Solar seems set for another good year across all regions of the UK, and to be boosted further as significant energy storage opportunities at last becomes a commercial reality.
Storage might even be said to hold the key to the future of solar as a maturing renewable operating without subsidy; not least as the bigger prize allowing investors to take a sanguine view of Government support disappearing in 2017.
But the year ahead is looking positive even without storage in the equation, and not just in the UK. As one door closes, another opens: The Republic of Ireland does plan to subsidise developments for the first time, promising further stimulus to the sector. There are no details yet, but the government there has already indicated that clear ground-mounted projects may be aided.
Just the prospect of such support, of course, is enough to further cement a pathway to more growth in the Republic. That path is already being trod, with land agreements signed and developers investing significantly ahead of an expected imminent announcement about subsidies.
There are also still many ground mounted projects going through planning processes in the UK, reflecting continued confidence from both developers and investors despite the imminent final end to the price support regime.
For example, what will become the largest solar farm in Northern Ireland has just been given planning permission; and several more large ground-mounted ventures are due to complete in Scotland this year.
The removal of financial support from central Government will clearly have some consequences. It might be expected to spur developers to refinance schemes to make their costs more attractive than they might otherwise be left when Government money dries up.
But what is very clear already is that the imminent loss of support is definitely not weakening interest in solar generally, just causing people to think harder about funding mechanisms.
Solar remains a tempting, innovating prospect; and with investor and developer attention now firmly focusing on energy storage, mainly with batteries, there is no reason to expect this to alter. Significant storage capacity is crucial to allow for grid balancing and schemes being planned either as stand-alone developments or co-located next to an installation.
Many developers are in the advance stage of participating in the National Grid tendering process for enhanced frequency response contracts, which deal with demand surges. The clear signals of interest in solar from National Grid are themselves encouraging investment in storage technology.
There is a similarly strong picture for roof top arrays in the year ahead, despite reductions in the feed-in tariff causing what, as it transpired, was a momentary pause in investor interest.
Once again what is evidently driving the sector is not the level of immediate support, but the technological advances in storage that may make a behind the meter projects an economical proportion without subsidy.
It is not just individual home owners who have arrays. Energy intensive commercial undertakings are also increasingly interested in generating their own solar power. There is an opportunity to grow this particular market, and we expect that it will do so quite significantly as more firms become aware of what renewables can offer.
We think the interest from commercial undertakings is an area to watch in terms of investment M&A activity, and we are not alone. There has been a marked increase in the number of rooftop portfolios coming to market, a trend likely to accelerate.
There is also a sense that the amount of regulatory churn that has caused some anxieties may finally be settling down. Investors want certainty above all else and now appear to be getting it.
The year ahead does need to be seen in the context of the one just passed, not to mention a period of quite extraordinary growth that saw investment in solar worldwide exceed £113 billion in 2015.
Last year was also a record for investment in solar PV in the UK, which is always going to be a hard act to follow in any wider economic climate, let alone one mired in some uncertainty.
The enthusiasm must in part have reflected the continuing Government support, but it also speaks to an increasingly skilled development community and reduced costs in the supply chain.
It is worth standing back and seeing just how far and fast the sector has come: From more or less nothing in 2010 to supplying 9.2 GW of capacity in the UK by the end of last year, which is enough to provide energy to 2.2 million homes. What is even more remarkable is that a third of that capacity was installed just last year.
In our joint report with Clean Energy Pipeline, UK Renewable Energy Finance 2016, we found that the first quarter of 2016 looks like maintaining the momentum for investment, something set to continue.
There will be changes, naturally, but in the detail not the intent. The certainty of state support finally ending next year means that already much current development is being financed either from private equity or off -balance sheet funding.
We think that this will encourage M&A activity this year and beyond, with developers either looking to exit or refinance as the new financial realities settle. The good news is that there is certainly no doubting the interest from pension and infrastructure funds, including funds from overseas, in buying into portfolios of projects.
Confidence is somehow in the air. Our bigger solar clients, those ones with development, construction and maintenance teams that allow economies of scale, seem generally positive about a subsidy-free world, encouraged by the enhanced frequency response tender from National Grid and storage opportunities more widely and its encouragement to develop viable storage technologies.
It is hard not to agree with an Economist report that recently described solar power as potentially no less than a world-beating energy source, provided storage costs decline and are commercial practical for the needs of grids. Solar is certainly now a central part of the renewables mix, even if it has lost ground to wind energy in terms of government favour from a financing perspective.
What seems very clear is that solar will continue to attract investors. It is just too important and viable to fail, particularly as the Government is maintaining stringent emissions targets. These will require every conceivable clean energy source to be deployed, making it all but inconceivable that the place of solar at the top table would ever be cleared away. Indeed, The Department of Energy and Climate Change has given proper reassurances, insisting that it wants solar in the renewables mix, just without subsidy. We should also remember that solar has already passed a significant milestone: The sun provided more electricity for the UK over a 24-hour period in April than coal-fired plants, about four per cent of national demand. That may be the most positive indicator of all.
First published by Solar & Power Management on 7 June 2016.
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