Policy Direction And Stability Needed

The UK solar and photovoltaic industry, like other PV markets, is impacted by changing government policies while industry relies on subsidies to develop market growth. Changes are afoot once again with recent announcements that the government planned to review subsidies to large scale solar as well as changes to existing programmes.

The problem with having an industry reliant on subsidies and government policies is that the industry is prone to a government's need to appear to be doing something and with solar being taken up by consumers faster than anyone wanted to imagine, governments around the world have juggled policy decisions in an attempt to balance energy decisions with financial realities.

This is no different in the UK but the gap between subsidy dependency and self-sufficiency is reducing rapidly as PV prices fall towards a sustainable level. Until then it is the vagaries of policy that continue to dictate the level of returns a company can achieve at any given time. Despite the protests at the continual changes to the UK solar and PV policy, it should be remembered that the UK market continues to be seen as one of the most stable, in terms of policy and growth, throughout Europe. 

The UK solar industry has had government supporters from the beginning and this championing by key individuals has turned out to be a mainstay for the industry, even as other government elements balked at the growing initial costs in supporting the introduction of renewable energies. People like Greg Barker, Minister of State for Energy and Climate Change, has consistently beaten the drum for the PV industry and is a constant pressure on the trade circuit.

Barker recently launched the Solar Strategy, a policy setting paper designed as a catalyst for long-term development of the UK solar industry. It is a fairly typical UK policy document, full of hope for the future and outlining grand plans to instigate, research and manufacturing. Any positives felt from such a positive announcement were quickly replaced with fear and déjà  vu as DECC announced a review of solar subsidies not long after Barker's hopeful announcement. The juxtaposition was a perfect example of the confusing policy messages that the industry has concerns over.

Once the initial negative reaction had subsided the idea of reviewing solar policy was perceived as inevitable and something that needed to be worked with. Companies began to support the idea of pushing roof top arrays as a means to open a  new market. Recent history has convinced many that there is an entrepreneurial spirit being shown in the industry that will succeed regardless of policy tinkering. Ground mounted PV will continue but with different dynamics than expected. The assumption had been that ROCs, even in their diminishing mode, would provide a hefty return on investment until 2017 but it will now close two years early. Companies are pulling out the calculators and although dismayed at tighter margins are seeing a viable market regardless.

Future control

The PV industry when in conference mode talks about moving to self sufficiency and developing autonomy as sustainable as the decentralised energy platform it is heading towards. There has also being the understanding that the energy markets are huge and are not easily changed or swayed. With solar PV consistently breaking energy production records in Germany and the UK and mainstream media reporting on Germany's success at supplying 50% of its energy via solar, the momentum is unstoppable and only the pace can be swayed by policies or industry.

It may be the time for the industry to start moving away from quick returns through subsidies and focus on longer-term sustainable goals. The response by the industry every time policies change to be even more impressive. When the upcoming ROC changes were announced the industry went into overdrive to install before returns change. In the first quarter this year the UK saw nearly 1GW installed on the ground.

The industry also has to face the realities of joining a Contract for Difference (CfD) scheme where they will have to compete with other renewable energy sources for a piece of government support for arrays above 5MW. Another policy direction seen by some as only helping the larger companies. There is an election in 2015 and the solar and PV industries would do worse than realise they hold a fair amount of collective power with energy tipped to be a major election point. Who they listen to will be crucial. As I write this the UK PM is under the microscope for employing a certain Mr Coulson, who has been found guilty of phone hacking. It is a timely reminder that advisers do not always provide the best or unbiased advice.

One area of PV and solar manufacturing that can prove troublesome is the transportation of completed modules. This could be an opportunity for the UK. With trade disputes creating all sorts of problems for Chinese manufacturers they will be looking for new ways to manufacture and assemble product closer to the source of sales. This suggests that some Chinese companies may set up assembly plants in Europe. An opportunity that the industry could pursue and encourage the government to help develop a suitable and attractive market environment. REA executive, Ray Noble recently pointed out that there are more cars made in the UK than when there was a domestic car industry. He feels this is the example that the UK should follow and pro-actively encourage such assembly here.

Most of all the industry needs to develop strategies for growth beyond the protection of government policies. Especially when those policies are used as fodder against the industry or sold as the cause of rising consumer energy bills. The energy industry in is highly regulated and will always be prone to policy change. Renewables need to be at the heart of this discussion with plans for consolidating domestic strengths to ensure growth.

There is a clear link between stable policies and consistent growth of any industry and the government needs to hear from the PV industry what shape long-term policies could be to encourage domestic market and industry growth. Policy direction is not simply about changing financial packages but rather provide long term direction with clear goals and time guidelines. Everyone can understand the need to change and tweak financial commitments as circumstances change but providing clear direction of long term goals regarding energy is what is sought by the industry. From any political party. The UK has a great opportunity to consolidate its growing leadership position in the solar industry in Europe and around the world.

©2014 Permission required.Angel Business Communications Ltd.