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Feed-in tariffs – companies must stop profiting at our expense

Solar panels

It’s rare that a campaigner agrees wholeheartedly with government, but that’s how I feel about today’s announcement on feed-in tariffs. Why? Because companies can no longer profit from large-scale solar schemes.

Feed-in tariffs – or FIT – were first launched last year to support people to generate their own renewable electricity.

These people can earn money for every unit of electricity the feed back into the grid. But it’s not free money, all of us pay for the scheme through our energy bills, so we believe the scheme must give value for money.

Today’s announcement confirmed that the government will reduce the rates they pay for large-scale solar, but only for new installations. This will only affect large-scale operations, such as big solar farms, not household schemes or many community schemes.

We support fairer FITs

The new tariffs won’t be popular with the solar industry but we’re glad the government stuck to its guns. It means that more of the FIT payments – which come from people’s pockets – will be protected for households, communities and small businesses.

These are the people the scheme was designed for; not for big businesses to make profits from investment-scale schemes. The changes announced today mean that large-scale installations aren’t going to be so attractive to companies looking to earn a big payback from schemes subsidised by UK electricity users.

The trouble is that when the scheme was launched last year, the previous government didn’t predict that companies would cotton on to the fact that there’s money to be made here.

The Department of Energy and Climate Change’s (DECC) figures showed an alarming number of large schemes were in the planning pipelines – they estimate that just one very large scheme would swallow up the cash that could be spent in one year on renewable technology for 1,250 homes.

What’s the true cost of FIT?

We all pay for the FIT through our electricity bills – DECC estimated in 2010 that it would add about £8.50 a year to each household’s bill in 2015. While that doesn’t seem like a lot, some businesses are cashing in by installing big solar PV systems that can earn them tens of thousands of pounds a year.

So while we support today’s announcement, we want government to go further by working out how much we’re paying for FIT and other environmental schemes through our bills. DECC admitted to us that all that it has are estimates on whether the £8.50 prediction is true; nor can it tell how much the amount added to domestic consumer bills compares to business bills.

FIT should be as value for money and cost-effective as possible in delivering its objectives of reducing carbon emissions, and helping people cut their energy bills. We’re not against FIT, we just don’t want consumers writing a blank cheque for a scheme that not everyone can benefit from.

It’s estimated that 4.5 million people already have difficulty paying their energy bills, so the payment for FIT coupled with the other schemes we automatically pay for through our bills like CERT, could soon push the costs up, forcing more people into fuel poverty.

Do you think that the FIT system is fair? Is it worth paying £8.50 per year for the environmental benefits? Do you agree that DECC needs to be more transparent about how much you are paying in your bill for it?

Comments
Profile photo of frugal ways
Member

Tim Yeo MP today said on radio 4 that the whole issue of higher fuel bills has shown a good case for opening up the books of the energy companies, so that we can all see just how much they are really paying for energy.
I understand that businesses will want to protect their interests, but every house in the country has to use an energy service/product, it should be open and accountable.
This ties in with your post here, are we really only paying £8.50 per month to subsidise this scheme?
Until I read this post I wasn’t even aware I was subsidising it.

Why is this information not included on my energy statements?

Member
Adrian Phillips says:
10 June 2011

Dear Miranda:

If you are really to launch a well informed debate about the costs of the Feed in Tariff, you had better be clear about the additional cost on bills. These are estimated at £8.50 a year but you say £8.50 a MONTH in the last para above! No wonder people are confused, Red faces I hope at WHICH!

Adrian Phillips

Profile photo of Patrick Steen
Member

Thanks for pointing out that error Adrian. As you can see the cost was correct in previous paragraphs, however we’ve now corrected it. Sorry for the confusion.

Member
Chris Powell says:
10 June 2011

Hello,

I feel like one of the losers of the FIT scheme having installed 2 wind turbines in June, 2009. I receive 9 pence per unit produced compared with more like 27 pence per unit had I installed the turbines 1 month later.
Both the Conservatives and lib dems stated before the election that ‘early’ adopters of renewable energy would receive the same tariff as later adopters. The coalition reneged on this about 6 months after taking power.
Had I known 2 years ago the amount of red tape, changes of policy, etc. that goes on I would not have installed alternative energy as just too much hastle. I received my first FIT payment last week, 15 months after submitting my returns, the holdup being entirely due to OFGEM’s inefficiency or inability to cope.

As an aside you mention in your article above that money is earned for export to the grid. Far more payment is made for every unit of electricity generated whether exported or not.

Profile photo of gringuk
Member

Are the energy companies really directly or indirectly investing the profits (which they reap from us) in the FITS scheme?

