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UTILITY WEEK | 7Th - 13Th FEbrUarY 2014 | 19 Finance & Investment the secondary legislation and associated arrangements for the fixed-price Roc scheme, is expected in spring 2014. In November 2013, Decc published a con- sultation that set out detailed proposals for the grace periods to be available during the transition from the RO to CfDs. Grace periods would allow RO support to continue to be available aer the RO closure date (31 March 2017) in some circumstances. The consulta- tion closed on 28 November 2013 and the government's response is expected early this year. Decc proposes to offer four forms of clearly defined and limited grace periods: l A 12-month grace period for radar and grid connection delays. l A 12-month grace period for projects that have signed investment contracts under EMR transition arrangements, . l A 12-month grace period for projects able to demonstrate that substantial finan- cial decisions and investments have been made before 31 July 2014, where the pro- ject is scheduled to be commissioned on or before 31 March 2017. To be eligible, these projects must have complied with a notification process by 31 July 2014. l An 18-month grace period for projects allo- cated a place under the 400MW dedicated biomass cap. The PPA market A CfD does not cover the sale of electric- ity itself; a separate PPA with an electricity oaker will still be required. The current lack of liquidity in the PPA market continues to be of concern to many renewables devel- opers, particularly those at the smaller end of the capacity scale. To address this, Decc is proposing to introduce an "oaker of last resort" mechanism for renewable generators, guaranteeing a route to market at a fixed dis- count to the market electricity price (larger than the discount expected to be avail- able in the market). Decc will consult on this "backstop PPA" mechanism in early 2014 and the secondary legislation should be in force by autumn 2014. However, a genera- tor is very unlikely to receive the CfD refer- ence price under a backstop PPA and thus it may not achieve the full strike price for its generation. What's next? The market is still waiting for the govern- ment's decisions on the implementation of CfDs. It also has to confirm its approach to the European Commission's likely require- ment for a CfD competition for more estab- lished technologies early in 2014. The government's response to the RO grace period consultation is expected early in 2014, and Decc is to consult on the oaker of last resort mechanism early this year. Clare King is a lawyer in Osborne Clarke's Renewable Energy team. I n July 2011 the Department of Energy and Climate Change (Decc) published the UK Renewable Energy Roadmap, pointing to offshore wind as the future of the UK renewable industry. In contrast, solar was hidden in the "other" category. This was hardly surprising in a sun-starved country, where solar installations total only 66MW, around 1 per cent of total renewable generation. Fast forward to Q3 2013. Total installed photovoltaic (PV) capacity in the UK had increased 38-fold to over 2.5GW, the UK had become the world's sixth largest mar- ket for PV solar in terms of capacity installed, and solar represented 13 per cent of the UK's installed generating capacity. In the same period, offshore wind capacity increased to only 19 per cent. Ministers were saying they expected installed PV solar capacity to exceed 10GW by 2020, maybe even hitting 20GW. So what happened? The twin drivers have been cost and demand. Faced with a PV solar cost per megawatt-hour of £202-380 in 2011, Decc forecast a range of £136-£250/MWh by 2020, assuming continued efficiencies. But over the following two years, the cost of panels halved and nearly 1GW of solar was installed, earning closer to £125/MWh. The solar industry's growth is in part attributable to the unprecedented achievement of installing over 2GW of capacity within two years of effectively being side- lined by the government. The table below demonstrates the advantage solar has over onshore and offshore wind in terms of speed of deployment. This speed was also spurred on by investor demand. Initially fuelled by retail investors investing through VCT and EIS funds, larger investors are now being attracted to the asset class. Most recently, LSE-listed yield com- panies have given solar further access to a more liquid and potentially unlimited pool of capital – with £300 million raised for solar-only funds in the past six months and two IPOs planned for a further £300 million. This is likely to translate into a lower cost of capital and ulti- mately benefit consumers, further driving solar growth in a country better known for its slate-grey skies. Daniel Wong, head of power & utilities, infrastructure and real estate, Macquarie Capital Europe "The solar industry has installed over 2GW of capacity within two years of effectively being sidelined by the government" Investor view Daniel Wong speed of deployMent of solar sCheMes solar onshore offshore Average development period 6-12 months 2-3 years 2-4 years Average construction period 3 months 12-18 months 36 months total 9-15 months 3-5 years 5-7 years