Ground-mounted solar farms face uncertainty

The future of more than 200 ground-mounted solar farms larger than 5MW is being closely re-examined following government plans to drastically change support for large-scale solar (FW 16 May).

The UK Deal Tracker, an industry survey by global market researcher NPD Solarbuzz, has identified 198 proposed projects in the 5-30MW category and another 17 applications in the 30MW+ sector submitted for planning review within the past 18 months.

Mid-scale solar farms of 5-30MW were most at risk from the Department of Energy and Climate Change’s (DECC) proposals, as after March 2015 Renewable Obligation Certificate (ROC) support would not be available and many sites could potentially be too small to justify inclusion by developers in the more complex Contracts for Difference (CfD) auction process, the report said.

More than 80 of the 5-30MW projects had full planning consent and were likely to be completed before April 2015, it said, but the future of others looked less certain.

“Developers need to decide quickly which projects can be fast-tracked for completion under ROCs before April 2015, which are viable under CfDs, and which should be terminated,” said Finlay Colville, vice president at NPD Solarbuzz.

Given the lead time for preparation, negotiation, planning and installation, it was unlikely that any large sites not already under way would be considered by developers as they would not be able to qualify for ROC support before the proposed deadline, Henry White of Strutt & Parker added.

Opportunities remain

Should DECC’s proposals get the go-ahead, there is likely to be renewed interest in smaller 1-5MW solar farms from developers cautious about the risks of shifting from ROCs to the CfD scheme. The sub-5MW solar will continue to get ROC support for now at least.

Some 81 solar PV farms in the 1-5MW range and already in the pipeline could be completed under the ROC scheme, with 45 applications already approved, NPD Solarbuzz said.

But landowners who had been in discussions with solar farm developers prior to the DECC announcement should be aware that reducing scheme size may mean that projected rental incomes will be lower than originally expected with larger projects, Carter Jonas said.

The company advised landowners to consider renegotiating terms with developers or change to a developer who would maximise value from the site, such as through a redesigned scheme, or with a developer more inclined to deal with the complex CfD incentive.

Alongside smaller solar farms, there were also “exciting opportunities” for rooftop schemes on barns and other farm buildings, said Mr White. “ROCs for smaller schemes and the Feed-in Tariffs, which will be applicable to roof top solar, will still offer good rates of returns for farmers and a good way of diversifying income streams.”

While projects in south east England were likely to deliver the highest margins due to the levels of solar radiation, returns from projects in northern England and Scotland were still attractive and exceeded standard agricultural values, he said.

Individual site location was critical though and developers were unlikely to pursue any project that failed to meet key criteria and was in danger of getting turned down in the planning stages, he said.

“The solar sector has been hurt in the past by insensitively-sited schemes, so it is important sites are designed well and on appropriate land.”

That essentially meant that the more isolated the site, the better, he suggested. Key location criteria included:

• Avoid restricted/sensitive sites (e.g. Areas of Outstanding Natural Beauty, Sites of Special Scientific Interests, National Parks)
  
• Keep clear of heritage assets (e.g. scheduled monuments, archaeological features)
  
• Find sites away from public rights of way/roads
  
• Avoid sites that are overlooked by nearby residents/passers-by.

 In its initial response to DECC’s plans the Solar Trade Association said any sudden change to RO support threatened the future of the non-domestic solar industry in a similar way to the FiT changes in 2011, which hit investor confidence.

The STA wanted ROCs retained for ground-mounted solar and for existing ROC rates on rooftop solar to remain, especially as FiTs had been capped at 1MW by state aid rules.

It was worried that existing FiT support for rooftop solar would limit the amount that could be deployed this way and also said that while RO support for commercial rooftop schemes was not expected to change, that scheme was due to end in 2017, potentially disrupting the market just as it developed.

The STA also said the FiT capacity triggers (the threshold at which payments are cut) for all solar over 50kW should be increased “urgently” and the FiT for 250kW solar should be split to give a 250kW to 1MW band, with further increases in capacity triggers. The current FiT band is 250kW to 5MW.

Changes should also be made to the government’s CfD proposals to ensure they worked for solar and small to medium-sized companies, the STA said.

ROC changes could mirror FiTs fiasco