Solar investors urge government to give large scale solar quick access to CfD Auction

Published:  12 October, 2017

The STA has written, together with seven major investor members, who collectively own 2GW of solar assets, to the Secretary of State for Business, Energy and Industrial Strategy urging him to allow solar back in to auctions for clean power as part of the Clean Growth Strategy.

The letter was sent before the announcement of a further £557m for 'less established' technologies and before recent auction results for offshore wind. It reflects widespread optimism in the solar industry that the technology may deliver clean power at £50 - £54/MWh by 2020 (effectively almost net subsidy-free) given access to the Contracts for Difference (CfD) clean power auction process.

This would mean solar would supply clean power for half the price of the Hinkley contract (around £100MWh in today’s prices). Solar has been shut out of competing for Contracts for Difference for 2.5 years and investment has consequently stalled.

STA CEO Paul Barwell said: "Today brings further good news for clean energy but we are still missing any positive news for the UK solar industry as it continues to be shut out of the auctions market.”

A new CfD round which allows solar to compete for clean power contracts is now long overdue. The Government, responding to the 2016 Committee on Climate Change Progress Report, said a year ago that it would ‘set out our plans for mature technologies (pot 1) in due course.’ [2] Both the CCC and National Audit Office also back auctions for ‘mature’ technologies (see also letter text).

The letter makes clear that the expected very low price for new solar CfD contracts is unlikely to amount to a net subsidy for consumers. Because CfDs stabilise the incomes of solar projects they de-risk investment and would enable projects to build out today, even with no net subsidy (depending on future energy prices).

For lack of a level playing field, the industry has been left waiting for the stars to align to resume activity, including further drops in the price of battery storage, but despite some pathfinder schemes meaningful activity is unlikely to resume until 2019, with worrying implications for British industry capabilities.

Matt Black, Senior Investment Manager at Foresight, one of the signatories to the letter said: "The cost reductions seen in solar over the last 10 years mean that solar offers the lowest generation costs in many markets globally. Competitive auctions drive significant cost reductions, as can be seen by the recent auction result for offshore wind. The UK has a leading solar industry which would be able to deliver cost-effective new generation if it was provided with fair market access. The days when solar was reliant on significant public subsidy are over but what the solar industry needs is a route to market and the ability to compete".

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