As the party season ends, more sober thoughts turn back to the great issues that dominated towards the end of 2009. With the Copenhagen conference highlighting massive short-comings in international efforts to fight climate change, it will be hoped that 2010 will see the UK move ahead in the use of renewable energy and herald greater cooperation between the powers in agreeing .

2009 was a year which saw the announcement of the introduction of the Clean Energy Cash Back system, essentially a feed-in tariff designed to attract investment in the UK solar industry. The announcement by the Department of Energy and Climate Change (DECC) was welcomed by those who have seen how successful similar tariff regimes have proved in other countries where they have been introduced.

However, following the consultancy process which followed the announcement, there have been a number of observers who have noted that the tariff rate will need to be sufficient in order the UK to compete with more mature markets in Germany, Spain, China and the US. While this month will see some clarification of the specific rates to be set for the UK tariff, it will be absolutely essential that the numbers are sufficient to boost investment in the new industry.

Critics of government policy have been headed by the flagship group ‘We Support Solar’ claiming that many within the government are acting against the general interests of solar energy, something which they believe will be reflected in a watery feed-in tariff.

However, not all predictions for the UK solar industry in 2010 are so pessimistic. David Kidney, Under Secretary of the DECC stated that any criticism of UK solar policy is nonsense and that the UK are set fair to strive to compete with the big international players this year. Speaking at a low carbon conference last month, Kidney fielded questions from an audience which pulled no punches, claiming that the UK was a leading light in the use and development of renewable energy.

Speaking mostly of the UK’s big offshore wind projects, matters also turned to solar where Kidney was adamant that the UK solar energy is looking healthy. Talking with regards to the introduction of the feed-in tariff system in April, he claimed that,

“April FiTs [feed-in tariffs] arrive in the UK and the solar industry is gearing itself up for what it thinks will be a major increase in demand for its products.”

Everybody within the industry will be hoping that the government under secretary’s optimism is well founded. As we approach the tariff date we will be able to greater gauge the level of investor interest in solar PV products. Certainly, with solar markets still going strong in Germany with investors looking to diversify portfolios with green stocks, the UK industry will be hoping to attract similar capital.

With Ernst & Young offering their annual solar attractiveness indices at the end of 2009, it again highlighted the clear correlation between strong feed-in tariffs and attractive markets for investors. Until the UK can produce a robust tariff (hopefully this will happen in the first quarter of this year), investors will be put off solar investment by the traditional worries that returns to not justify investment.

However, with the government under massive media pressure to fight climate change, 2010 may just be the year which is looked back on as the watershed in solar installation. With growing public awareness of solar combined with viable solar investment products, the UK could be set to become a world player…we hope.

This week the economist published an article criticising the German feed-in-tariff. The article wasn’t totally atrocious and it highlighted some of the current issues facing the German solar market. However it did leave out some key points that would have changed the articles’s conclusion. Being a fan of both the Economist and the feed-in-tariff I had to respond.

In addition, although I didn’t mention it in my response as I hate nit-picking, the author made a factual error by implying that the solar panel’s made by First Solar incorporate silicon. Since the key differentiator of the world’s largest solar manufacturer is that they don’t use silicon, this error raises doubts about the author’s level of expertise or research.

You can read the article using this link and my reply is shown below.

http://www.economist.com/businessfinance/displaystory.cfm?story_id=15213817

My response:

Sir,

Whilst your article makes some valid comments, it misses two key points.

Firstly, according to the Bundesnetzagentur (Germany’s grid regulator), large utility-scale photovoltaic installations accounted for fewer than 20% of the solar market in Germany in 2009. The rest of the market is made up from smaller rooftop systems. This is not the case for wind energy (since their performance decreases disproportionately with size). This means photovoltaic installations compete for the retail electricity price rather than the wholesale electricity price. Since retail prices can be four times greater than wholesale ones, solar energy has an easier cost target than wind energy.

The second point is that the cost of energy from photovoltaic systems is predicted to decrease at a faster rate than the energy from wind turbines. The basic components that make up a wind turbine have been costed-out for far longer than those making up a solar installation. According to the European Photovoltaic Industry Association, economies of scale and technological innovation will bring solar energy to cost competitiveness with regular grid prices by the middle of this decade, including in cloudy Germany. This means the end of subsidies is well-within sight.

