Global Solar PV Market Report

The UK’s solar sector is currently undergoing big changes to ramp up capacity addition. While the short-term outlook suggests the annual installation hitting 2GW level during 2023, the government is committed to achieve 70GW of solar capacity by 2035.

The Government’s main mechanism for supporting large- scale, low-carbon solar power infrastructure is the Contracts for Difference (CfD) scheme (available for any solar PV project above 5MW capacity), which ensures that eligible technology receives a fixed price for generated power that supports investment from the fluctuating market. In the fourth allocation round, conducted in July 2022 (CfD AR4), a total of 66 solar projects totalling 2.2GW had secured contracts. Developer JBM Solar was the biggest bidder, securing 320MW of contracts, followed by utility ScottishPower and Lightsource bp, which secured 288MW and 130MW respectively.

Contribution in the UK solar sector is coming from all segments of the market, across different rooftop and ground-mount activities. Regulatory requirements have especially helped promote the residential solar segment. As per the latest ECO4 (Energy Company Obligation Scheme), the government allocated a £4 billion budget for 4 years (April 1st, 2022-2026) towards the installation of solar panels. Through this scheme, consumers can save up to £1,600 annually. Additionally, the government has scrapped VAT on solar panels until 2027, post which it will go back to its original level of 5%.

The growth in solar PPA prices in the UK continues the trend seen over the past year, as record high and volatile wholesale power prices make them increasingly attractive. The UK witnessed the biggest increases in solar power purchase agreement (PPA) prices in Europe in Q4 2022, posting a jump of 30% on quarter-on-quarter basis. This steep price increase of PPAs can be attributed to government auctions, as more capacities are being allocated to auctions means less is available for corporate buyers, resulting in demand outpacing supply. Among notable deals, Vodafone signed a ten-year solar PPA with Centrica as the power supplier and MYTILINEOS as the generator. This agreement will cover Vodafone’s 44% of annual energy requirements in the UK.

Solar-plus-storage systems have emerged as a viable option to reduce price and ensure energy security in response to skyrocketing energy prices, resulting from ongoing geopolitical events. Accordingly, the UK prioritizes battery storage high on its national net-zero agenda. Adoption level of storage technology among UK households is growing, and even big companies are collaborating on solar and battery projects. The British company Amberside Energy and the Copenhagen Infrastructure Partners (CIP) have partnered to develop 2GW of solar and battery storage projects across  the UK.

Solar thermal and PV have a substantial role to play in decarbonising the UK’s heat supply. Heating currently accounts for around one-third of UK emissions, and solar technologies (including solar thermal) offer an affordable and reliable method for transitioning to clean heat.

The unexplored agri-voltaic sector has high potential in UK as solar power currently covers less than 0.1% of UK land. Approximately 75% of the UK’s land is farmland and is best suited for energy generation through solar PV. Necessary backing is available from the government as well since the consensus is that solar and farming can be complementary, supporting each other financially, environmentally and through shared use of land.

The private sector’s interest in the solar PV sector is growing. Low Carbon, the global renewable energy company, is constructing three new large-scale solar farms in Essex, Derbyshire, and Buckinghamshire. The project will receive funding from a multi-bank financing facility of NatWest, Lloyds Bank, and AIB.

The CfD Auction Round Five (AR5) was opened on March 30th, confirming a budget of GBP 205 million for 2023 alone. Continuing the trend of last auction, solar  PV projects with over 5MW capacity would compete with other established technologies like hydro and CHP. While the continued participation of solar PV in CfD auctions validates government’s funding support for the technology, the subsidized solar contracts through CfD auctions promote expansion in the solar PV project pipeline as well. The steady project pipeline for solar farms in the UK points to the rising investor interest across the spectrum.