If this is the case then we are being scammed twice for the energy we are obliged to pay such a high price for and which we, the average consumers, can only obtain from them.

Absolutely disgusting!

Member
Eric G. Knowles says:
10 June 2011

The true costs of the scheme should also include any costs for maintenance, servicing, and replacement of the equipment. How long do the parts last before they need to be replaced?
We are beginning to identify the true cost of the more energy efficient boilers and the problems due to sustained low temperatures. We need to have visibility of the issues associated with equipment used for providing renewable energy.

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Member

Although the government try to encourage installation of this equipment by making the VAT penalty on so doing 5% rather than 20%, the VAT penalty on getting it serviced is still 20%. This is probably an oversight, but it needs to be corrected. Wind turbines that are not serviced are likely to be less efficient, and could indeed become dangerous as they age.

Profile photo of tbwtg
Member

These kinds of proposals for feed-in are no use for ordinary people who live in small houses or flats. How about letting us club together to buy shares in generators/solar arrays/heat pumps etc, then get some rebate on our bills for the feed-in? Oh, isn’t that a bit like publicly-owned electricity supply (which we used to have?)

Member
Michael Smith says:
10 June 2011

The FIT scheme is a good scheme for reducing our dependence on fossil fuels. In some ways it is a shame that the larger PV schemes will no longer be supported as these can generate significant quantities of power. The problem with looking at current costs is that they make no allowances for the rising price of fossil fuels. The real cost of fossil fuels is rising rapidly, and will continue to rise for the forseable future as the world recovers from recessions and economies in China, Inda South and Central America grow. Our dependance on imprted fuels makes us extremely vulnerable to political events. Do we really want to continue to rely on imports from Russia and the Middle East, or Fracking to release shale gas locally,or return to deep coal mining with all that implies?
Whether or not you believe in global warming, we desparately need to invest heavily in renewable energy for the future of our children.

Profile photo of Miranda Akhurst
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I agree that the largest installations are the ones that can make this biggest contribution to reducing our dependence on fossil fuels, but the kind of schemes that can really do this need to be in the hundreds of MW rather KW that are supported by the FITs. I also don’t think the UK is the best place to house the size of PV that is needed – large scale off-shore wind should be our preferred option in my opinion.

Large schemes are still supported under FIT, but UK consumers are no longer paying through the nose to support them.

Member
John says:
10 June 2011

The FIT scheme is a poorly adapted copy of a very successful scheme which has been operating in Germany for almost a decade. The German scheme looks at how mature (cost effective) each type of renewable electricity gereration is and sets the tarrif to support the less mature technologies, ie PV pannels. So the tarriff for windfarms is set low relative to PV i think in the region of 1/7.

One of the fundamentasl diffrences between the German and UK systems, is that the tarrif is very simple in Germany .The German Government REQUIRED the electricity generators to enter into 25 year contracts (the expected working life span of a wind turbine or PV pannel) with the provider of the micro renewable electricity provider (householder ). The upfront funding of the microrenable instalation comes from banks as a loan based on a guarenteed income from the electricity sold.

Thus i am concered that the UK Government is changing the tarriffs on renewable energy. My concern is not regarding the impact on solar farms, but that the government did not think out the impacts of the FIT scheme on the UK power generation market, before implementing it.!

Member
Paul Wakelam says:
10 June 2011

Having spent A LOT of money installing 20 panels on our roof, and despite receiving very useful cheques as payment for ‘fuelling the grid’, to hear that Boards are going to raise their charges by 19% it seems quite clear that there is no financial benefit to us: we are now in effect paying ourselves for what produce via increased charges! Or am I missing a trick somewhere?

Member
Bruce G says:
10 June 2011

I think that your article completely misses the point of having Feed in Tariffs. We are aware that our current energy production is either unsustainable or potentially unsafe. Therefore there has to be a mechanism for us to address this and encourage the energy industry in what ever way, shape or form to move to alternative and sustainable production. As with any new industry there needs to be development and research before the technology becomes economically efficient – look at computers. If we do not allow the large businesses (normally backed by pension funds) into the industry we will not have the development of technology. With out that, we will not get to a point of efficiency such that the energy can be produced cheaper than fossil fuel and nuclear.
This does not even touch on the issue of energy security. As we saw with the gas pipeline into Germany being shutdown and the dramatic impact it had on the economy, we need to ensure we can be self-sufficient to avoid political or financial energy blackmail.
In conclusion, we need to encourage EVERYONE to be moving to renewable energy sources and all be willing to dig into our pockets to look after the next generation. As to the actual financial impact on households, the cost increase per household in a year is less than the tax on one tank of fuel in the car.

