Photon Energy celebrates 10 years in the business
Last month, we celebrated 10 years of Photon Energy - making us positively ancient in the UK’s solar PV industry. In the last 10 years, we’ve seen the UK’s solar PV industry develop from a small, niche industry that employed at most, 1,000 people to an industry that, at its height in 2015, employed over 35,000 people – more than the nuclear industry.
When we started, back in 2006, the UK had a total of 14.3 MW of solar PV installed. After our first year, this had risen to 18.1 MW and by the end of 2009, there was around 30 MW of installed capacity.
Those early days were largely marked by a government that was unconvinced by the potential for solar, and by stop-start grant schemes such as the Major Demonstration Programme which saw the installation of around 200 systems having been billed as the UK’s answer to the German 100,000 roofs programme.
By 2007, the Low Carbon Buildings Programme had started which was originally intended to ‘establish the UK as a credible player...alongside Germany and Japan’ and was a catalyst for the establishment of Photon Energy.
In the first year of the scheme, 3.8 MW of solar PV was installed, with a further 4.4 MW added in 2008; in 2010, the final year of the scheme, a total of 40 MW was installed. This compares to the 7,411 MW installed in Germany and the 991 MW installed in Japan in the same year.
Does this lack of ambition, stop-start schemes, continual policy changes all sound a little bit familiar?
Another innovation in 2006 was the introduction of the voluntary Code for Sustainable Homes which set progressively tightening environmental criteria for new homes. It was adopted by many housing associations creating a new market for solar PV. This complemented the increasing popularity of the “Merton rule” where local planning authorities could require new commercial buildings over 1,000 m2 to generate at least 10% of their energy from renewable energy.
However, it was the unpredictability of the various grant schemes and the introduction of the Code for Sustainable Homes and the Merton Rule that led us to concentrate our early efforts on the new-build market – both residential and commercial. By keeping this as a major part of our client base, we have been protected from the extreme boom and busts of the feed-in tariff and ROC schemes.
Fast forwarding to 2017, the feed-in tariff has done a great job in helping to kick-start the UK’s solar PV industry: there are now over 870,000 solar powered buildings with some 3.5 GW of rooftop solar installed in the UK. Photon Energy has installed over 21 MW of roof-mounted PV and boasts an impressive array of clients in both the new build and retro-fit markets.
But what now? The feed-in tariff has been effectively scrapped, the Renewables Obligation scheme has been closed, but they have by and large done their job.
For the last 5 years, the rationale for installing solar has been to maximize the revenue from a subsidy so the decision to install a rooftop solar system has been a financial one. This will change. With the value of “displaced” electricity worth between 5 and 6 times more than the generation tariff, the revenues from the feed-in tariff are increasingly irrelevant. Rooftop solar systems are now being designed to maximise on-site energy use rather than maximise income from a subsidy.
Today, a 250kW system installed for £900/kWp, on a building where all of the electricity is used on site, an IRR of 7% can be achieved with no feed-in-tariff; the same calculation for a 50kW system installed for £1000/kWp gives an IRR of 5%.
The solar industry needs to be planning for a post-subsidy world. Mechanisms such as Enhanced Capital Allowances for solar PV should be introduced, priority grid access maintained with guaranteed export revenues.
This would allow us to continue our journey towards subsidy free solar…and be free of the meddling and interference by politicians.