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The business significance of the Government's solar step change

Posted by Phil Nelms on 14 February 2013 at 8:34 am

The addition of Solar PV to the government’s Renewables Roadmap is highly significant. After a year dominated by cuts, consultations and legal challenges in the solar industry, as well as rising fossil fuel prices for everyone else, that there has been an attitude shift within the corridors of influence.

The Roadmap sets out a path to 7-20GW of solar power by 2020 and leading ‘Tory Moderniser’ Greg Barker of the Department of Energy and Climate Change (DECC) has lauded his own ambition of 22GW by 2020. Sure, there’s a lot of work to be done to reach the upper targets here – ongoing cost reduction  and also infrastructural improvements to help balance the grid – but we’ve come a long way since summer 2011 when the Government took action to shut down large scale solar prospects altogether

Remoulding the Industry

The initial mistrust that the solar industry in particular was treated with by the coalition may stem purely from inheriting what was seen as an unsustainable incentive scheme put in place by Labour. This difficult opening period has given way to a more positive outlook from the government thanks to DECC getting hold of the feed-in tariff (FIT) and remoulding it into something they consider more certain over the long term, something they are happy to subscribe to.

This stable basis and loud proclamation of ambition from DECC seems to be a signal that they are ready for businesses to begin serious investment again. Whilst before, there were fears that large scale investment by commercial interests may gain too much from the average taxpayer in financial incentives, that certainly isn’t the case now.

Motives

We shouldn’t kid ourselves that the government has come over all sensitive about the environment all of a sudden. This newfound optimism for alternative forms of energy will for the most part have been a business oriented decision. After all, the chancellor is still the chancellor. What we have seen is sharply rising energy bills over the last few years, caused primarily by the lack of control the UK has over its largely imported energy supply. Whilst on one end of the scale we can talk about fuel poverty for the very poorest being caused by these rises, which is a political issue; at the other end of the scale UK businesses are losing competitive advantage over rivals in what was supposed to be an export-led recovery, and foreign investors are losing profitability.

Because of this it may be that the interests arguing for a continuation of a purely centralised energy system are losing traction. Yes, they provide jobs and investment themselves but they are beginning to be outweighed by other industries being affected. By the end of 2012, even Npower and Scottish and Southern Electricity were arguing for an extension to large scale renewable energy incentives.

These economic factors are behind support for solar as well as reinvigorated plans for a tidal barrage at the Severn Estuary, new nuclear power plants (though support may be cooling due to post-Fukushima regulations adding on cost) and ‘fracking’ – showing that it is cheap energy, rather than clean energy that is being pursued. Environmental credentials are only a bonus at this stage.

So?

The Government’s focus on producing cheap, home-grown energy has provided an enormous opportunity for businesses. There’s an interesting article by Stephen Newman – technical director at MITIE Asset Management – putting across the argument for decentralised energy as one way of facing our energy challenges in the coming years

It is something that we’ve supported for a long time and means that businesses themselves can forge the way forward in the UK and all that takes is for them to make a secure, long term investment. In the case of solar, it happens to be a rather profitable secure, long term investment.

The foundation now in place with the Feed-in Tariff and Renewable Obligation support means that there is certainty and this has allowed financial options to be made available to the market to add flexibility to the way installations are funded – meaning there is no longer a need to pay up front in one lump sum. 

Generating your own energy is a bandwagon to be leapt upon in 2013 – it’s never been more secure, profitable or necessary.

What do you think? Am I way off?

Photo Credit: broodkast via Compfight cc

About the author: Phil is in charge of online marketing for Southern Solar.

If you have a question about anything in the above blog, please ask it in the comments section below.

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