Solar Parks in the UK

by James Martin II on December 5, 2012

Solar Park

The number of ‘solar parks’ in the UK have exploded in recent years thanks mainly to the UK’s feed-in tariff and renewable obligation certificate schemes, both designed to increase renewable energy uptake. A quick glance at any UK-based media outlet covering solar power or renewable energy will almost daily have news about a new solar park being built or progress on parks already under construction. Why are solar parks proving themselves so popular in the UK?

What is a solar park?

In the UK, when someone refers to a ‘solar park’ it can generally be taken to mean a ground-mounted power plant comprised of solar photovoltaic (PV) panels with an output capacity of over 1 megawatt-peak (MWp), but potentially much larger. A popular size for solar parks in the UK is 5MW, thanks to the sweet spot that systems of this size are in with regard to government incentive schemes. Cornwall council, for example, has installed several solar parks since the feed-in tariff was introduced and the UK’s solar boom began.

Solar parks in the UK are built either as investments for wide range of organisations, or specifically as power generation plants for electrical utilities or energy-intensive operations such as manufacturing or data server farms. Solar parks differ from solar farms essentially in name only, although solar farms tend to be constructed on agricultural land.

Cornwall's 5MW Cornwall Solar Park

Cornwall’s 5MW Cornwall Solar Park. (Image credit: Isolux Corsan.)

The benefits of solar parks*

In addition to the push given by the feed-in tariff, there are a number of reasons for the rapid increase in the number of large-scale solar project in the UK. Among these are the falling cost of solar PV system components and installation (mainly solar panels and inverters), increased competition among installers for customers in a tightening market as incentives are wound back, steadily rising electricity prices across the nation, and of course the desire of large organisations to show that they are looking to the future and doing their part to help the environment.

Returns from power generation

Calculating earnings or cashflow from a solar park is not always straight forward, and will vary on a case-by-case basis. However, the following explanation attempts to lay out some of the basics of what is involved in the economics.

If the plant is built with the intention of selling all the power produced to an electricity retailer or a 3rd party, a power purchase agreement (PPA) will most likely be arranged to supplement income from the government-backed incentives described below. In conjunction with these incentives, a PPA will help to make the the solar park investment financially viable. Typically, the desirable rate to be arrived at is at least 6p per kilowatt-hour (kWh, a unit used for measuring electrical energy).

Incentives available for solar parks

There are essentially 2 government support options for solar parks that offer an income additional to that of a PP: The feed-in tariff and the renewable obligation certificate (ROC) scheme. The project developer/owner may apply for only one of these when the project is commissioned. The actual support given will depend on the size of the project and the preferences of the developer/owner. What are the differences between the two schemes?

Under the feed-in tariff, systems whose capacity is between >250 kilowatts (kW) and  5MW are eligible to receive 7.1p per kilowatt-hour at the time of writing. Under this rate, a typical 5MW solar park generating approximately 11.75MWh (megawatt-hours; 1MWh = 1,000kWh) of power per day (on average throughout the year) could potential see a daily feed-in tariff benefit of approximately £835, or £304,500 annually, as a rough indicative figure. A PPA of 6p could add approximately £257,000 to this figure. (See the current feed-in tariff rates.)

The other incentive option is the ROC scheme (which is likely to be replaced in 2012 with a ‘contract for difference’ arrangement–check back on our blog or follow us on Twitter for updates). If the capacity of the solar park in question is greater than 5MW, only the ROC scheme is applicable. However, smaller systems may choose between receiving the feed-in tariff or opting for the ROC scheme. The main difference between the feed-in tariff and the ROC scheme is that under the ROC scheme, renewable electricity generation plants such as solar parks are issued certificates for each MWh of power that they produce. These certificates are tradable commodites, and the price of one ROC fluctuates with supply and demand, although it has hung around £40 for most of its history. Under the current 2x multiplier, this would mean a daily benefit of £940 for the owner of a 5MW solar park, or £343,100 annually. Again, this would be additional to PPA-related earnings. (Read more about the renewable obligation certificate scheme.) 

Whether to select the feed-in tariff or the ROC scheme is one of the key questions the project’s owner/developer must answer. Obviously, serious consideration is necessary as to which of the above to choose when embarking on a financial venture as significant as a 5MW solar park, and more sophisticated modelling and analysis than the above of the pro’s and con’s of each incentive scheme is required to make a decision. (Solar Selections can help with free advice: Read about what we do.)

*All figures in this article are indicative only.

Solar parks: The costs, and how Solar Selections can help

In the UK the current cost per watt (W, 1kW = 1,000W) for an installed solar PV system is about £1.40–significantly lower than it has ever has been historically. For a large-scale installation like a solar park or solar farm, installation costs are actually lower (at around £1.00-1.20/W), although the additional costs associated with larger projects (grid connection fee and planning) bring this figure back up to around £1.40 as well. In any case, this means that now a great time to invest in solar, especially if capital costs can be avoided. This is where Solar Selections comes into its own.

Solar Selections has a unique place in the UK solar industry, acting as a solar installation brokerage with a network of over 50 of the UK’s top installers. We work with a range of commercial solar clients who we can assist by 1) running tenders as an impartial 3rd party to increase transparency and help clients choose an installer and system that offers them the most value for money from a trusted company, and 2) offering an ultra-competitive finance package for large-scale solar systems through a partnership with a financier.

If you are considering an investment in a solar park or solar farm, get in touch with one of our commercial team members today:

Jarrah Harburn, National Sales Manager: jarrah@solarselections.co.uk

Tom Charlesworth, General Manager: charlesworth@solarselections.co.uk

sales@solarselections.co.uk

020 7205 2267

© Solar Selections Ltd 2012

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