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The Next Big Thing? Image: Viridian Solar |
For anyone thinking of responding to the STA or directly to
DECC, here are some things to mull over:
1. Solar – grant or tariff
The consultation definitely leaves the door open on changing the support for solar thermal from a 7-year tariff to an upfront grant. While the choice may seem blindingly obvious – customers would prefer a grant every time – it’s worth pausing to consider what might happen if solar thermal is treated separately to other technologies.
If solar is in a separate grant scheme,
even if “branded” RHI, then it would be much, much easier for politicians to
tinker with. The recent history of solar
grants (Clearskies and Low Carbon Building Programme) indicates that the temptation
to continuously “improve” the system may be too great to ignore. Even if you believe that the team setting up
the RHI has the best of intentions (and I do), the nature of government is that
there’ll be different people running it before too long.
For this reason, the STA is currently
consulting on a hybrid – a combination of an upfront grant against
cost of the cylinder upgrade and a solar thermal tariff for 7 years just like the rest of the RHI
technologies. There is a logic behind this, as the cylinder upgrade as part of a solar thermal installation results in energy savings that are not given credit in the RHI impact assessment, see my earlier blog article on the subject.
2. Scope for Cost Reductions
The STA has estimated potential cost
reductions of 35% if the solar thermal industry can achieve economies of
scale (imagining a market of 150k installs/year, an increase of 5-fold from today's estimated 30k).
The nature of solar thermal
equipment is that much of the cost is fixed by the price of global commodities. Unlike solar PV, where the main component
cost is for a material that has no other bulk uses (silicon wafer), these commodities are materials like
aluminium, copper, and glass which have many other uses. Changes in the solar
market are unlikely to influence the price of these materials.
For this reason, the STA is proposing that
the majority of cost reductions could come from efficiencies gained in installation
rather than price reductions in materials.
It is easy to focus on the actual process of installation and to wonder
whether this can be sufficiently squeezed, but that is to ignore other business
efficiencies that would emerge as solar thermal graduates from cottage industry
status.
Imagine a solar installation business
that increases in turnover by 500% over a number of years. Would it need 5x more people in the office,
or would specialisation allow people to do business processes more
efficiently? Could it have staff which
did nothing but surveying? Would these
people have to travel less distance between appointments? How about marketing? How much more effective would be each pound
spent advertising the business when the potential market is so much larger?
Fundamentally, you have to ask the question,
why should UK plc invest in solar thermal?
What’s the end goal? Unless the RHI
helps solar thermal unlock installations at lower cost so that it doesn’t need subsidy
in future as energy prices increase then why bother?