What’s the future for Solar PV following recent Feed in Tariff(FiT) cuts?

Why you should use the electricity you generate on site yourself

Let’s be clear, Solar is, and always has been, a great way for homeowners & businesses to save money.

However, over the last 6 years, the Solar PV industry and consumers have focussed onSolar PV and the FiT from an investment and ROI perspective. Both the industry and customers should now view the benefits of solarpv differently; primarily as an environmental sound and sustainable source of low cost energy for consumers.

There’s a growing realisation among residential and business consumers that the key to maximising the benefits of Solar PV systems is to consume as much of the Solar PV electricity generated on-site as possible, because avoiding energy costs now has a higher return on investment than the FiT:

  • The FiT pays the Solar PV electricity generator 6.8p for 1kWh, depending on the system size

vs.

  • The savings from not buying 1kWh(unit) at 15p/kWh are more than twice this.

Most electricity suppliers increase their prices annually, by around 5%. Solar PV generated electricity is a fixed cost for the life of the system, so the PV owner is also hedging against future price rises over the 30-year life of their system.

So, how can Solar PV owners maximise their consumption of Solar PV electricity?

There are a number of options available to help consume Solar PV generated electricity rather than let it flow back to the national grid.

One technology that is gaining increasing popularity is battery storage.  People are curious about how they can store or use electricity rather than letting it return to the grid.  They know about batteries, so increasingly it’s something that comes up in conversation.  Most people are aware how mobile phone batteries have improved in performance over the last few years and how Tesla and other electric car manufacturers are using similar Li-ion technology to power their electric cars.

However, Li-ion technology is expensive on the scale required to store any meaningful amount of electricity for use when the Solar PV stops generating.

Many of our battery storage customers start-off looking at Li-ion but tend to opt for lead acid batteries in the knowledge that they have a useful life of approx 5 years during which time the price point of Li-ion batteries is expected to fall due to manufacturing scale and research.

People are very keen on immersion heater devices; they are an easy “add-on” to solar PV owners’ existing electrical systems.  They work by diverting electricity that starts to flow back to the national grid to heat water in the hot water storage tank, converting surplus solar PV energy to stored heat energy.

During the summer customers’ boilers tend to cycle when producing hot water in the morning & evening.  Many Customers switch off their boiler for the summer,which reduces wear & tear on it and let their solar PV system heat their water up.  The boiler’s still there for back-up if required.

Voltage Optimisation (VO) is a less well known technology where customers install a “step-down transformer” which reduces the incoming voltage from 240V to 230V in keeping with the rest of Europe. Most household appliances operate quite normally at this voltage and so will last longer than if they operate at a higher voltage.  There is also a potential reduction in electrical costs of 10% – 20% depending on what electrical goods are in regular use in the household.

Devices that help consumers increase their “self-consumption” of Solar PV generated electricity are increasingly popular with Solar PV owners who have got used to the return from their feed-in tariff but have come to realise they can improve the overall return from their Solar PV systems and the general energy efficiency of their homes by using more of the energy they are producing.

For more information on any system mentioned here, please get in touch today.

Commercial Rooftop Solar PV systems.

The case for commercial rooftop solar PV has historically been constrained by concerns about short-term return on the capital employed.  We believe that there is now a clear and compelling economic case for its widespread adoption.

The cost of solar PV equipment has reduced significantly over the past 3 years and even though Feed in Tariffs (FiTs) have also fallen, the potential savings from producing your own electricity versus the rising cost of buying grid electricity have actually increased.

Also, many businesses are concerned about energy security.  Instability in the former Soviet Union, which supplies a lot of the Gas that Europe burns to produce electricity and the retirement of some of the UK’s coal fired power stations before replacements are built has brought the threat of blackouts which threaten business continuity.

The opportunity in the UK for commercial rooftop solar PV is vast, even without taking into account the inevitable long-term price increases of traditional grid-supplied power. If you factor in the potential to make our existing buildings more energy efficient to reduce electricity consumption, the impact on individual business’s operational costs and “UK plc’s” bottom line are potentially huge.

