24 March 2016

With the closure of the solar RO it is timely to reflect on the fact that some £10 billion of solar assets have been installed in the UK in recent years. Many of the developers involved in this revolution have grown, diversified or evolved into asset managers, managing large portfolios of generation assets.

Regen SW believes that the future development of solar power in the UK will depend on the way existing installations are manged. Projects need to address issues such as: the impact of grid outages on income; best practice operation and maintenance; adapting to the growing storage and smart energy revolution; and working with local communities, landscapes and biodiversity.

One of the major challenges is that income levels for distributed generators have come under severe pressure from the combination of falling power prices and the removal of the Climate Change Levy Exemption by the Treasury.

However, there is now a further risk – the government announced in the recent Capacity Market Reforms that “Ofgem is reviewing whether it would be in consumers’ interests to change the charging arrangements for distribution-connected generators. Ofgem will set out their conclusions and a proposed way forward on this matter, which could potentially include initiating changes to the charging regime, in the summer.”

Any changes to these charging arrangements, or ‘embedded benefit’ payments, to distributed generators at a time of low power prices and no levy exemptions would pose a serious threat to the viability of the sector.  In particular, the biggest impact of reductions would be on sites connecting at a more local level, many of which are owned by community groups, local landowners or local authorities.  Given the drive for greater flexibility of our energy system and the treasury commitment to a ‘smart power revolution’ the charging regime should, therefore, encourage generation to be connected and used at the most local level possible.  Much of the value identified by the National Infrastructure Commission’s smart power report is through avoiding expenditure on expensive assets through distributed energy flexibility and storage. The more local the level at which energy generation and demand can be balanced, the less the requirement to reinforce grid assets.