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A Survey of Subsidy-Free Solar in Europe

Harry Moncur permanent-hires, Renewable Energy, Energy Storage & DSR...

A Survey of Subsidy-Free Solar in Europe

By Harry Moncur, Head of European Solar, harry.moncur@greenrecruitmentcompany.com

Subsidy free solar has been an established part of the Southern Europe landscape. However, it is now starting to gain traction in Northern Europe. The success or failure of subsidy free solar is keenly watched by the wider industry, as more generous incentives in Europe are likely to decline over time. For this article, the focus is on looking at four subsidy-free markets: the UK, Germany, Spain and Italy. The split is for two North European markets to see how the new sector is developing there and two Southern European sectors to look at the more mature subsidy free markets have evolved.

UK

The UK solar sector has enjoyed a strange relationship with subsidies. The UK industry was a major leader in European installations for solar but following years of incentive withdrawals, larger scale schemes largely ground to a halt by 2017 with the closure of the Renewables Obligation (RO). The fact is that the UK sector has previously had a subsidy reliance that made it too dependent on government support. The result has been a rise in both PPA activity and the emergence of a fast growing subsidy free sector in the UK.

Since 2019, the UK is now in a post-subsidy era and solar seems to be again picking up, in part driven by declining costs for panels (and battery storage) coinciding with increasing demand for clean energy.

In December last year, the largest subsidy free solar farm (40MW) on the Bedfordshire/Cambridgeshire border went live joining another solar farm in Bedfordshire and another in Buckinghamshire. Other notable schemes are already in development in Warrington, Swindon and Gloucestershire. A recent study suggested that there could be 5GW of subsidy free solar in the UK by 2030.

Germany

Germany is starting to engage with subsidy free solar. The German position is different from the UK, because as it stands, developers in Germany can choose not to benefit from the market premium system and go subsidy free. In fact, the law, supports the connection of these projects and still leaves them open to receiving hardship provision in case of loss. Like other markets, subsidy free solar is made possible by declining module costs, good power prices and general positivity.

In terms of projects, the largest solar scheme in Germany (180MW) is being built subsidy free in Brandenburg by EnBW. Unsubsidised schemes in Germany are also benefitting from a willingness from lenders, such as UmweltBank, a specialist lender is funding a 20-year scheme for BayWa. BayWa have previously built Germany’s first unsubsidised solar plant near Stralsund. A key feature of the German subsidy free market is that it is integrating into the PPA market (in difference to Spain where they have an interest in merchant solar alongside PPAs). A good example is Statkraft’s deal to buy power from 52MW of subsidy free solar from Enerparc.

Spain

There is no hotter European solar market than Spain currently, the country is home to half the entire subsidy free solar pipeline of Europe. There are genuine worries that the market could be too hot and that potentially there is more pipeline than PPA at the end of it. However, Spain’s solar market isn’t like the UK solar market and it is helped by the willingness of firms to pursue merchant as well as PPA solar. Bullish firms include Statkraft, BayWa and most recently a JV between Noy Fund and Hive Energy will deliver 420MWp in the Castilla-La Mancha region.

Italy

In December 2019, Octopus Renewables went live with seven subsidy free solar plants on Sardinia – the plants generating 70MW of energy can power a fifth of the needs of nearby Cagliari. These came hot on the heels of news that utility A2A from Brescia had acquired a 1GW pipeline of solar from Chinese firm Talesun, with a plan to keep the projects subsidy free. Earlier in the year Zouk Capital had announced a similar plan for 120MW of solar. The vitality of unsubsidised solar in Italy, is interesting given the return of government auctions to bolster the solar sector, however it seems that Italian solar is less worried about support than on streamlining regulations.

Closing Thoughts

A subsidy free solar sector in Northern Europe is now perhaps less daunting than it was five years ago. Previous shocks, cheaper and more efficient panels and the rise of PPAs have created fertile conditions for subsidy free solar. In Southern Europe, the sustained vitality of subsidy free solar should create warm feelings for the future of solar. The next question we should be asking is whether it’s time for governments to end subsidies for fossil fuels?