The image of the environmentally insensitive, gas guzzling American that we in Britain like to cling to has been overturned – certainly when it comes to support for residential solar system support. If DECC goes ahead with the proposed review of the feed in tariff one could argue that Cameron’s “greenest ever” government is actually less green than the American government (one which I think it would be fair to say is not renowned for its environmentalism).
At present the American system allows for a 30% tax credit in the first year for Solar PV systems. This in the UK would amount to a tax credit of around £2100 reduction off the cost of a £6300 residential solar system. Under our proposed scheme the UK government would offer support of (payable in year 1 of the installation – and the 30% is 100% deducted from tax – not applied at the taxpayers rate).
For a perfectly south facing, non-shaded system at the ideal roof pitch the DECC review predicts a proposed annual payment of around £ 154.19 per year for 20 years under the feed in tariff scheme paid over 20 years. One would only need to invest the tax credit into an account with a 2% savings account for at the end of 20 years for the support from the American system to be worth more than the UK system.
If you do not have the perfect roof, say have a south east roof, at a 20 degree pitch, the support in the UK falls to £143.19 per year – and all you need as an American is a 1.5% interest rate in the savings account to beat your British counterpart.
And of course – when you are buying something 30% back in the first year far beats the 30% back but dripped to you over the next 20 years! Also the American system I think is superior as it does not discourage those without the perfect roof from installing as the rebate is on the price paid and not the generated power – which also of course encourages quality (something that the UK government seem to want to drive out) as the rebate is higher for a better quality system ..
So the days of us all sniggering about the polluting, climate change denying Americans are coming to an end! They can genuinel
What will DECC’s review (if implemented) mean for the renewable energy industry?
We have been through these “mega cuts” before but what will the impact be this time around? I think that it will mean the death of the renewable energy specialist – but not necessarily for renewable energy as a whole.
The steer from DECC seems to be towards larger, industrial systems with a lot of on-site consumption being where they see PV being supported – and not in a retro-fit market on individual homes. But that has tended to be the biggest market.
Businesses often do not own the premises they are in, or have competition for resources (so a widget maker can make more money from a better, improved widget making machine than he can from PV so in a capital competition sense, PV often comes off second best!)
Homeowners love PV. It has revolutionised the way we use energy – a soft benefit over and above the electricity generated. Everyone we have installed for not only generates but makes a genuine effort to adapt their lifestyle to ensure that they use as much of the electricity as they can – and is far more aware of how much energy they use (and really does try to reduce their consumption). Simple changes – such as ensuring that our homes use more energy on sunny days (by washing the sheets and mowing the lawn when the sun shines) does I think not only have an impact on carbon reduction but an behavioural impact across our lives that helps make us all more “resource aware” ..
Lets be honest – the new rates for sub 10 kW effectively mean that the Feed in Tariff is barely worth worth applying for. Certainly costs will be higher for an accredited system – direct costs on installation – generation meter and certification – add a couple of percentage points to the installation. However indirect costs – maintaining accreditation for the installer could add just as much again – never mind the often bemoaned and expensive accreditation required specifically to access the UK market adding perhaps as much again. I would see that a non-accredited system would be perhaps at least 5% and perhaps 10% less expensive than the accredited equivalent. With the subsidy scheme returning only 30% over 20 years – a 10% reduction in the up-front costs would certainly be an attractive alternative.
The payback period is around 7.25 years. Under the new tariff 15 years. Even with a 10% fall in the equipment prices we are still over 14 years.
My assumed £6300 system consists of – 54% on panels and inverters, 12% on the railing and electrical wiring components, with 34% on roof labour, an electrician and scaffolding – with 5% on VAT
Remove the scaffolding (so assuming a new build or re-roof) and payback is just over 13.5 years. We can get down to a payback of some 11 ½ years if we cut installation costs dramatically (and this will only work when the job is a small part of a larger job). What I am getting at is that roof top domestic solar will make a lot more sense on new roof installations (new homes, re-roof’s) when the work is done by the roofing contractor who is there laying roof tiles anyway. Specialist installers will find it difficult to operate – or to convince home owners that solar is sensible given higher operating and installation costs.
And whilst DECC and others will argue that the industry recovered before and so can do again – I have two counter arguments. One I still think half of the public think that solar “is not worth it” after the first mega-cut in 2011/2012 (despite returns now being as good as ever!). This time round the other half may well be justified in joining them!