Trends in the UK Solar Energy sector

What trends do you observe in the Solar Energy sector in the UK?

The world has set itself very ambitious targets to decarbonise our current way of life and there are strong time pressures to achieve these targets. I believe that we are at the start of a revolution that will need the everyone’s contribution to succeed, including that of Solar Energy technology. Today, solar is a small part of the energy mix of the UK, representing only 4.4% of the electricity produced in 2022 and total installed capacity is approximately 14 gigawatts (GW).

Early last year the UK government established the Solar Taskforce to meet the solar deployment ambition of 70GW of installed solar power in the UK by 2035. Of that 70GW, it is estimated that 20GW could come from solar infrastructures retrofitted to Commercial and Industrial (C&I) buildings. The Solar Taskforce will help the UK government draft a strategic roadmap in the first half of 2024 that will help the solar energy sector grow in the UK.

What are the challenges faced by this industry?

The main challenge in the UK is related to the status of the National Grid network.

The National Grid was  built 100 years ago to distribute energy from a limited number of remote generator points to users across the whole country. Today, the situation is different with the potential of a huge number of smaller-scale generators scattered across the country able to export their surplus energy into the National Grid. It is the reverse of the situation a 100 years ago, moving from a few to many model to a many to many model, hence the challenges.  There is a major focus on getting the grid upgraded by 2040. 

In this context, a solar farm (Utility Scale Solar, to use the technical term) takes over 2 years to be built. So, C&I buildings are a great opportunity to increase our solar capacity, largely because the lead times are significantly less (no building permission is required for electrical generators under 1 megawatts (MW), no consultation process is imposed, etc). As such, a rooftop solar system can be installed in 6 months to 12 months, subject to Distribution Network Operator* (DNO) permission. 

What can SGEF bring to this sector?

The financing of the UK solar market has been dominated by PPA (Power Purchase Agreements). The PPA is a highly complex legal structure for many customers and involves a long-term commitment of 15 to 25 years. SGEF is promoting customised Asset Finance and Leasing options as an alternative to PPA. The dynamics of increasing energy prices and falling solar panel prices allows customers to have a payback period of 3 to 5 years if the system is the right size for in-situ usage.

We aim to support the C&I retrofit rooftop solar market, directly or through introductions from the installers. Customers may be landlords or tenants that own or operate an eligible building (such as logistics and distribution centres, factories, shopping centres, etc.).

The landlord has two motivations: decarbonising their assets (and thereby getting a better Energy Performance Certificate (EPC), all commercial and residential buildings in the UK must have an EPC of B or better by 2030) and earning additional revenue from selling electricity to the tenant. The tenant’s motivations are to decarbonise and save money on electricity bills.

SGEF is committed to supporting energy transition investments, for the benefit of our planet and society. We finance the real economy and help decarbonise the world.

* The Distribution Network Operator is the local company responsible for distributing electricity.

Find out more about SGEF’s CSR ambition Care and Dare About the Future here