Renewable Energy Foundation

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The Economic Prospects for Solar Generation in the UK are Poor

Renewable Energy Foundation is today publishing a substantial study of the economics of large-scale solar in the United Kingdom.

The author, Professor Hughes of the University of Edinburgh, and a former World Bank economist, finds that while there were some declines in the cost of solar plant construction in the period 2011 to 2020, these were explained by the falling prices for solar panels and inverters. Other costs increased over the decade and are often affected by a scarcity of equipment and skilled labour. Since total costs are now dominated by items other than solar panels, further falls in the cost of solar panels will have a limited impact on total capex costs. A surge in public support will push up non-panel costs – and thus total capex costs.

Moreover, the average annual level of opex costs per MW of capacity for solar plants is three to four times the official assumptions at about £36,500 for a plant in the size category of 10-20 MW. Opex costs are highly variable over time and across plants because of equipment failures and other factors, but the pooled data suggests that they tend to increase with the age of the plant. The estimated rate of increase over time was about 5% per year in real terms. That rate of increase may fall as the industry matures but it would be prudent to assume that opex costs will increase by 2.5% to 3% per year in real terms.

The study also finds that there is extremely strong evidence from both the UK and the US that the output of solar plants falls at 1% to 2% per year after age 3 years, after controlling for the level of solar radiation.

The combination of rising opex costs and declining performance means that existing solar plants are unlikely to cover their operating costs once their period of eligibility for subsidy comes to an end after 20 years and they move to operating as merchant generators.

Professor Hughes, author of the study, said:
“Spending public money to promote solar generation in the UK seems to have been and still is a very poor use of limited budgetary resources.”

Last Updated on Wednesday, 01 March 2023