Germany, UK show solar can walk the walk in subsidy free times

Germany’s Federal Network Agency (Bundesnetzagentur) has this week announced over 500 MW of solar contracts have been issued in its national auction held a month ago. Most reports of it have made a big issue about the average pricing, which is around €0.065 per kilowatt-hour.

More important it seems to us is how much capacity Germany will add this year. The Agency has a schedule of 1.47 GW to auction in Solar over the year, and another 3.67 GW of wind auctions – totaling just over 5 GW combined, in auctions, not counting any smaller installations, like home solar. Last year it was closer to 7 GW, so this actually represents a significant slow-down.

Over the past 4 years Irena (International Renewable Energy Agency) has reported that Germany added 20.7 GW of wind averaging about 5 GW a year, with the lowest being 2018 when it was 3.7 GW. It now looks set to add a similar smaller amount in its highly centralized regulated plan in 2019.

Similarly Irena has solar additions in Germany at 7 GW over the past 4 years, averaging 1.75 GW a year, but leaping to 3.6 GW last year. If solar was to take up the slack implied by the Agency’s auction it would need to be that high again, but it is scheduled to be just 1.47 GW. Interestingly this is almost certainly a temporary slow-down due to the ending of  subsidies, but the technology is specified and much about the type of installation is also specified.

There seems to be a bit of a furore about Germany’s insistence in law that no farm land or areas of natural beauty can have any solar panels on them, and the local solar operator, along with other tighter legal restrictions imposed by new German legislation. However despite bemoaning this the German Solar Industry Association thinks every solar auction in Germany will be oversubscribed, as this was with qualifying bids of 869 MW of capacity entered. We’re not abundantly clear if all capacity behind the meter is added by this auction process in Germany, but it looks like it.

However this bidding process cannot be directly analogized with installations, as some installations are being completed from prior auctions, rushed through due to subsidy cuts about to be imposed for commercial PV projects, implemented through a commercial feed-in tariff.

Meanwhile in the UK Solar Media in a recent report on UK Large-Scale Solar Farms, says the pipeline for large-scale solar farms has jumped in the last 6 months from 2.5 GW to 4.2 GW.

Doing a similar calculation for the UK we see that over the past 4 years solar has contributed a declining level of capacity, a total of 7.4 GW over the four years, averaging 1.76 GW a year behind the meter. But this all relates to the political uncertainty over the coming review of renewable energy in the UK, and it has declined from 4 GW in 2015 to 332 MW last year according to figures from Irena. To have a 1.7 GW leap in the pipeline is therefore significant.

Solar Media reckons this growth comes from established greenfield developers getting back into the market, and highlights Lightsource BP, coming back to the market a utility-scale solar project developer owned by British Petroleum.

All of this suggests that like Germany there will be a rise in post-subsidy Solar build-out during the next two years. Solar Media monitors successful planning applications to see how many Solar farms are likely to be built out during the next two years and said in the last month alone 15 new sites were added to the pipeline, to build 846 MW of solar energy, much of which is down to the Sunnica Solar Farm, a 500 MW resource which will go to final planning consent a year from now on the accelerated review process the UK has for

Nationally Significant Infrastructure Projects.

Solar Media says that across the remaining pipeline it sees a lot of planners who were veterans of Feed-in Tariffs through the Renewables Obligation regulations in the UK, which have expired, and these companies are seeing enough motivation to bid on a subsidy free basis going forwards. Our own view is that this takes all uncertainties out of investment and as they get more confident that this is a massive solar land grab, they will become bolder and look to every larger build outs.

One thing which had slowed Europe down on solar and pushed many countries to preferring wind power, was the minimum import price imposed on Chinese panels by the European Union, which was removed last Summer. We understand that it inflated prices by up to 66% while it was in operation and almost single-handedly halted solar penetration in renewables.