INDUSTRY I OPINION
commercial rooftop and large-scale ground-mount. Each of these segments has its own subset of market dynamics, supply and demand factors, and issues related to financing and incentivizing. Anyone arriving in the UK today and looking at the residential segment (itself a combination of new-builds, retrofits and social housing) may well see a managed FIT-based scheme with clarity in tariff rates and degression phases. Indeed, run-rates of 60-100 MW per quarter within this segment are by global standards extremely favourable.
During 2013, the global PV industry is forecast to install approximately 5.5 GW of residential PV capacity. What is more revealing is that 40% of this is from the Japanese market alone. In fact, the UK is likely to be ranked in the top-6 residential markets for 2013, with only Japan, Germany, Australia, and the U.S. having much stronger residential segments. But why has the residential segment in the UK had such bad press in the past 12-18 months? Here, Figure 1 spells out the answer more clearly than any historical narrative could.
Between the start of 2010 (Q1’10) and today, there have been four phases that UK PV installers have been required to navigate through. These are shown by the four shaded zones within the graphic. The solid blue line then shows the trailing twelve months (ttm) of residential PV demand at the end of each quarter. The use of ttm metrics is particularly useful as this eliminates spikes in demand or seasonal effects. It also helps to illustrate the boom/ bust cycle that has characterized the UK residential market.
Starting with the introduction of the FITs in 2010, the market grew moderately until Q1’11. Initial growth was largely in line with government plans. The problem for the government occurred during 2011 when global module prices plummeted and 2011 FIT rates then created a highly lucrative environment. This is shown in the FIT Boom (Uncontrolled) phase.
The inevitable decline in ttm levels was prompted by sharp cuts to the FIT rates (the FIT Reset phase), and it is only during 2013
Figure 2: Currently, the large rooftop segment accounts for less than 4% of the UK’s solar PV capacity
that the residential segment can be considered to have stabilized with the 60-100 MW per quarter today translating to a 12-month average of 320 MW.
For illustrative purposes, a dashed line is shown here that bypasses the boom/bust cycle phase. This provides the basis for the forecasted scenario within the future FIT Rebound (Managed) phase.
Whether the UK residential segment can now grow in a controlled manner to reach the 500 MW ttm (annual) level by the end of 2014 is yet to be seen. However, the basis for this (through removing the artificial peak) appears sound and stands as a placeholder that legislators and installers can target for a sustainable growing end-market.
Finally, a fascinating statistic for the UK residential segment is to compare the UK to the U.S. Putting aside all the differences related to financing and policies, the biggest difference probably comes down to the different media relations campaigns for residential PV in the UK and the U.S. If numbers were unavailable, and media campaigns and press coverage was anything to go by, you may think that the U.S. residential market was orders of magnitude larger than the UK market. The corporate engine that advertises and strongly promotes the residential segment in the U.S. is in a different league to UK based marketing efforts.
In reality, even with the downturn in the UK residential segment, during 2013 the UK residential market will be approximately 60% of the U.S. residential market. However, perhaps even more surprising, during 2012 the UK residential market was 10% higher than the U.S., a year in which precious few positive vibes were in evidence within the UK residential PV community.
Figure 1: The long-term prospects for the residential market in the UK remain promising. Excluding the boom/bust created by the early FIT rates, the trailing twelve month figures indicate a stable market at the 400-500 MW level developing during 2014
Large commercial rooftops sagging While is it possible to make a strong case for a residential rebound, the same cannot be said about the large commercial rooftop category. This segment is languishing somewhat, as
Issue III 2013 I
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