Chelgate articles
Feed-in tariffs: learning from Germany
DECC's consultation on the Feed In Tariff is likely to have a big impact, but it could all be so different, writes Michael Hardware of Chelgate.
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The recently announced consultation on the Feed in Tariff (FIT) proposes significant reductions in the rates for larger scale solar applications, while leaving the rates on projects up to 50 kW, mainly domestic, unchanged. Germany's second largest solar photovoltaic manufacturer, Solarwatt, launched itself into the UK market in February, hoping that the UK market would follow that in Germany, but the review may have put that into question.
According to recent research by PricewaterhouseCoopers (PwC), solar photovoltaics (PV) currently represent only 0.3 per cent of renewable energy in the UK today, some 32 MW. This places the UK a long way behind other countries such as Germany, Spain and the USA. To put this in perspective, in 2009, PV installations in the USA were some 500 MW, whereas the UK had a mere 6 MW. Both of these pale into insignificance when compared to Germany, which installed 3,800 MW.
Globally, the PV market has been growing at 20 per cent per annum since 2002, making it the world's fastest-growing energy technology. In 2008, the global PV market reached 5.5 GW and the installed capacity totalled almost 15 GW compared to 9 GW in 2007.
FIT schemes have been key market stimulants. Germany introduced its FIT more than ten years ago, while the UK has been pontificating about it for about as long. Germany had the fastest-growing PV market between 2006 and 2007, and it is estimated that more than 8,000 MW of PV were installed in the country last year. The German PV industry accounts for more than 10,000 jobs in production, distribution and installation, while more than 88 per cent of all PV installations in the European Union were grid-tied applications in Germany (2006).
Prospects for the UK
Success in Germany could have been an indication of what might have happened in the UK in the coming decades. PwC identified a potential five-fold increase in PV installations in the UK in 2010 as a result of the current FiT, although predictions for future years will have to be revised downwards if the current review goes ahead. It was estimated that installed capacity in the UK could have reached 1,000 MW by 2015, and around 5 GW by 2020 - this would have brought the UK capacity in 2020 to levels reached by Germany today. There remains a possibility that this may still be achieved as the majority of UK installations are currently small domestic ones, usually no larger than 3 kW, which is also the case in Germany, as well as France. In Spain and Italy, large-scale solar farms are more common.
FITs have been highly successful in Europe at stimulating markets, driving rapid increases in PV markets. Typically, European annual installations increased by 300 per cent during the first year of a FIT. Typically, European annual installations increased by 300 per cent the first year of a FIT. There have been two setbacks in the UK which may mean that this level will not be achieved here. The FIT budget was reduced from £400 million to £360 million annually from 2013, and now DECC has announced a reduction in the FIT for projects over 50 kW.
DECC aims to focus FIT away from field-based solar farms and on the smaller-end domestic and small commercial applications, for which it was designed. Time will tell whether the small end of the market will have enough volume to reach the levels previously predicted by PwC, although the implementation of the Green Deal from 2012, involving the retrofitting of 26 million existing homes and two million existing commercial buildings, will hopefully provide a further stimulus for the adoption of solar PV. BRE is currently completing research into how the industry can deliver the Green Deal, which will be the equivalent of retrofitting some 12,000 homes per week for the next 40 years.
German market matures
Germany's PV market is more than 10 years old and could, as such, be considered ‘mature'. With other countries now actively embracing renewable energy sources, including PV, Germany's overall share of the market, estimated at some 48 per cent of the entire world market in 2006, will decline over the coming years. Although the German market will continue to grow, it will do so more slowly than previously, and at a lower rate than other countries, such as the UK, further down the PV evolutionary path. This is also partly due to the German government, which is currently reducing the subsidy provided through the FIT now that the industry is established in the country.
Although German PV manufacturers have enjoyed good market growth in recent years, they now have to look to overseas markets for future growth. Solarwatt, which was established in Dresden in 1993, launched in the UK market at a reception in the House of Commons in February. It is in advanced discussions with potential customers, and expects to make several announcements in the coming months. It is also developing a distribution and installation network to target the smaller end of the market - domestic and smaller commercial - across the UK, in readiness for the Green Deal.
