How much will my business save?

The case for commercial rooftop solar PV systems

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

The cost of solar PV panels has plummeted and even though Feed-in Tariffs have reduced, the potential savings from producing your own electricity versus the rising cost of buying grid electricity have increased.

Also, many businesses are concerned about energy security. With instability in the former Soviet Union, which supplies a large percentage 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 on line, bringing the threat of future blackouts, threatening business continuity.

The opportunity to the UK of commercial rooftop solar PV is vast, even without taking into account the inevitable long-term price increases of traditional grid-based power. If you factor in the potential to make our existing buildings more energy efficient to reduce electricity consumption, the impact on UK plc’s bottom line could be remarkable.

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

1. The building owner invests capital to install the Solar PV electricity generating system.

The investor is paid the Government Feed in Tariff (FiT) contract payments and use the electricity they produce, reducing what they buy from their existing electricity supplier. Once installed Solar PV generated electricity has a fixed cost, whilst Grid electricity generally increases each year. 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 12 – 15% are possible from solar roof top projects where 75% 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 25 year life of the panels. If the solar roof top scheme is smaller than 50kWp (3500 – 4000 sq ft), installation can go ahead as a permitted development without the need for planning permission. However if planning is required it is unlikely to be refused as Government climate change strategy encourages Solar roof top PV systems in preference to, say, wind turbines.

For example if a 50kWp system is installed on a farm, where farm buildings have been converted to a variety of purposes such as residential, workshop or industrial use as well as traditional pig, poultry or dairy farming and the electricity is also used for food processing grain drying or air-conditioning.

A 50kWp system using tier 1 equipment will cost £50,000 – £55,000, say, £54,000.

Contributory element of Solar PV Income (£)
FiT generation tariff income on 100% of output

5267

FiT export tariff income, on 25% of output.

545

Income from sale/use of Solar PV electricity @ 6.5p/kWhr(unit)

2193

Annual insurance maintenance & repair sinking fund(£)

-1000

Net Profit 1st year 7005
Return on investment 1st year


12.97%

 

2. An investor installs the solar PV system; eliminating capital investment for the building owner.

In this instance the investor installs the solar PV system and takes the FiTs payments. The investor sells the electricity generated on the roof to the building users at a lower price than they buy electricity from their existing supplier. Government FiTs contracts are for 20 yrs, contracts between investor and consumer are generally 20 – 30 yrs. This solution allows businesses to immediately benefit from reduced electricity bills, index-linked to inflation, and reduced supply risk – without any capital or maintenance investment whatsoever.

If the building owner pays 13p/kWhr (unit) for electricity from their existing supplier this will mean that they save 50% of their electricity cost on every unit they buy from the investor.

If the investor is producing 50% of all the building occupier’s electricity needs they will make an immediate saving of £2193 a year. This will continue for the life of the panels, generally 25 years, a total saving of at least £55,000, not allowing for inflation on the cost of the suppliers electricity.

 

Contributory element of Solar PV Income (£) Building users saving Building users saving over 25 yrs
FiT generation tariff income on 100% of output  5267
FiT export tariff income, on 25% of output.  545
Income from sale/use of Solar PV electricity @ 6.5p/kWhr(unit)  2193 2193 54,825
Annual insurance maintenance & repair sinking fund(£) -1000
Net Profit 1st year 7005
Return on investment 1st year 12.97%

 

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