Solar FutureThe success of PV market development in the UK

Colin McNaught

26th June 2012

Major provider of environment and energy consultancy

and advice to the private sector

Advised DECC on Renewables roadmap, RHI, FIT,

CRC

Auditor for the RHI schemeCHP Quality AssuranceUK emissions inventory

BPVA MCS Installer survey

WRAP PV Industry report

AEA

• Looking back – trends & patterns

• Looking forward – who & where is the growth?

Agenda

A brief history…

DTI Domestic Field Trial2002 installs:• 262 kWp• 12 sites• Avg £7,200 per kWp

Low Carbon BuildingsLCBP Solar PV:• 11,490 kWp• 5,586 sites• Avg £5,924 per kWp• £45.5 million grant

Clear Skies“The gap led to "a famine". "a lot of damage to a rapidly-growing industry"

Source: IEA & DECC

The Impact of the FIT

Capacity 1,250 MW 282,000 Installations

Registered schemes – Ofgem 22 June 2012

• Domestic sector = 75% of capacity 97% of installs

The Impact of the FIT on Solar PV

Registered schemes – Ofgem 22 June 2012

Surges in Solar PV

• Peak of 29 MW in one week, circa £75 million invested

• 2010/11 around £640 million invested

• Surge around 6 weeks before deadlineDECC 22 June 2012 up to 50 kWp

Certain reduction 43p to 21p/kWh

Possible reduction 43p to 21p/kWh

Energy Efficiency requirements

Falling module prices

Source IMS

• Centre for Economics and Business Research: “The primary danger is that once deflationary expectations are entrenched, consumers will delay spending and businesses will delay investing as this can be done more cheaply in the future. As a result, deflation can contribute to downward economic spirals and turn a recession in to a deep and lasting depression.”

• Tariff cuts may over-ride the impact of deflation

• Difficult questions:

Are tariff cuts needed to motivate buyers?

What happens as the cuts become smaller?

The danger of deflation

Location, Location – Solar PV by Postcode

Focus on London

Focus on Sheffield

Ofgem Jan 2012 Domestic only

Which districts have the best market?

Scale of Domestic Market

Less:- Listed buildings- Shaded roofs- Unsuitable roof

structures

26 Million Homes

26 Million Homes

96% are not flats

67% Owner occupied

50% EPC D or better

50% Southwards facing

Target Market 4.1 million

homes

• Around 300,000 installs

• Around 2/3 on single properties (not rent a roof/social housing)

• So 200,000 owner occupiers

• Or 5% of estimated 4.1 million market

• How do future buyers compare with past buyers?

Scale of Domestic Market

InnovatorsEarly

Adopters Early Majority Late Majority Laggards0.10 million

0.3 GW0.55 million

1.7 GW1.40 million

4.2 GW1.40 million

4.2 GW0.66 million

2.0 GW

Profiling the market

4.1 million homes

• Innovators – venturesome, educated, multiple info sources;

• Early adopters – social leaders, popular, educated;

• Early majority – deliberate, many informal social contacts;— More risk averse = De-risk the process and the returns

— Need confidence = They seek the market leader

— Less affluent = Price Matters + Finance Matters

• More Ford Focus than Morgan kit car?

• Need to re-build awareness post the big cuts

The next generation of customers

• Increasing the value of export

• Impact of energy price rises

Moving beyond the FIT

• A £6,000 investment in Solar PV vs. Cash ISAs

• 12 million Cash ISAs in 2010/11 = £38 billion

A competitive investment

• Needed to re-engage and update customers– On cost, on investment returns, on quality

– Public Sector: EST, Green Deal, DECC…

– Private Sector: Which?, money journalists, banks…

• But need Clarity and Consistency of messages

Allies and Partners

EST: Main Solar PV web page

An average system is 3 kWp and will cost around £10,000 (including VAT at 5%). Most domestic PV systems cost around £3,000 to £3,500 per kWp installed, though small systems cost proportionately more. Costs vary between installers, so it is important to get several quotes.

EST: Home Energy Generation SelectorPotential costs & savings for Solar Electricity

Panel

Typical capital cost before grants,

depending on size and type of system

installed.

£8,000 - £16,000

Financial saving (£/year)

£190

Estimated payback 14 years

Estimated CO2 saving (kgCO2/year)

920kg CO2

New Strategies

• The FIT and the surge have opened the market

• The Challenge is to sustain growth:– New market segments

– The financial case is still excellent

– Less reliance on FIT = less policy risk

– But less push from the tariff cuts

– Smarter installations to maximise the other income

– Focus on cities

Solar FutureThe success of PV market development in the UK

Colin McNaught

26th June 2012