Generally, there are 2 ways that businesses fund rooftop commercial Solar PV

  1. The building owner/user installs the Solar PV electricity generating system using their capital.

The building owner/user is paid the FiT contract payments and uses the electricity they produce, reducing what they buy from their existing electricity supplier.

Once installed Solar PV generated electricity is a fixed cost, whilst Grid electricity generally increases each year (5%+).  Therefore, the solar PV generated electricity becomes more valuable over time.  Any Electricity not consumed on site is “exported” to the grid and the owner is paid an export tariff under their FiTs contract.

Solar roof top systems make the best business returns when the majority of the electricity produced is consumed on site.  Returns of 10 – 15% are possible from solar roof top projects where 50% or more of the electricity produced is used on site.

Production of on-site electricity also serves to fix that element of operational costs for the 20 year life of the FiT contract and the remaining 10 – 15 years life of the panels.  If the solar roof top system is 50 kWp or smaller, installation is deemed permitted development, not needing planning permission.  However, if planning is required it is unlikely to be refused as Government climate change strategy encourages the installation of solar PV roof top systems.

For example if a 50 kWp system is installed on a farm, where some farm buildings have been converted for mixed use as offices, workshop, or light industrial as well as traditional pig, poultry or dairy farming, this mixed use will mean demand is spread over the day and across the year.

A 50 kWp system using tier 1 equipment will cost approx £50,000 and generate approx 50,000 kWh of electricity a year.

Income from Solar PV generated electricity 
FiT generation tariff income on 100% of output @4.39p/kWhr 2195
FiT export tariff income, on 25% of output @ 4.91p/kWhr 632
Value of 75% of Solar PV electricity @ 13.0p/kWhr*** 4875
System value 1st year 7702
Return on investment 1st year 15.40%

 

*** business uses 75% of system output, therefore not buying same from grid supplier @ 13p/kWhr.

  1. An investor installs the solar PV system; NO capital investment for the building owner.

In this case an investor installs the solar PV system and takes the FiTs payments.  The investor sells the electricity generated by the PV system to the building owner/users at a lower price than they buy electricity from their main grid connected supplier.  Government FiTs contracts are index linked to RPI inflation for 20 yrs, contracts between investor and consumer are typically 20 – 25 yrs.

This solution allows businesses to immediately benefit from reduced electricity bills, index-linked to inflation, and reduced supply risk – without any capital investment or maintenance overhead whatsoever.

If the building owner pays 13p/kWhr for electricity from their grid supplier and 6.5p/kWhr for the Solar PV generated electricity this will mean that they save 50% of their electricity cost on every unit they buy from the investor as soon as the system is operational.

If the investor is producing 75% of all the building occupier’s electricity needs they will make an immediate saving of £2437 a year.  This will continue for the life of the panels, at least 25 years, a total saving of at least £60,000, not allowing for inflation on the cost of the supplier’s electricity.

 

Income from Solar PV generated electricity

Building users saving Building users 25 yr saving
FiT generation tariff income on 100% of output 2195
FiT export tariff income, on 25% of output. 632
Income from sale/use of 75% of Solar PV electricity @ 6.5p/kWhr 2437 2437 60937
System net value 1st year 5264
Return on investment 1st year 10.53%

(The output figures and possible cost of electricity are for illustrative purposes only)

To take advantage of a solar investment opportunity, call us now on 01480 819740, or request a callback using our form.


How to get hot water from your solar pv panels

Integrated Solar Photovoltaic (PV) systems and Hot Water Smart Switches

How can you use Solar PV generated electricity to heat water?

There are systems on the market which you can connect to your immersion heater and use excess Solar PV-generated electricity, which would otherwise be exported to the grid, to heat your water. These units monitor the amount of electricity generated as well as the amount that your home is using. When there is a surplus this energy is diverted to your immersion heater to heat water instead of being exported to the grid.