It is clear that the German solar market became overheated in 2009, and in fact many within the industry have themselves called for the feed-in-tariff to be reduced faster than originally planned. However considering the above factors, alongside the fact that many of the world’s leading solar companies are German as a result of subsidy, Germany’s pioneering feed-in-tariff should be considered a resounding success.

If I had a pound for every time I’d heard that comment I’d be a rich man. That’s not to say it’s a dumb question though, it’s a perfectly reasonable question – it’s clearly sunnier in the south of Spain than in Blackpool. The question is by how much and does it matter?

At any given moment its not easy to predict how it’s going to be, but over the course of the year, the overall sunniness level can be accurately measured and predicted. This value is called the irradiation and can be defined as the amount of energy hitting a 1 square metre area pointed towards the sun over a whole year. In the south of England, according to the European Commission’s Joint Research Center, we get 1100 – 1200 kWh of irradiation per year (a kilowatt hour, kWh, is a typical unit of energy). In Devon and Cornwall you get between 1200-1300 kWh per year and in the North of England and Scotland its 1000-1000 kWh. In contrast, Barcelona gets 1700-1800 kWh of irradiation per year and in the very south of Spain and Italy it can get up to over 2000 kWh per year. So comparing London to Barcelona that’s 50% more irradiation for the Catalonians, which is significant but doesn’t mean we should give up hope for solar energy in the UK.

There are some other factors to consider here; irradiation doesn’t correspond exactly to the amount of solar energy you get out of a PV system. The best solar panels on the market today are only around 18% efficient under good conditions. At high temperatures for example, solar panels become less efficient. If the temperature of the solar panels increases by 20oC, they will only produce around 90% of the energy they would at room temperature. This means that on a clear but cold day in London, solar panels could produce more energy than a hot and sunny day in Spain.

Another factor is the difference between clear days and cloudy days. In the UK we get a lot of cloudy weather which blocks the sun and leads to ‘diffuse’ sunlight (meaning from all directions) rather than ‘direct’ sunlight. The four sunniest months of the year in the UK (May-August) deliver 5 times as much solar energy as the four winter months of the year (Nov-Feb). Solar panels can still turn diffuse light into electricity though, and there is evidence to suggest that some types of solar panels are better at collecting it that others. This means we may be able to improve the difference between London and Barcelona by using different technologies.

Despite these factors though, solar panels in Spain will of course still produce more energy than solar panels in the UK, which makes energy from solar cheaper in Spain than over here. But in some ways what happens in Spain is irrelevant, the question that really matters is whether solar energy makes sense or not in the UK.

I would say it does. With the feed-in-tariff, installing solar panels in the UK instantly becomes a highly profitable exercise yielding significantly better returns than most savings accounts (discussed in a previous article). Much of Germany, where over half the world’s solar panels were installed in 2009, is on the same latitude as the UK (northern Germany is in-line with Newcastle). So if it works over there, it should work over here.
The second point is that prices of solar energy systems are falling and electricity prices are due to rise, leading to so called ‘grid parity’ – the point at which solar electricity costs the same as regular electricity and can flourish without government support.

Because Spain is sunnier, grid parity is expected to happen there sooner than here (some claim it may have already happened in certain cases). Several predictions indicate however (in particular those from the EPIA – European Photovoltaic Industry Association), that we can expect grid parity in the UK as early as 2013 or 2014. In just a few years solar energy will be competing on real terms with retail electricity prices, hardly a waste of time in my opinion.

So the next time someone greets you with incredulity at the prospect of using solar panels in the UK, you at least have some numbers to back yourself up…

You heard it here first. Sources recently disclosed to me that we can expect an announcement from the UK government concerning the feed-in-tariff in mid-to-late January.

You may well be aware that while the government has committed to launching a feed-in-tariff program to support renewable energy, it has not confirmed the value of the proposed tariff yet. Numbers have been suggested, but we do not know the exact price per kWh of energy that will be paid to producers and this is causing significant problems for the UK PV industry when advising customers.

The long-awaited announcement will be closely scrutinized to see whether the UK government is serious about meeting its renewable energy targets. Given that the UK is the last major European economy to introduce a feed-in-tariff program (by a considerable margin) the industry will be hoping that the price set will be strong enough to allow the UK to gain some of the lost ground.