What’s the future role of photovoltaics in the UK energy mix? A discussion of recent market and policy developments

Dr Chiara Candelise, Imperial College

The introduction of the Feed in Tariff (FIT) scheme has spurred photovoltaic (PV) sector in the UK, leading to a relatively unexpected increase in installed capacity since its implementation in April 2010.  By the end of 2011 PV installations reached about 750MW from about 40MW at the beginning of 2010. Such market growth has definitely been policy driven, but has also been helped by the dramatic price drop experienced by global PV module prices in the last two years. Indeed, module price drops and increased installation rate have led the UK Department of Energy and Climate Change (DECC) to undergo a controversial review of the FIT scheme, implying a substantial cut in the tariffs to support PV deployment. On the other hand, these recent developments have allowed the UK PV industry to grow and the achievement of considerable cost reductions in UK PV system costs (including balance of system costs). Medium-long term expectations on PV technologies also seem to have increased, as shown by a target of 20GW installed PV capacity by 2020 recently suggested by the UK government, a twenty fold increase from current levels, and a rather ambitious target compared to what previously envisaged or modelled in UK energy mix scenarios (e.g. in Markal scenarios). DECC has also recently released projections of future PV system costs implying quite aggressive reductions in the years to come.

This paper firstly reviews recent UK PV market and policy developments. It presents and analyses UK PV market facts and figures, including market segmentation and UK PV system cost trends. It also provides an overview of the discussion surrounding the controversial revision of FIT scheme. Implications in terms of distributional impacts, UK PV supply chain and investor confidence of such policy changes are discussed, and the relationship between demand pull policies and PV system cost reductions is also explored. The paper then discusses future prospects of the UK PV sector in a quickly changing policy context. What are the implications for the UK PV sector of the reduced policy support? How global module price dynamics will affect profitability of PV in the UK and what are the drivers behind further cost reductions at system level in the UK? The paper addresses these questions with the view of shading light on the role of PV in the future UK energy mix.