This type of system does not affect your FIT generation payments because you are still paid for exporting 50% of the electricity you generate regardless of whether you use it in your home or export it to the National Grid.

One of the Solar PV Smart Switches our Customers use.

Solar hot water switch

Here’s a Summary of how a Solar PV Hot Water Smart Switch works

  • The Smart Switch unit fits into your airing cupboard and connects to the immersion heater electrical supply; the example above measures 260mm x 130mm x 64mm.
  • The Smart Switch unit receives information continuously from a wireless sender device clamped over your house’s “live” supply cable.
  • The sender monitors the flow of electricity in and out of your house.
  • When there is surplus electricity flowing out of the house it tells the “Smart switch” to start using this surplus electricity to heat hot water.
  • This activates the system to start heating your water and adjust how much electricity is used to heat the hot water by only using the surplus energy generated by the Solar PV system – it doesn’t use any electricity from the National Grid.
  • It works with normal household immersion heaters rated up to 3kW. No modifications are needed.
  • You can override or program the unit for total flexibility.

No two households’ hot water use is the same, it depends on the number of occupants, how many showers they take, how long they shower for etc. Likewise the amount of solar PV electricity generated varies with the size of the Solar PV system and the amount of sunshine being converted into electricity at any one point in the day.

Hot water use and available electricity will affect how long it takes to achieve a return on the cost of the Smart PV switch. Below is a typical example of the costs and savings in an average UK home.

Typical cost savings from a PV solar hot water system*

  • The average house with a 4kWp Solar PV system is estimated to produce 3600kWhr of electricity a year and is deemed to export 50% of this annually.
  • The average hot water cylinder is 150 litres and the energy required to heat the water in it to 60 degrees C is approx 9kWh. If you pay 15p/kWhr for your electricity (inc standing charge & VAT), a tank of hot water would cost:

9kWh x 15 pence/ kWh = £1.35.

  • If you heat your hot water by electricity every day (at £1.35/day) this will cost £493/yr.
  • The Solar PV system is most productive during the April – Sept. It should provide enough surplus electricity for the smart switch to use to heat your hot water. So you will save ½ of £493, i.e. £246 a year. There will be surplus electricity which can be used by the smart switch Oct – Mar but possibly not enough to heat a whole tank.
  • Some days the tank will retain enough hot water to only need to be “topped-up” with Solar PV generated electricity.

An average cost to supply and fit a solar PV hot water switch with a Solar PV system is around £400. So in 2 years you will have recovered the cost of the unit and started to make significant savings on your hot water bills.

To talk to one of our Solar PV experts about a installing a photovoltaic system with a solar PV hot water switch, please call us now on 01480 819 740 or use our request a call back form.

Solar PV Feed in Tariffs (FiTs) explained

The Feed in Tariffs (FiTs) scheme, also known as the Clean Energy Cash-back Scheme is designed to encourage more people to generate their own renewable energy from sources that release less CO2 than buying from national electricity generators who burn fossil fuels to produce energy releasing greenhouse gases. Government Feed in Tariffs pay you for every unit (kWh) of electricity you generate (the generation tariff) plus an extra payment for electricity you generate and export back to the National Grid (the export tariff).

On average the Feed in Tariffs, plus savings made by using the electricity you generate mean that the capital cost of installing a Solar PV system is recovered within 5 – 8 years.  This means that if you invest in a Solar PV system you can be sure to recover your investment.  After the capital investment is recovered your Solar PV system will produce you a profit for the next 15 – 20 years.

This is as true now as it was when the Feed in Tariff incentives were launched in 2010.

For further information on the ecomonic argument for Solar PV click here.

Length of the Solar PV Feed in Tariffs contract

Solar PV payments are set at the rate prevailing at the time the generating equipment is installed and registered and are guaranteed for 25 yrs.  Feed in Tariff payments for domestic installations are tax free.  The FiTs contracts are index linked increasing annually by the Retail Price Index(RPI)rate of inflation.

The level which Government deemed would stimulate investment in Solar PV was set at approximately 8% return on investment when the FiT scheme was launched in April 2010.  This target ROI has been maintained as the FiTs scheme has evolved.

