Crikey! Why the UK is the fastest-growing solar market

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August 2, 2010 - Forget Germany, Canada, or the US -- if you want to find the hottest solar market, look toward the British Isles, says one analyst.

PV system installations in the UK will total 96MW in 2010 -- that's an eyeball-melting 1500% jump from "a negligible" 6MW in 2009 -- and will "dramatically outpace" any growth from fellow EU country Spain, which will increase "only" 730% in 2010, according to iSuppli's Henning Wicht, in a research note.

"When you think of weather in the United Kingdom, London fog comes to mind more readily than bright sunshine," he writes. (Germany's climate is similarly described as less-sunbathed than one might think for a solar-thinking segment.) But with adoption of "attractive" feed-in tariffs (FiT), and Germany's planned reduction in its own FiT structure, "the focus of the PV world is shifting to places with more favorable incentives -- making the United Kingdom a solar hotspot this year."

Obviously such a blistering growth pace is unsustainable -- so look for the UK market to cool off to "just" a 50% annual growth rate for each year through 2014, Wicht says. (The US is expected to grow tenfold over that same time, roughly 30%/year.) Modeling ramp rates of other countries (and accounting for the UK's level of insolation (i.e. the amount of sunlight hitting an geographic area), he calculates UK PV installations will rise to 2014MW in 2012 and 501MW in 2014.

UK photovoltaic system installation, in MW. (Source: iSuppli)

The key to the UK's surge is in its FiTs, which guarantee that utility companies will buy excess electricity produced by solar installs -- helping users (individuals or organizations) defray upfront costs of PV systems, and thus promoting solar energy use. Such policies have been the hallmark of Germany's market leadership, where 3.8GW was installed in 2009. (Germany could see anywhere from 7GW to 8GW in 2010, analysts predict, despite handwringing over its FiT reductions.)

In the UK, they hope implementing above-market FiT rates will encourage smaller, distributed, self-generation, with the end goal of reducing CO2 emissions and help renew the nation's energy park. Average residential electricity price is £0.12/kWh; a residential PV system (up to 4KW) can earn £0.36/kWh generated that the owner consumers, or £0.39/kWh fed into the grid. Complete the math and there's a financial benefit of £0.48/kWh for self-consumption of PV-generated electricity; a typical 2.5kW system could save £140/year on a household's electricity bill. Installations since July 2009 can retroactively qualify for the tariff, Wicht notes. ROI for some residential projects could approach 12%.

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