DECC makes a brave decision

DECC – The Department for Energy and Climate Change has confirmed that large-scale solar PV is not for the UK. They have reduced the incentive to 8.5p per kWh  which means just about all the planned multi mega watt solar farms will not go ahead.  This is great news and means that the limited funds available through DECC will go to the smaller investor and not the city institutions who are after little more than a load of money.

What this will mean is that solar schemes will invariably be limited to roofs, which are dead space with no other use than keeping the things and people below, dry and warm.

It also means the solar scheme will almost certainly be installed close to where the power generated will be used, thus reducing transmission losses and limiting the need to upgrade the local power transmission lines.

And it means that those who are paying the higher bills that pay for the Feed in Tariffs will have more of an opportunity to benefit, not the bankers in the city.

I really struggle to understand why the solar industry is so upset, the Govt have not reduced the available cash at all, there will almost certainly be just as many installations, it’s just kept it out of the hands of the larger players.

Free Solar Panels

I’m paying to have a new set of solar panels, its happening while I write this, the installers are on the roof drilling holes and so far not having cups of tea, though coffeee was offered.

The installation is being paid out of my hard earned savings and in my view a more effective alternative to either keeping the money in the bank or ‘investments’. I’m expecting an 8% to 9% return on my capital outlay over the course of the next 20 years or so, that return dropping at the point my Feed in Tariff contract finishes though I would expect to keep generating electricity for some years after that.

Overall my £12,000 investment will repay a bit more than £20,000 at current rates. The FITs are inflation linked so my return will not be eroded by inflation. Keeping my money in the bank at say 0.5% will see a degradation of about 1.5% per year allowing for 2% inflation.   Solar, with the Feed in Tariff is clearly a good bet.

Prior to going ahead with a paid for system I had looked very carefully at the option of a free system, I expect that my roof is South enough to comply with any ‘free’ requirements, however going through all the pros and cons it was clear that a paid for system was a better bet.

My concerns were:

• Its my roof, getting free electricity based on a fairly standard install of 2kW would save me about £100 a year.
• For the next 20 years, I cannot install my own system!
• Nor can any prospective buyer of my house
• That bit of roof is no longer mine to do with as I wish
• Insurance / Damage

While I am sure that much of this has been carefully looked at by the free installers and there is a lot of small print protecting each party, it wasn’t at all for me.

I also looked at a company offering leased systems, effectively a solar installtion that after 20 years you might own. Wow, all the downside of a free system and you pay for it!  I covered this is greater detail here:
Solar PV leasing along with numbers, don’t go there!

While all the free and leased systems that I have looked at seem to have a reasonable business ethic behind them, just a bit too in favour of the installer, I am waiting for the real scammers to jump on this and how they will fleece people who usually tend to be older and trusting.

The Sunday Times 10/10/10 page 27  identified a clear scam. Free solar panels, but you have to pay for a survey to see if you are eligible. I doubt that there is any chance of any free solar panels being installed, especially when the ‘survey’ costs £2,500!

I can see more of these free solar scams coming on stream, perhaps a fixed annual rental, maybe an upfront bond re-payable over the years – but not when the company goes bust and re-starts with a new name and same scam.

My standard advice when considering solar thermal and PV.

Solar thermal will only heat your hot water, it won’t heat your house. At best it will provide 70% of your hot water, it shouldn’t cost more than £4,000 and you should use an MCS accredited installer in order to get the RHI when and if it is introduced.

Solar PV will cost about £12,000 or less for a medium sized system of 2kW, less than £19,000 for a 4kW system. The return should be in the order of 8%

(2012, prices have fallen and you should be looking at less than £10K for a 4kw system, the returns remain the same or better even with lower FITs)

You will never have to pay for a survey from a legitimate supplier

Never use a supplier / installer who will not discuss prices prior to a visit.

Installers who insist on sending a salesman prior to even talking about a price will be looking more at what you can afford, less at what the system costs.

As to who is installing my system – solarUK

Joined up Government? NOT!

I have commented on the Government’s kick in the teeth for the pioneers of renewable energy. Our generated electricity clearly has a far lower worth than newer renewably generated electricity – yet its the same and actually has done far more good for the industry and cost us more than energy coming on stream now!

Now, not content with undermining the renewable energy industry by kicking the pioneers in the teeth, but they are going to do their damndest to kill off some of the the most effective parts of the industry.

At the moment, anybody taking advantage of the Low Carbon Buildings Programme grant scheme can expect a grant of £400 for the installation of a solar water heating system. This can represent a worthwhile 10% rebate on the average cost of  £4,000. This money runs out in about two months! Lets say June 2010

In April 2011 there is the new scheme, the Renewable Heat Incentive which pays a rate for energy generated / CO2 saved for systems that generate heat renewably.

