Who’s going to feed the Feed-in-Tariff?

  • Building Design Expert
  • 6 years ago

Unless you have spent the last two weeks on the moon, or under the sea; there’s a good chance you may have heard about the government cut to the Feed in Tariff. If the precise detail of the cut has passed you by, other than “it’s more than halved”. Then you heard it here first – It’s down from 43.3p per kWh to 21p. That’s a lot of new companies profit projections down the pan. But c’mon, hands up if you were naive enough to not think that the goose laying these golden eggs was not going to just up and fly south at some stage? No, I didn’t think so.
The Feed in Tariff (FiT) was the first government sponsored get rich quick scheme, and people were so busy being open mouthed with shear incredulity that they forgot to take a reality check. Doesn’t everyone remember that if an offer appears to be too good to be true, then it usually is. This of course is a variation on that theme, but such a promise was never going to be around for long.

The Department of Energy and Climate Change (DECC) can argue that the original scheme did it’s job. It was certainly a key player in bringing down the capital cost of Photo-Voltaic panels. So good job done there. They are not exactly affordable yet, but the reported 30% reduction is very welcome and much needed. There are now over 100,000 installation across the UK as a result of the scheme. Now we know that this sort of number barely makes a dent in the armour of the big electricity generators. But look around you there are PV installations on roofs now where there otherwise would not have been. In some instances there are roofs where previously there were none, just to put solar PV onto.

So why stop it there? Well the DECC didn’t stop it. They just cut it. But to listen to everyone bleeting, you might conclude that the switch had been thrown to stop the world spinning. The FiT still exists. It is still fully operational. It is just Not as lucrative as it once was. But it’s still not bad, and it’s still worth doing. Where else can you get around 10% ROI. Okay, it used to be 20%, but we covered that. It couldn’t and wouldn’t last.

PV installers need to re-assess the game. Until now it’s been very easy – an order book that kept having to be renewed every week, and there were not enough staff available to fill all the vacancies appearing in these new start-up companies. Good for them, they have made hay while the sun was out. Now it’s time for the real business men to step forward and pull the industry back together. Men from boys. Wheat from chaff. You know the sort of thing. The fittest will survive, of that there should be no doubt.

Let’s, for a minute, consider what happens if: The government makes available a huge sum of money, and all you need to do to get some of it is complete a few forms. It doesn’t take much thought does it? There will be a lot of takers, and there were. First there were the well off who paid the full capex for their PV installation and received the full 43.3p /kWh. If you had a big house with a south facing roof you would have to be mad not to payout £12K to receive around £25K in return over the next 25 years. That, as they say, is money going to money.
Of course the other offer was that if you did not want too part with the cost of installation, you could simply reap the savings made on electricity and ask the installer to stand the installation cost. Not too tricky a decision for the installer because they receive the FiT payments. It’s a great way to fund a business!!!

But it doesn’t end there. If you took out a loan to cover PV installation costs, the FiT would have that loan repaid after 7 years, if you factor in the savings made on your electricity bill.

So how do all these costs break down:

Feed in Tariff @ 43.3p / kWh

  • Capex cost – installation 3KW PV panel installation  –  £12,500
  • Annual electricity costs pre PV installation circa £1,000
  • Income generated by FiT  –  £1,050
  • Saving generated on electricity bill circa £250
  • Grossed up income £1,300 / annum fantastic

Feed in Tariff @ 21p / kWh

  • Capex cost – installation 3KW PV panel installation  –  £12,500
  • Annual electricity costs pre PV installation circa £1,000
  • Income generated by FiT  –  £510
  • Saving generated on electricity bill circa £250
  • Grossed up income £760 / annumstill not bad

So as you see – south facing roof? Still quids in!

However, it has been reported that installers have been carrying out installations on less than optimum orientated roofs. Well I never. can you imagine. That almost sounds like taking massive advantage of government scheme that just hands out money. Of course with so much money being handed out the marginal installations (in terms of roof orientation to a southerly aspect) were still worth doing, certainly for installers claiming the FiT. I’m hesitating at pointing fingers here, but let’s just say it’s the cynic in me popping his head above the parapet.

Conclusion:
Reduced FiT will curtail even the thought of taking unfair advantage of an overgenerous scheme, and should lead to the money being spent more wisely. The ROI is still streets ahead of putting your money in a building society ISA. The savings to be made on electricity bills are still there, as big and bright as they ever were. On a practical level, if there was any chance of getting the DECC to review their decision; it should be the cut-off date of 12 December 2011. Other than that – did they have to cut the rate so near the stem? We could argue that until the cows come home, and where I live they rarely do. If you have hung about um-ing and err-ing then you’ve missed it. If you have ordered it and you are going to miss it because the 12 December is too soon, that is a little harsh.

However, when all is said (clearly not done) this is NOT a sign from the treasury that the FiT is out of breath. It just hasn’t got the lung capacity it once had, that’s all. We need to get off the sofa, dry our eyes, take a deep breath and carry on with what we were doing prior to the FiT reduction. That way we can continue to feed the Feed-in-Tariff, and get solar PV out there and working. It’s still worth doing.

Take a look at the video of a new installation on a car park roof deck next to Leeds Armouries. Innovation at it’s best. It’s flexible. It’s ‘Green’ and it makes so much sense, both environmentally and as an investment financially and for the future.

Want to know more? Go to the Design Office Bookshop