Profile photo of Miranda Akhurst
Member

Bruce, I agree that we need to be encouraging everyone to move to renewable energy, I just don’t think consumers should pay businesses for producing it – after all businesses can afford the upfront costs of installation so its not as if they need the financial incentive of FIT.

As importantly as encouraging more renewable energy, is encouraging us all to take stock of our energy consumption – substantial behaviour change will be the key to weaning us off our fossil fuel habit. FITs helps us do this, but its not going to do it alone.

Member
Kj says:
10 June 2011

As a household we are planning to install solar PV and hot water, primarily to reduce our oil dependency / carbon footprint. Having the FIT payments acted as a sweetener to sell the idea to my partner. Once installed, we will change to an electric oven, install electric under floor heating and, if needed, night storage heaters (that will be set to heat up during the day). But even with all these changes we will still need some grid electricity, and probably gas heating, for the winter.

As I’m benefitting from generating power and selling it back to the grid, I’d be happy to pay a higher tariff for anything from the grid that we do use if it helps others stay above the fuel poverty line.

However, I would like more transparency from the energy companies – I would like to know the business case for building and running, for example, a new coal fired power station vs. paying the FIT tariff for enough households to cover that much extra energy. If the FIT payments are on a par with the new station, then why are the energy companies allowed to pass off the costs to consumers anyway?

Profile photo of Miranda Akhurst
Member

Hi Kj,

In October 2012 the Renewable Heat Incentive will be introduced – the FIT for generating your own heat – perhaps hold out till then for the changes you’re planning for heating your house. The Green Deal will also come out then, providing financial support for you to get your house insulated (among other energy efficiency technologies) – you don’t want all your lovely renewable energy lost through your roof! 🙂

Member
Peter says:
10 June 2011

After two years debating the issue of solar PV I finally got an initial 2.45Kwp system installed in early April and it has almost completely covered my electricity costs for April (when it was very sunny remember) and May when the evening temperatures improved. I expect to be a in “profit” for June-August from the FiT payments. That said I don’t think the electricity supply companies are being encouraged to work with small householders enough and their payment of 3p / KWh (FiT is from the government) is free money as they charge far more than this even on optimal pricing schemes. The real question is how to store the electricity/energy generated. One route is divert any excess to heat water which I am seriously considering for the short term, the other is to use deep cycle batteries which may be the longer term solution. One thing is for sure at 3p I don’t see why I should sell my electricity to the power companies, I would expect to sell it for what I pay for it.

Member
Rod says:
10 June 2011

Hang on a minute – you are getting 43.3p per Kw anyway, plus the 3p. Are you sure you want to sell it for what you pay fo it? – like 13p?

Member
Peter & Lynn Nelson says:
10 June 2011

Whilst it is good that the government is going to restrict F-I-T for very large scale schemes, we do hope that it doesn’t penalise and jeopardise village and other community-based projects. That would be a real pity and frustrate the aims of reducing reliance in fossil fuels, creating greater diversity in energy generation and extending access to alternative energy. The creation and maintenance of a world-class renewable energy industry is vital to our whole economy. It’s sad that so much of the hardware for this industry is being made elsewhere; we could all benefit from promoting British-based manufacturing and innovation in this field. That’s not going to happen if the incentives to participate in the industry are curtailed.

Member
jab says:
10 June 2011

We need to encourage the investment in pv to make it cheaper for future generations .the cost will come down.But it is not fair to make poor people pay for this initial investment.Can the companies not consider making the standing charge disappear and making high consumption users pay more as they can obviously more afford it.Also it will encourage careful consumption.The goverments we have had over the last 30 years have all been making poor decisions.I see many examples of bad judgement.Thank god they have stalled health reforms

Member
David says:
10 June 2011

Yes, I agree that large firms should not be able to make fat profits out of Solar Voltaic production. However, that should not mean that large schemes are not allowed. There are many house-holders who would like to pay for an installation and reap the benefits but are unable to do so for reasons of sun direction, or because the house is old and is a listed building. Why not make it possible for people to subscribe for panels which are not on their own houses but are part of a large installation on a suitable site? They would pay for the number of panels they wish to have and receive the pay-back but the installation may be some miles away. It would mean that all their electricity would be fed into the national grid but isn’t that what we as a nation want? Would this not save the building of a power station or two?
I mentioned this to our local MP so hope he may have passed this on to the relevant Committee in parliament for consideration, but it might need a bit of a push!

