh Government, the business community will now be hoping that the Welsh Government will recognise the need to maintain investor confidence and that crucial decisions will need to be taken on how best to maintain-the growth of a vibrant and innovative SME sector in solar in Wales..