According to research from business rescue specialist McTear Williams & Wood, Photovoltaics (PV) promoters have been aiming to connect around a gigawatt of new solar farms before 31 March 2015, but up to 10% of these could be at risk as developers struggle to complete projects in time. In total that represents around 100MW of capacity likely to miss the Government’s subsidy deadline which will lead to multiple business failures.
This follows DECC’s May 2014 decision to close the Renewables Obligation scheme (RO) to new solar PV capacity above 5MW from 1 April 2015 and replace it with the new Contracts for Difference (CfD) auction regime where there is no guarantee of subsidy for newly connected projects. Also under the CfD regime it is forecast that capital values will fall by up to 20%.
The immediate effect of this change was a scramble among developers to build and energise as many new projects as possible before the end of March 2015 with over half of this activity in the East of England. Under capitalised developers of partly constructed projects above 5MW which cannot be energised by this date are likely to be in some financial difficulty as until they have a committed CfD subsidy no investor will be interested at a sensible price.
Commenting on the research Andrew McTear of McTear Williams & Wood said: “Over the past couple of years we have seen several high profile failures with developers unable to complete projects ahead of scheduled subsidy reductions. That has triggered onerous penalties which have driven some into insolvency. This time it is likely to be a lot worse.”
Following the reduction from 2 to 1.6 ROCs in April 2013 McTear Williams & Wood was appointed administrator at SAG Solar UK Limited (SAG) which had failed to connect the 5MW Ford Farm solar farm on time. By bringing in new financial backers and engineering partners McTear Williams & Wood was able to rescue the Ford Farm and safeguard the 35MW Wymeswold solar farm project in Leicestershire. Today, both are operating successfully.
Andrew McTear adds: “We expect there will be a number of players in difficulty in the run up to the March deadline. Many developers seem to have been over-ambitious in what they can deliver and face onerous penalties for failure. But the good news is that we have identified new sources of finance to help salvage distressed projects. Our advice to developers and suppliers concerned about solar farms missing the deadline is to make early contact with the specialists who can help.”
2 March 2015