The Future of UK Solar: An Installer's Perspective

@jojusolar

An installer’s perspective

Dr Christian N Jardine

Technical Director, Joju Solar and Senior Researcher, Environmental Change Institute, University of Oxford

The Future of UK Solar

Future of UK Solar, Dr Christian Jardine

@jojusolar

05/03/2023

What will happen to the market?

• Two critical things to consider

• What is the return on investment?• Is this considered investable?• Who is buying?

• What is the market confidence?• What have they heard in the press?• Will people be enquiring about solar?

Future of UK Solar, Dr Christian Jardine

@jojusolarInnovation Theory

23/09/2015

Upt

ake

Time

Innovators Early Adopters Early Mass Late Mass Laggards

Support for innovation

Information and incentives

Regulation

Future of UK Solar, Dr Christian Jardine

@jojusolarMarket segmentation

23/09/2015

Future of UK Solar, Dr Christian Jardine

@jojusolarCrossing the chasm

23/09/2015

Upt

ake

Time

Innovators Early Adopters Early Mass Late Mass Laggards

Support for innovation

Information and incentives

Regulation

The

chas

m

Future of UK Solar, Dr Christian Jardine

@jojusolarInnovation Theory (new markets)

23/09/2015

Upt

ake

Rate of return on investment

Innovators Early Adopters Mass Laggards

5% 10% 20%15%

Future of UK Solar, Dr Christian Jardine

@jojusolarInnovation Theory (now)

23/09/2015

Upt

ake

Rate of return on investment

Innovators Early Adopters Mass Laggards

5% 10% 20%15%

Future of UK Solar, Dr Christian Jardine

@jojusolarWhat innovation theory says

23/09/2015

• Real danger that we have fallen off the bottom of the s-curve• Prospects for domestic PV look very poor indeed• Knock on effects for rent-a-roof model• Knock on effects on the social housing market

• Government has no real idea of relationship between uptake and rate of returns required

• Believe 4-8% is sufficient• Modelled on southerly UK radiation.• Policy withdrawn too soon to access the mass market

Future of UK Solar, Dr Christian Jardine

@jojusolar

13/10/

Commercial Market

Domestic Small Commercial Large Commercial

2kW 50kW 150kW

£5000 £65000 £150000

9-12% 15-18% 16-20%

10yr 7yr 5-6yr

10000/month 200/month Just a handful

Future of UK Solar, Dr Christian Jardine

@jojusolar

05/03/2023

Returns on investmentU

ptak

e

Return on investment5% 10% 20%15%

Compared to residential• We know even less about this market• Uptake is much lower• Higher initial hurdle rate• Impacts likely to be more proportional

Future of UK Solar, Dr Christian Jardine

@jojusolar

13/10/

Simple levelised Cost Calculation

50kW

Price 55k

Generation (kWh) 42500

Used on site (kWh) 42500

Price/kWh supplied 5p

Retail electricity 10p

Cost parity Yes

• Proportion used on site is critical• Suggests PV cheapest way of supplying electricity to a

commercial building

• Unfortunately, this is a deeply flawed calculation

Future of UK Solar, Dr Christian Jardine

@jojusolar

13/10/

Discounted cash flow - 50kW

-£100,000

-£50,000

£0

£50,000

£100,000

£150,000

£200,000

£250,000

£300,000

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20%

NPV

Discount Rate Applied

NPV of 50kW System

Without FiTs

With FiTs

Levelised Cost of Energy

Policy MakersAcademics

Businesses

Future of UK Solar, Dr Christian Jardine

@jojusolar

13/10/

Market niches

• Can you find people willing to install at low discount rates (low IRRs)

• Councils?• Corporates with cash reserves and CSR concerns• Those wanting to go ‘green’ for brand differentiation

Future of UK Solar, Dr Christian Jardine

@jojusolar

13/10/

The importance of self-consumption

4.7% 60000 57500 55000 52500 50000 47500 45000 42500100% 11.0% 11.4% 11.9% 12.4% 12.9% 13.5% 14.2% 14.9%