So, anybody who has done the minimum of research will see that it will pay them to delay any installation that might miss the LCBP until the RHI comes into effect. Potentially a 10 month gap for installers that will almost certainly drive many into bankruptcy!

Worse than that, the companies that rely on marketing, pressurized selling techniques with significantly overpriced but low quality systems will hardly feel the effect.  They will survive while the companies that are working within a tight margin to ensure a high quality fair priced system will fail!

Click here for a full explanation of what is going on and the letter that has been written to Alistair Darling can be seen here

A Note on Sales Techniques.

When I was promoting Solar systems about 5 years ago, after a mail drop I got 600 positive responses out of about 100,000. Actually that is good. Of these responses, each being visited by a technician, no hard sell just a system being promoted on its merits and low price I got 3 sales.

I spoke to a competing company that used pressurized selling. My systems sold for less than £4,000 theirs, using the exactly the same equipment (I was put in contact through the supplier) were generally sold for between £7,000 and £9,000 basically whatever they could talk the customer into paying. They were categorical that they would have converted between 30% and 50% into sales!

The supplier dropped this installer, they were unhappy with their sales methods!

Feed in Tariffs

The Feed-in Tariff scheme  as defined by this government is ill conceived. It does not tackle the problem of energy conservation nor CO2 reduction and appears to be more suited as an investment that will make wealthy people richer. It does not help the fuel poor, nor does it help the householder who simply wants to do their bit for the environment, rather it will make energy cost more, particularly for those who are currently struggling to pay their bills.

Below I have proposed an alternative that will encourage and reward conservation, will mean cheaper bills for the lower energy user and will support the homeowner who wants to generate their own electricity.

The Spanish FIT scheme has just closed, it proved to be too costly. Germany’s has been seriously scaled back, for the same reason. Experience shows they are not sustainable.

Our FIT scheme is going to favour the large investor taking over large plots and setting up large scale arrays, the householder is going to be sidelined – though they will ultimately pay through higher tariffs!. Basically the Labour Govt’s scheme, which you will inherit, is not at all focused on saving energy, or reducing carbon, it seems to be about developing an alternative investment.

Even now it is being touted as providing an 8% return on investment, that is so wrong, isn’t this about saving the planet?

FITs favour the investor with money and ultimately are paid for by the consumer, the energy poor, at the bottom of the heap

An Alternative?

What follows is simple and I hope innovative, solving many problems.

I would like to suggest an alternative scheme that will encourage both renewable energy generation, reduction in consumption and address fuel poverty.

Current Situation

When you purchase your electricity – as we all do – the 1^st 1,000 units or so are charged at a premium. This is the alternative to paying a standing charge. In my case with Eon my current quarterly bill shows 242 units at 22.84p  then 1982 units at 8.71p.

The more I use, the cheaper (average cost per unit) it gets.

Anybody on a low income or trying to save electricity will pay a higher average cost per unit as they lower their consumption.

Here’s an alternative (domestic only).

Through OFGEN, Energy companies will be directed to reverse their charging scheme, charging a low tariff, lets say 10p per unit up to the UK average consumption for a domestic property. Any consumption above that is charged at a higher rate, I would propose a sliding scale that I have detailed below.

Immediately we have clear incentives.

• The less energy used, the lower the average cost of each unit.

• Those who are on lower incomes and lower energy use will immediately benefit with lower cost energy.

• Higher users of energy will pay more and have a clear incentive to reduce energy consumption.

• Higher users will also have a clear incentive to invest in microgeneration. Anything they generate, by definition will be saving money at the higher rate.

• Surplus energy exported to the grid is used to reduce the overall consumption bringing the consumer / generator nearer to, or below the average.

Going forward, the average energy use will decline, there is now a clear incentive. As the average goes down, that point at which the higher tariff starts kicking in also declines, hence there is a simple process that will reinforce the incentive to keep reducing consumption. The average consumption being publicised and re-set each year. (we are all, as a nation now part of this drive to save energy)

Identifying the average UK consumption is relatively easy, the data exists and it is only numbers.

In numbers.

An average consumption of say 8,000 units per year, a baseline cost of 10p per unit, any consumption above 8,000 but less than 12,000 charged at 20p

Above 12,000 charged at 40p (sounds high?)

Low income, energy poor benefits: A low income consumer immediately benefits, their cost is 10p per unit. Considering a 6,000 unit consumption compared to now (1,000 at 23p + 5,000 at 9p = an average of  11.3p) their energy cost comes down.

Mine goes up. I use 9,000 units, about £950 or an average cost of 10.5p ie less than the person on a low income and low consumption. My cost goes up to and average of 11.1p per unit, as I use more, my average cost goes up.

Now, I have wind turbines and solar PV so my consumption is already low compared to similar families / houses. If I didn’t have these, my consumption would be higher, my average cost would be higher.

