UK large solar power is "back on" for developers who can build and supply electricity on-site for industrial customers, British Gas' Chris Morrison said late Wednesday at a seminar held by legal firm SNR Denton.
Morrison, head of commercial for British Gas New Energy, a division of Centrica, said there was a viable business in developing large solar photovoltaic plants on land leased from a client who is then supplied directly by the plant, avoiding transmission connection fees.
Large PV plants initially attracted a GBP300/MWh ($482/MWh) feed-in tariff under the UK government's FiT scheme, Morrison said.
This rate allowed British Gas to build a 4.1 MW solar plant on Toyota-owned land in Derby and supply the company for free in exchange for a 25-year leasehold on the land.
Following a UK government feed-in tariff review, however, the rate has been reduced to GBP85/MWh and is expected to fall further in July.
While acknowledging that the current FiT was a more realistic rate, Morrison said British Gas would move its solar projects into the Renewables Obligation "because of much greater certainty in that regime."
Large solar PV projects can opt to earn two certificates (ROCs) per MWh under the Renewables Obligation. At present, this amounts to around GBP90/MWh, Morrison said.
While subsidies had fallen, so had the cost of PV panels. "When I joined British Gas about two years ago we were looking at GBP1.45 a watt for monocrystalline modules," Morrison said. "We are now looking at 50-60 pence a watt and less going forward because of intense oversupply."
Backed by a power purchase agreement, ROC earnings and some limited uplift through 2017 from Levy Exemption Certificates, large ground-based PV projects on industrial sites represented "an attractive investment opportunity with stable returns over a 20-year period," Morrison said. They could be expected to earn around GBP150/MWh in all, he said.
Project size was not limited under the RO and could potentially be as much as 30 MW, Morrison said. Further, the planning process was generally quicker and simpler than for onshore wind.
On the downside, deal structuring was more complex and there was a new exposure to energy price and contract risk. However, the RO was not liable to the same budgetary restraints that had forced cuts in FiT rates and, as certificates were linked to the retail price index, the regime offered a steady return, Morrison said.