90% 10.3% 10.7% 11.2% 11.7% 12.2% 12.8% 13.4% 14.1%80% 9.6% 10.0% 10.4% 10.9% 11.4% 12.0% 12.6% 13.2%70% 8.8% 9.2% 9.7% 10.1% 10.6% 11.2% 11.7% 12.4%60% 8.0% 8.4% 8.8% 9.3% 9.8% 10.3% 10.9% 11.5%50% 7.2% 7.6% 8.0% 8.4% 8.9% 9.4% 9.9% 10.5%40% 6.3% 6.6% 7.0% 7.4% 7.9% 8.4% 8.9% 9.5%30% 5.3% 5.6% 6.0% 6.4% 6.8% 7.3% 7.8% 8.3%20% 4.1% 4.5% 4.9% 5.2% 5.7% 6.1% 6.6% 7.1%10% 2.9% 3.2% 3.5% 3.9% 4.3% 4.7% 5.2% 5.7%

0% 1.3% 1.7% 2.0% 2.3% 2.7% 3.1% 3.6% 4.1%

Price 50kW (£)

% se

lf co

nsum

ption

• Design systems to fit within load• Assist in moving load to fit with solar

Future of UK Solar, Dr Christian Jardine

@jojusolar

05/03/2023

The shape of the solar marketIn

stal

latio

ns

Installer

Tradesmen

SMEs, PV Companies, renewable companies

The big boys

15001

Future of UK Solar, Dr Christian Jardine

@jojusolar

05/03/2023

Tradesmen

• 1-3 man bands• Roofers and/or electricians diversifying their core offering• Small no of installations, but lots of them• Residential

• Can slip back into core professions• Can sell PV systems for a days labour• Leads to very commoditised PV market

• Is it worth them retaining MCS accreditation?

• Suggestion: Return to core business, pick up jobs when they arrive

Future of UK Solar, Dr Christian Jardine

@jojusolar

05/03/2023

SMEs

• 3-20 staff• Offices and overheads• PV/renewable specialists• Residential/commercial

• Strong skills in house, technical expertise, marketing(?)

• Can they sell enough to support staff levels?• Can they diversify offerings?• Can they sell at high enough margin?

• Suggestion: Diversify or quit

Future of UK Solar, Dr Christian Jardine

@jojusolar

05/03/2023

The big boys

• Many staff• Financial backing• May own assets (=revenue)• Foreign markets?• Ground mount/commercial/residential at scale

• Strong financial position• May be able to ride through (if they choose to)

• Large overheads, so high risk if market not there

• Suggestion: Use financial position to develop new products and offerings

Future of UK Solar, Dr Christian Jardine

@jojusolarPlay or fold?

23/09/2015

Do you have any installation work next year?

Do y

ou h

ave

a br

illia

nt id

ea fo

r div

ersifi

catio

n?

Future of UK Solar, Dr Christian Jardine

@jojusolar

05/03/2023

Diversification

• Obvious candidates: other heating, energy efficiency and green products, EVs etc.– New markets– Up-sell to existing customers

• Thermal storage: Up-sell or use to boost rate of return• Batteries: Broadly helpful for return, not a panacea, market not

proven yet. Expect mis-selling• Commercial rooftops – returns look better, but historically a very

tough market to crack• Look at all your skills – might be something surprising. Don’t rule

anything out

Future of UK Solar, Dr Christian Jardine

@jojusolarOn to the next s-curve

23/09/2015

Future of UK Solar, Dr Christian Jardine

@jojusolar

05/03/2023

Some lessons from last time

• Even if you think returns are there, market confidence is crucial to ‘sell-ability’

• Every solar company lost money in 2012/13 apart from a few that had long-term portfolio contracts in place

• Debateable that companies have recovered from last crash• Lots of people stuck around because they believe passionately in

renewables; vocational calling• Margins dropped as market became oversupplied• People leaving the market ran jobs at cost or less to shift excess

stock• Beware of being ‘busy fools’

Official Solar Energy Partners of

@jojusolar

jojusolar.co.uk

@DrChrisJardine

Wishing you the best of luck!

Thank you for your attention!