Profile photo of ChrisGloucester
Member

Solar PV and Solar hot water systems do work.
The problem is how the economics pan out and how the economic systems have been set up.
Solar would never pay for itself without the FIT. The PV array has a working life of about 25 years and if it was just lower electricity bills this would amount to a considerable loss over that 25 year working life. As it stands spend £12,000 to £15,000 on a decent size array and with the FIT it will pay or itself in about 12 to 15 years, and from then on you could expect to make perhaps £1000 per year. So over 25 years it’s quite a positive investment. But, you’re locked in of course, unless you move house and manage to recoup the original outlay with a higher selling price than would otherwise be.
So the FIT is essential, however the problem lies with where the FIT money comes from. It is basically a stealth levey on everones bill, and that’s not entirely fair because many many bill payers could never get in on the game. The FIT money, all of it, should come from general taxation, like income tax, because only that way is the levey fairly charged on the basis of ability to pay, and it fits with the ethos that Co2 reduction is everyones problem, and as said any levey is fairly based on the ability to pay it.

Solar Hot water is never going to pay for itself. For six months of the year I only use gas for hot water and it works out at about £9 per month. Solar hot water might save all of that £54, but produce next to nothing for the other six months. So we’re looking at say £50 to £60 per year, and how much is a solar hot water system? £4000 or £5000? You don’t need a degree in mathematics to see that payback is a bit on the long side.

Now don’t get me wrong I’m all for solar energy, the sunlight is free, but for solar to really take off meaningfully incentives fairly financed need to be introduced, specially for solar hot water..

If you’re rich enough to go solar to save the planet I applaud you, but be under no illusion about the economics and fairness of the whole setup.

And whatever you do don’t borrow to set up any solar installation with things as they stand. It would be cheaper to burn £5 notes to keep warm (OK bit of an exageration but you get the point)

Member
Bob Seymour says:
10 June 2011

Re: the economics of PV.
We have been approached to consider solar PV panels, and a friend of ours is having them installed & reckons they’re a money-spinner in UK at present. But I have looked into the economics, and can’t agree.

The modules seem to be 1.5 kW capacity each, and have an area of some 11 m2. The cost is about GBP 9000 installed. Normally one to three of these are used.

There is a S. Wales local grant, apparently, of about 30% towards installation.

Each unit is expected to produce about 1200 kWh per year (i.e. 9% of its maximum capacity) for 25 years. The inverter used to synchronize with the utility supply has a lifetime of about 10 years and costs GBP 750 to replace.

The government apparently gives a grant (the “feed-in tariff”) of about 36p per unit generated. As I understand it that applies to the entire generated quantity and not just to the surplus fed back into the grid. Also, there is a saving against the utility electricity bill, current price being about 11p per unit.

We use about 6000 kWh per year, so we should therefore receive a total benefit of 47p per unit for all electricity generated.

I work out that the “payback” period (with no discount rate or inflation rate) is about 10.7 years with no installation grant, or about 8 years with a 30% installation grant (but the company claims it’s 4 to 5 years).

I calculate the Internal Rate of Return (the equivalent rate of interest, with the capital amortized over the 25 years) is 8%. So it’s a good investment over 25 years, assuming you actually wanted to tie up your capital for 25 years and get nothing back but yearly income.

The Internal Rate of Return for an 11-year lifetime and zero residual value, works out as zero, and over 13 years it is 3%. So it is only a worthwhile investment over a longer time than we might live in this house!

It probably would make economic sense for the electricity companies to invest in this way but it makes no sense for consumers. The increase in renewable generation is, I suppose, a “common good” and therefore should be invested in by society rather than individuals. From an individual’s point of view, there should be a 100% installation grant, but no “feed-in tariff”.

All these considerations ignore any effect on the value of the house. We feel it could be positive or negative in that respect.

Profile photo of ChrisGloucester
Member

Had to read it a couple of times but Ithink you are basically right. If you’re in it for the long term it works out that you at least lose no money but it’s not the gold mine the sales people would have you think.
I think my earlier comment was simpler though.

Member
JCotes says:
10 June 2011

the PV scheme seems to me to be a bargain for private householders with small installations, but bad for tax payers (the efficiency in UK is only about 5%) and the scheme is
troublesome to keep going. Our electrical supply company requires readings every three months to within a week, does not provide accounts and says it makes payments direct into our bank account. These are difficult to trace. Thus the system is geared to the business community, though it is families that should benefit. Could the system be more user friendly?

