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• Believe 4-8% is sufficient• Modelled on southerly UK radiation.• Policy withdrawn too soon to access the mass market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