The Department for Energy Security and Net Zero (DESNZ) wanted to understand what mechanisms and levels of support were appropriate to support the deployment of solar PV in the UK, including consideration of potential changing market dynamics and the reducing costs of energy storage.
The background
The UK Government’s target of 70 GW of solar PV by 2035, requiring a substantial and sustained level of investment by customers. The solar PV feed-in tariff (FiT) has successfully increased the volume of installs and reduced the overall cost of the product itself. Technology has improved significantly in the last decade and costs have fallen which, along with increasing electricity prices, makes solar PV more attractive to some customers. Battery storage can further improve payback in some cases. Overall PV and battery costs are still too high for many consumers, leading DESNZ to consider what mechanisms could be implemented to drive uptake.
The key question
DESNZs questions included:
- What support is needed, if any, to continue to increase deployment of residential solar PV?
- How will the addition of storage impact costs and payback?
- Has the market reached a point where a loan could be provided which could be repaid using the energy savings delivered by the system?
What was needed
The project required a quantitative evidence base to inform decisions on how policy intervention could support more affordable financing. A financial model using a detailed database of costs for installing a solar PV and battery system was developed, to allow sensitivity analysis to be performed on a range of business models and possible support mechanisms.
What we did
We dissected a typical solar PV and storage system and developed a costed component breakdown, qualifying this breakdown with stakeholder calls. A model was built to allow DESNZ to modify key parameters around installed costs, wholesale energy prices and consumer energy prices. Additionally, this enabled the project team to establish economic favourability to the consumer under a range of scenarios.
The LCP Delta difference
Our knowledge of solar PV systems and our relationships with key stakeholders (who we interviewed) put us in a strong position to build the key assumptions and inputs to the project. Our strong modelling capability and knowledge of the dynamics of the solar PV and energy market in the UK allowed us to build an accessible and reliable tool which will be used by the DESNZ team in future scenario planning exercises.
