The solar photovoltaic (PV) feed-in tariff (FIT) program introduced bythe United Kingdom in April 2010 has catapulted the UK into themainstream of global PV market activity.
According to theresults of the Solarbuzz UK PV Market 2010 report, the UK’s emergencecould not be better timed, when taking into account the uncertainprospects for the dominant German market next year.
With FITs as high as 41.3 pence per kWh paid over 25 years, the foundationsare in place for rampant PV market growth in 2011. Government incentives yield immediate installed PV system Internal Rates of Return between 8percent and 11 percent over the next 12 months. Despite this, the UKmarket is already exposed to significant potential policy risks-more sothan most other European markets-even though the FIT is only six monthsold.
Six market segments are emerging; five are on-grid, and oneoff-grid. 2010 demand has already seen rapid growth in residentialinstallations, with the South East and South West regions accounting for 45 percent of the English part of the market in MW terms.
Inaddition, an emerging pipeline of large scale commercial, agriculturaland industrial projects are currently going through the application andpermitting processes, ready to impact 2011 demand.
With severalbig name national utility and retail brands entering the UK market, they join a fast growing downstream installer network that exceeds 500companies. The leading wholesalers and installers, constituting a groupof eighteen companies, are well-positioned to serve the burgeoningmarket. Back in 2009, the top three of these accounted for 60 percent of shipped wholesale volumes.
"The early entrance of big namebrands are helping to lend public confidence to what is generally apoorly understood renewable energy source in the UK," noted Alan Turner, VP of Solarbuzz Europe. "These companies join a multitude of Europeanand international companies scrambling to establish early positions inthis fast-growing embryonic market."
The wide range of end-market segments has led to four main downstream channels to market. These arenot completely exclusive and examples of overlap can be found. Inaddition, novel business models are being advanced, still to be testedfor practical viability, but with some gaining traction.
Thefragmented end-market, together with the diversity of the installers and wholesalers, is further complicated by the 60 module suppliers thathave already gained the accreditation necessary to enter the market.This downstream picture sets extreme challenges for solar companies tooperate profitably in the UK.
"Notwithstanding the potentialuncertainty over government policy, no major company can afford toignore this market opportunity," concluded Turner. "The challenge forcompanies is to construct business models that can deliver profitablegrowth while volumes are still low, while at the same time phasing their level of downstream investment consistent with the policy risk."
Source: Solarbuzz, USA.
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