FITs. Helping us generate energy or just a money making scam?

When the FITs were introduced I thought the rate was overly generous and unsustainable. A 10% return on investment would mean that anybody with a shed load of cash would get on the bandwagon, who cares if it generated any renewable energy, lets make some money!

My credentials, well read my other blogs, but yes, I bought 2.6 kilowatts worth, I paid £11,000 and had I delayed a year would have got the same for about £9,000 . Yes, I would have been financially better off by delaying my installation.

Which is why I welcomed the sharp drop in FIT rates, When the Feed in Tariffs started the standard 2kW system would cost about £12,000 or approaching £20,000 if you got scammed.  Prices have come down to as low as just over £6,000 almost half !  So, if £12K  was a great deal when FITs were 41p and index linked, why is £6K  not the same great deal with FITs at 21p !!  Actually its a slightly better deal!

To my mind the solar companies have really shot themselves in the foot. Rather than saying that low installation prices would make the drop in FITs match the return that early installers got, they said that solar panels were now unaffordable  But they are the cheapest they have ever been!  The idiots have told the public not to buy their product!

21p means the FIT scheme can be retained for far longer, it means the cost of installation can comedown and the industry retained.  At 43.3 it means the scheme must close overnight when the set amount of money has run out!

Church and charity warn on solar :http://www.bbc.co.uk/news/science-environment-16304817

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Solar PV leasing

With the introduction of Feed in Tariffs, the installation and promotion of Solar PV has shifted from an activity based on saving or generating energy to one of making as much money as possible. As long as this results in the generation of renewable energy perhaps this isn’t such a bad thing, however the watchword remains, “Buyer Beware”.

The latest solar related leaflet to come through my door is promoting solar leasing, outwardly it looks like a great idea, certainly it promotes a way of making money – incidentally generating energy – that seems to be easy and risk free.

The premise is: The lease is X (stated per month so it looks small) the income is Y (stated per year so it looks big) and all you need is to have a load of solar panels on your roof.

But, when reading the small print and comparing the costs and income, the free money premise becomes rather suspect.

The promo I received includes a fairly standard 12 panel system generating a nominal 2.1kW being sold at £13,000. Okay, its at the top end of the prices normally quoted but not that bad.

This has an annual saving and income stated as being £980 with a monthly lease of £62 spread over 10, 15 or 20 years (its unstated as to which applies) also a 2% increase per year or rpi whichever is higher. Also there is an up front fee of £1,500. 

On the website (associated with the brochure) it then goes on to say that at the end of the lease period a new lease could be contracted or the equipment removed – at your cost. So you never own it!

Now, £62 per month is of course £744 per year which allows for a nominal profit of £236 if all goes according to plan, ie sufficient sunny days.

To be on the safe side,  lets drop that to a more realistic  £900 savings / income and FIT over the course of the year, some people would claim even that was too high. Now we have an annual saving / income of approx £150. Sounds okay?

But what about the £1500 up front payment? That’s the first 10 years just to pay off the deposit, ie for the first 10 year lease you’ve made nothing.

For a 20 year lease, the first 10 years is spent paying off the deposit, then you might get £1,500 by the time the 20 years is up (okay there is inflation etc. but also increases in the lease cost, they might cancel each other out) lets deal with known numbers.

At the end of the lease its time to remove the solar panels – at your cost, after all this isn’t an HP agreement its a lease, you have never owned the panels. Removing them might well cost £1,500 or more, your roof must remain in good condition. Or you could enter into a new lease and start again?

Think long and hard about a lease. In particular if you might move house during the period of the lease, the new owner might not want such a deal hanging over them so it would then be up to you to finish the lease at the terms stated by the owner of the solar panels that are on your roof.

And consider insurance, even though you don’t own the panels, they are your responsibility.

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 1st 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.