Climate Change

As a result of the United Nations Framework Convention on Climate Change (UNFCCC) protocol aimed at fighting Global Warming negotiated in Kyoto “The Kyoto protocol”, the EU has agreed targets to reduce Green house Gases (GHGs) emissions. For more information see our Kyoto Protocol page.

Current Solar PV Feed in Tariffs

Please follow this link to the Energy Savings Trust web site where you will find full details of the current generation and Export FiT rates.  More information on Feed in Tariffs can also be found on the Department of Energy and Climate Change (DECC).

 

Tariffs for solar installations up to 250kW from 3rd March 2012

After a period of uncertainty, caused by Government mismanagement of the Feed in Tariff Scheme a new tariff rate of 21p/kWh came into effect for domestic size solar panels with an eligibility date on or after 3 March this year. Other tariff reductions also apply for larger installations. See table 1 below:

Table 1: Solar PV Feed in Tariffs from 3rd March 2012

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Band (kW) Generation tariff until 31 March 2012 (p/kWh) New generation tariff from 1 April 2012 (p/kWh) Multi-installation tariff from 1 April 2012 (p/kWh)
≤4kW(new build) 37.8 21.0 16.8
≤4kW (retrofit) 43.3 21.0 16.8
>4-10kW 37.8 16.8 13.4
>10-50kW 32.9 15.2 12.2
>50-100kW 19 12.9 10.3
>100-150kW 19 12.9 10.3
>150-250kW 15 12.9 10.3
>250kW-5MW 8.5 8.9 8.9
Stand alone 8.5 8.9 8.9

 

Tariffs for solar installations up to 250kW from 1st August 2012 

Since the introduction of the 21p/kWh rate, the UK Government has announced that FITs for solar PV will be reduced from 1st August 2012 and that the rates for other renewable energy technologies (apart from micro-CHP) should be reduced (or stay the same) from 1st October 2012.

Table 2: Solar PV tariffs for systems installed on or after 1st August 2012

Band (kW) Standard generation tariff(p/kWh) Multi-installation tariff (p/kWh) Lower tariff (if EPC not met) (p/kWh)
4kW (new build)  16.0 14.4 7.1
4kW (retrofit)  16.0 14.4 7.1
>4-10kW  14.5 13.05 7.1
>10-50kW  13.5 12.15 7.1
>50-100kW  11.5 10.35 7.1
>100-150kW  11.5 10.35 7.1
>150-250kW  11.0 9.9 7.1
>250kW-5MW  7.1 n/a n/a
stand-alone  7.1 n/a n/a

A full table of eligible technologies and their FITs is available on the Dept of Energy and Climate Change Website (DECC).
Minimum energy efficiency requirement for properties claiming FITs for solar PV

DECC has also put in place a minimum energy efficiency requirement for anyone wanting to install solar panels on their building and claim the full FIT rate. From 1 April properties will be required to produce an Energy Performance Certificate(EPC) rating of ‘D’ or above to qualify for the full FIT rates.

The tariff levels for properties meeting the requirement are as set out in Table 2 above. Where properties do not meet the requirement, they will receive 9p/kWh (apart from >250-5MW and stand-alone installations, which always receive 8.9p).

 

Other changes:

 

  • The export tariff increases from 3.2p to 4.5p/kWh to reflect the value of electricity exported to the national grid.
  • The feed-in tariff’s time-span is reduced from 25 to 20 years for new solar installations, bringing solar in line with most other technologies and reducing the overall costs of the FiTs scheme.
  • The Government will reduce tariffs by 3.5 per cent every three months, although rapid uptake could see reductions up to 28 per cent.
  •  These quarterly changes to be announced with two months notice.
  • Tariff cuts will be skipped for up to two quarters if uptake is low
  •  Organisations with more than 25 solar PV installations will get 90 per cent of the standard applicable tariff, reflecting the costs involved for these projectsRPI index-linking of generation tariffs to be retained.

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