Changes to U.K. support for solar power will deter farmers from building projects in rural areas as Prime Minister David Cameron’s government says the countryside is being blighted by unsightly panels.
The government now requires many solar plants to bid for so-called contracts for difference in an auction instead of, in the old system, simply offering support to developers who satisfied the rules. The switch reinforces a program started in October to remove subsidies for farmers that use solar.
The new regime means solar parks will compete directly against cheaper onshore wind instead of receiving a specific allowance for power that comes from the sun. Developers say that will hurt the economic case for building solar farms in Britain, among the hottest markets for the technology in Europe.
Britain is promoting the use of solar panels on rooftops, easing planning curbs for facilities of as much as 1 megawatt.
“It appears by making the contracts-for-difference auction process technology agnostic, the government doesn’t really want any more big ground-mounted solar projects as they can’t compete with onshore wind at this point,” Stephen Lilley, a partner at Greencoat Capital LLP, said in an interview. “It appears to want solar panels on roofs.”
With solar about 60 percent more costly than wind on land, the technology will lose out in any head-to-head competition. Solar will be further handicapped as facilities larger than 5 megawatts, unlike onshore wind, won’t have the option to choose to stay with the old Renewables Obligation program until 2017.
Rooftop plants are typically smaller than 5 megawatts.
Solar costs an average of $137 a-megawatt hour, compared with $86 for wind, according to data compiled by Bloomberg.
Under the CfD system, generators bid for guaranteed power payments for 15 years. Funding is divided into two pots, with the first allocated to “established” technologies including onshore wind and solar. The second, much larger amount is set aside for less mature renewables such as offshore wind.
The first CfD auction, to allocate 315 million pounds ($467 million) to 27 contracts, gave 15 to onshore wind, three times more than offered to solar, results released Feb. 26 show.
The U.K. is also responding to a boom in applications for solar projects beyond expectations as prices of panels slumped, eating into the government’s renewables budget, according to a Department of Energy & Climate Change strategy document.
The department was unable to comment when contacted by Bloomberg because of parliament’s dissolution before the country holds a general election in May.
“The government has been clear for a while on wanting to shift U.K. solar from fields to rooftops, mainly due to the cost impact as large ground-mount projects mushroomed,” said Nico Tybaji, an analyst at Bloomberg New Energy Finance.
Ministers have tried to stem a backlash against renewable projects that some campaigners say blight the countryside by threatening to block subsidies. The ruling Conservatives held swaths of rural U.K. areas in 2010 elections, from Skipton and Ripon in the north to Surrey in the south, while the Labour opposition mostly dominated cities like London, Liverpool and Glasgow.
The capacity of larger-scale solar projects built last year almost tripled to 1.7 gigawatts from 620 megawatts in 2013 and may reach 2.5 gigawatts this year as developers rushed to finish projects before the old subsidies stop, according to BNEF. Solar funding contrasts with the 35-year deal for atomic power that Electricite de France SA got at 92.5 pounds a megawatt-hour. EDF’s contract is more than twice as long and almost double rate of 50 pounds awarded to two of the solar parks that won approval in the first CfD auction.
“One does ask the question why the Renewables Obligation system, which seems to be working, is being changed,” Lilley said. “Perhaps you have to look at the wider remit of the new CfD regime including nuclear to find the answer.”
A key difference with the new system is that the auctions, which require developers to have already secured consents and grid access and paid related costs, are held only once a year. That means they have to shell out at the risk of losing the auction and having to wait a whole year before trying again. They could apply for obligations any time under the old regime.
Building solar on the ground is “much riskier” since the advent of CfD’s, said Tess Sundelin, managing director of Green Hedge Renewables Plc. “We’re supportive of the effort to move to a technology-neutral auction system,” she said. “But as currently designed we are concerned that the system in fact doesn’t provide a level playing field for solar.”
If they don’t win a contract, companies must wait another year before submitting a bid or scrap the project and lose 90 percent of what’s already been invested, Sundelin said.