Next Energy Capital managing director Abid Kazim told the Energy and Climate Change Committee on Tuesday morning that solar’s cost of capital has a “massive impact” on when solar power is able to reach grid parity, even with high volumes of deployment.
Kazim said investors need “clarity, continuity and consistency” to avoid changes which can add “10, 20, 30 per cent, in extreme cases, to the cost of an asset” and “will impact the consumers’ pocket”.
He told MPs that two weeks before the government’s May 2014 proposal to close the Renewable Obligation regime to projects over 5MW from 1 April 2015 his fund was considering a project with costs of £80,000-120,000/MWh.
But following the announcement the developer’s costs spiralled to £200,000-300,000/MWh because the developer “was facing bankruptcy”, Kazim said.
The UK must learn the lessons from continental Europe, he added.
He warned that the UK risks raising the cost of capital for solar development in the same way that policy changes in Spain and Italy have hit the industry.
These countries now face a cost of capital of 14-15 per cent, almost double the 7-9 per cent which his fund prefers and almost three times the 5.25 per cent which for the UK is a “reasonable and sensible” goal in order to remain an attractive region for investment, he explained.
“The attractiveness of a country is based on the actions of its government,” he added.