Market Trends of UK Solar Power Industry
The Residential Segment is Expected to Witness Significant Growth
- The United Kingdom has witnessed significant solar PV installations over the past decade, supported by the government's incentives, which can be credited to the increasing demand for clean electricity.
- As of 2023, the United Kingdom registered 15,993 MW of solar capacity, which accounted for 4.8% of total electricity generation. This is an increase of 9.1% compared to the previous year. As per the report, the growth in solar PV has been dominated by numerous installations of less than 50 kW, including 172,000 new domestic installations in 2023, the most in a calendar year since 2015.
- In the United Kingdom, an average home consumes between 3 kWh and 6 kWh of energy daily, and accordingly, system sizes may vary. One of the most common system capacities installed is a 4 kW system, which is suited to satisfy the energy needs of a household of 3-4 people. However, a 5 kW solar system is typical for a home with 4-5 people, while a 6 kW solar panel system is suggested for a home with over five residents. Thus, most residential PV systems have a capacity below 10 kW.
- The primary factor driving the growth of the residential segment is the increasing energy prices in the domestic market. It is estimated that due to the recent energy crisis, energy prices have nearly tripled since 2000. Due to this significant rise in energy prices, many homeowners are turning toward solar to reduce home energy costs.
- With technological advancements and the increasing adoption of smart home technologies, the demand for solar power is expected to increase in the residential sector during the forecast period.
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Declining Small Scale Solar PV Installation Costs is Driving the Demand in the Market
- The declining cost of small-scale solar PV systems and their installation has been one of the major factors driving the distributed solar power generation market in the United Kingdom for the past few years. The average cost of solar PV generating equipment, installing and connecting to electricity supply, and VAT of the systems between 0 kW and 4 kW declined between 2013 and 2023.
- This trend has led to a growth in the total number of solar PV installations in the residential, commercial, and industrial sectors in the United Kingdom. In FY 2022-3023, the country's total number of solar PV installations with a system size of less than 4 kW (primarily residential) stood at 1,15,648 systems, representing the highest number this year.
- Solar PV systems under 4 kW are majorly deployed as rooftop systems in the residential sector. Systems between 50 kW and 5 MW are deployed as rooftop and ground-mounted systems in large housing communities and commercial and industrial (C&I) sectors.
- Although supportive government policies, subsidies, and incentives supported the growth of small-scale and distributed solar PV markets in the United Kingdom until 2023, the declining cost of solar PV and associated systems are expected to drive the market during the forecast period.
- The average installation costs of small-scale solar photovoltaic systems in the United Kingdom fluctuated during the study period. Solar installation costs in the 0-4 kW range began to rise in April 2022, exceeding increases in the 4-10 kW range. The 0-4 kW band prices peaked at 2,622 British pounds per kilowatt installed in January 2023. With technological developments, solar PV installation cost is expected to decrease during the forecast period.
- Thus, owing to the above points, declining small-scale solar PV installation costs are expected to drive the market.
