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
- 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.
- 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.