You could be forgiven for being confused by the present proposals around the flagship scheme to support decentralised, small scale renewable energy systems. After all, if the “Greenest Government Ever” is unclear about it, how are we supposed to know what is going on ?
Well, without standing on my soapbox for too long, let me try to unravel some of the uncertainty, put forward what we do know to be the situation and make a few suggestions as to what you might want to think about if you are still considering investment in PV.
The Government initially designed the Feed in Tariff to deliver a target real (including inflation) return on investment of circa 4.5%. This was deemed to be sufficient to ensure adequate take-up of PV, thereby contributing to stated Government aspirations to reduce carbon, promote decentralised, democratised energy and create ‘Green Collar’ jobs. To these ends those who installed prior to December 12th a solar PV system of up to 4kWp (all but the largest domestic roof), were able to access a rate of 43p per kWh plus an export tariff rate of 3p per kWh. This when combined with the falling prices of PV modules and inverters often delivered a ROI of around 10-12%.
For reasons beyond the scope of this article, various revisions to the tariff now mean (for sub 4kWp) that we face the following certain facts:
- From 4/3/12 to 1/7/12; a rate of .21p per kWh
- From 1/4/12 all buildings proposing to install PV will be required to carry out such energy saving works as necessary to obtain an EPC (Energy Performance Certificate) level D to access whatever the prevailing tariffs may be or be limited to a presently expressed rate of 9p per kWh.
- From 2/7/12-1/10/12 a new rate of either 13.6, 15.7 or 16.5p per kWp. The actual rate will be decided dependent upon the rate of take up in March and April.
As though these drastic cuts and additional barriers were insufficient to radically reduce the rate of take up, the following are the additional proposals presently being consulted upon:
- On 1/10/12 a further 5% reduction in the prevailing rate
- A baseline minimum degression of 10% every 6 months thereafter.
- Subject to further deployment rates which would alter every 2 months, additional reductions may be applied.
- A reduction in the FiT lifetime from 25 to 20 years for all those coming in after July.
- Export tariff to increase beyond the present 3.1p per kWh…BUT generation tariff will reduce to account for this.
So what does all of this mean for consumers who remain interested in solar PV ? Put simply, the longer you wait to install PV, the more obstacles you will have to overcome. Until July 1st 2012, PV will continue to make very good investment sense offering most homeowners a simple ROI in excess of 6%. When you account for the fact that this is index linked and tax free the ultimate ROI is closer to 9 % plus for most people. Clearly, if you get on board after April 1st you may also have to take certain steps to upgrade the energy performance of your building to reach EPC level D. Any such works should be seen as a separate equation which should deliver in their own right, considerable energy savings and a very attractive return on your investment. Lets not forget that the ROI on a simple measure like taking your loft insulation from zero to the recommended minimum of 270mm can, through the reduced need for space heating, deliver a 33% annual ROI and deliver a breakeven in circa 3 years !
As to whether FiTs for PV are no longer fit for purpose, I’ll leave that to your judgement. Has it delivered sufficient decentralised, democratised energy ? Has it helped to create enough sustainable solar jobs ? In attempting to answer the question, maybe we can consider the German model:
From less than 10,000 employees in 1990 (prior to their FiT programme), there are now 367,000 people working in the renewable energy sector in Germany. We had less than 1000 prior to the launch of our FiT programme in April 2010, reaching 16,000 jobs just prior to December 12th 2011 BUT according to the Government’s own figures, we will loose 33% of those in 2012.
In 1990 3.1% of German energy requirements were met by renewables, it is now in excess of 22% with more than 11.7 gW of PV installed to 2010. In the UK we have just passed the 1 gW of solar PV installed with around 3.3% of UK energy requirements being met by renewables in 2010.
So, I guess we have a long way to go, especially if we are to hit the multitude of targets set by Government. It strikes me that we could benefit from statesmen with vision and the courage to pursue it rather than politicians too bound up with the system and the interests of big business to be able/willing to do something brave ! Whilst we might all spend some time waiting for the later, we can and must do all we can to reduce energy use in our homes, businesses and communities and invest all we can in renewable energy….it is not only the future, it is the only future !!!
Please note that this article is not intended to be a comprehensive review nor to give specific advice upon which you should act. For further information and specific advice please email the author; Dermot Barnes at dermot@ecodomus.co.uk
For details of the FiT review conclusions and proposals for the current consultations please see:
http://www.decc.gov.uk/en/content/cms/meeting_energy/renewable_ener/feedin_tariff/fits_review/fits_review.aspx