Note, the costs per unit remain in the same ball park figure as existing costs.

The process and impact

The break points for doubling and quadrupling the cost per unit above are at average consumption, 1.5 times average and twice average. (keeping it simple)

A high consumer will have a clearer incentive to reduce consumption, ie their average cost goes up the more they use rather than down! 40p per unit means I will certainly switch my lights off and choose a more fuel efficient fridge.

40p per unit means Mr Average will also have an incentive to install microgeneration. I would see a simple additional reward in that exported electricity can bring down the net overall use. If my use is 9,000 units, I export 1,200, I pay for 7,800. While the average consumption is 8,000 units I pay at the 10p rate. As the average goes down, I must in turn look for other ways to save energy if I want to keep my per unit cost at 10p!

Feed in tariffs become an irrelevance.

There is no need whatsoever for the complexity of Feed-in Tariffs, nor can the money to finance Feed-in Tariffs run out, nor, with the utilities paying for the Feed-in Tariffs will we see ever higher electricity costs being passed on to the lower income consumer to benefit the wealthy investor!

Every year the average will come down as there is more microgeneration and energy saving. That means the point at which the higher costs start kicking in will be at a lower baseline, it is self sustaining towards ever lower consumption!

The lower income, lower users of electricity are generally well below average consumption so for some years remain insulated from this process.

The energy companies?

Well, they will be free to set their rates, I have used 10p as an example, they can be  as competitive as they wish. All they have to do is follow a formula of less than average consumption is charged at X, Average to 1.5 times average is 2X , more than 1.5 times average is 4X. These figures could be fine tuned but that would give an opportunity to procrastinate for the next 5 years.

I can see tariff packages where there is a standing charge then a lower X, No standing charge but a higher X.

NB. This is workable. I have worked within the regulated Water industry and am currently working within the energy sector, in particular energy switching so am very aware of how energy companies try to differentiate and compete.

Also, consider this. There are only 500 people qualified to install microgeneration systems that might be eligible for FITs. Compare this with 60,000 Gas Safe (Corgi) qualified engineers.

Requiring an MCE (Microgeneration Certified Engineer) in order to qualify for a FIT simply duplicates existing quality schemes.

Feed in Tariffs, a kick in the teeth!

Feed in tariffs will NOT apply to ANY system that has already been installed.

If you have a renewable energy system, your system, as with mine will continue to receive the same, pittance, a minimal financial return on generated and exported electricity. This will apply to all systems, all the schools, community halls, the public everybody who has put their money where their mouth is!

Only systems that have been installed under the new MCS (Microgeneration Certification Scheme) will be able to claim the much publicized 35p per unit generated. The MCS has yet to be finalized and though it replicates the IEC regulations that your system (and mine) will certainly comply with, the MCS is an additional layer of bureaucracy that seems to function only to sideline us. (Us being all the people who have created this industry, lobbied for feed in tariffs and changes in the planning law and who have (for whatever reasons) coped with the high cost of installation).

This MCS will severely curtail the number of companies able to install solar PV, retaining a very tight club of installers and almost certainly allowing for a ‘cartel’ pricing structure. Solar systems are already twice teh price in the UK as Germany! It does not add to the quality of equipment or installation as Part P and IEC (IEC is the recognised international certification scheme) already have that function.  The cost of management of MCS and the quango that will be created will almost certainly be higher than the money saved in alienating us through avoiding payment for solar generated electricity.

I would expect that the negative publicity associated with the sidelining and effective alienation of all early adopters who would otherwise be actively promoting this technology will also represent a cost in that the scheme must now be publicized at a cost to the taxpayer.

I am an early generator of solar energy with a professionally installed Solar Century system. It is grid connected and the Highest power station in Kent. I was part of the EAMA study and have and expect to continue exporting renewable electricity. My electricity and system seems to be perfectly adequate, the system will be exactly the same as new systems!

This twist to the Feed in Tariffs whereby only new systems can apply is a slap in the face to all of us who have facilitated the creation of the renewable microgeneration industry in the UK. Without us investing in this new technology, there would be no industry, no installers, nothing!

I do not understand the Governments atitude in alienating so many people. people who should have been supported as they would have been fantatsic free publicity. EVERYBODY with a system is going to be ‘hurt’ by this. There will be NOBODY with an installed system who will be out there actively promoting – we won’t be saying, get a system, we will be saying, “I’ve been utterly let down, don’t trust these people”.

Worse than this, it will be financially beneficial for me to scrap my existing system and install what will almost certainly be an identical system, just 5 years newer (with the same 25 year and more lifespan). Whoever came up with this incompetent system, well, words fail me!

This Government should hang its head in shame!

Also see: http://www.yougen.co.uk/equal/: Join our Campaign for Equal Cashback with petition.