Member
Roz says:
10 June 2011

We would love to be able to generate and use renewable energy and make use of the FIT scheme. But we live in a grade 2 listed building which is divided into 3 properties. Last time I enquired our local planning authority will not allow any solar panels on the roof. The nature of the property with walled gardens mature trees and cobbled paths would make siting panels elsewhere or use of wind turbines or ground sources impractical.The large sash windows cannot be altered (again planning restraints) to reduce heat loss (heavy curtains help) so we are reliant on expensive oil as there is no mains gas and wood burners are not practical for an upstairs apartment. With our heating bills already higher than most I fail to see why we should subsidise others who are able to reduce their costs. This argument is even stronger for consumers on low incomes in rented accommodation who will also be trapped and unable to make changes or improvements for whom energy bills are a high proportion of their outgoings.

Profile photo of MalHamlett
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Do you think that the FIT system is fair? (NO DEFINATLEY) Is it worth paying £8.50 per year for the environmental benefits? ( YES DEFINATLY PROVIDING EVERYBODY PAYS)

Do you agree that DECC needs to be more transparent about how much you are paying in your bill for it?

( NO THERE HAS TO BE COMPLETE TRANSPARENCY FOR ALL LOCAL AND NATIONAL GOVERMENT DEPARTMENTS) Then there is no need for a FREEDOM OF INFORMATION!!!!!!!!!!!! )

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Hi Mal, thanks for your comment, however please don’t type in all capitals as it sounds like you’re shouting. Please check out our commenting guidelines for more info: https://conversation.which.co.uk/commenting-guidelines/ Thanks.

Member
GaiusScotius says:
10 June 2011

Feed in tariffs are, economically speaking, taxes, however as the government never sees the cash it can pretend that they are not. Were all forms of renewable energy generation subject to the same FIT levels, then although consumer prices would still remain higher than otherwise, the market would not be distorted. As it is, FIT levels are not and the result is that potential suppliers, quite naturally, game the system.

Beyond the scandal relating to PV FITs, a further result of this gaming is the proliferation of what, bar the FITs, are otherwise sub-economic renewable generation facilities. In the area in which I live, “small scale” (meaning 150ft tall) wind turbines are popping up all over the place, to the benefit of a few farmers and at the cost of industrialisation of a precious rural environment. The behaviour of the farmers and developers is quite rational, but the market distortion is again having unforeseen consequences.

I have noticed how many airlines now breakdown the various taxes and levies, both public – like air passenger duty – and private – like “security” charges, that are added to airfares. I would urge the major energy retailers to follow the same path and identify clearly how their bills are formulated, even to the extent of isolating transmission and primary fuel costs per KWh. Only when consumers actually see what “tax take” (in addition to VAT) they are paying will this country engage in a reasoned discussion of how best to renew its energy infrastructure to meet future demands.

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Quote: “The trouble is that when the scheme was launched last year, the previous government didn’t predict that companies would cotton on to the fact that there’s money to be made here.”

Really?
I mean – Really????

Member
nig says:
10 June 2011

There is hope for those who can’t fit PV , wind turbine or ground source but still want to produce their own electricity- you can get a gas boiler with ‘microgeneration’ that uses a stirling engine to produce around 1kw per hour while you are heating water or warming the central heating.
This attracts a lower level of FIT and still costs plenty more than an ordinary boiler, so only becomes cost neutral if you don’t move for 11 years or so [depending on how much hot water and central heating you use over this period].
I am unsure as to how real the planetary benefit in terms of lower carbon emissions really is- you are burning gas, but if it only uses otherwise waste energy from flue gasses, that is a good thing.
If the ‘waste’ heat could be used to improve the overall efficiency of the boiler by pre warming water, then the benefit is less clear.
If it is a ‘both/and’ scenario where the ‘waste heat’ both runs the stirling engine and warms incoming cold water, then it’s a win win and is well worth considering

Claimed lifetime of the boiler is fifteen years which takes it into profit, especially if energy costs keep rising- every self-generated unit that you use will be worth more in reduced expenditure on energy imported to your property (as long as the government of the day doesn’t renege on the promise to keep the FIT linked to rising costs)

Member
Damn Young says:
19 July 2011

You don’t get KiloWatts per hour.
Watts are already a rate in time.
🙂

Member
mike says:
11 June 2011

I had a 3.7kw panel system installed at beginning of April with a 40% grant and repayment of balance of cost of installation interest free over 25 years, with debt linked to my property by local council. The idea being that either I or the buyer of my property if i sell it will pay off or assume responsibility for the balance outstanding. No up front payment by me at all. Repayment of interest free loan per month will be about £30 or £360 per annum. Income from FIT estimated at about £1500 per annum. Actual energy generated from 1 April to end May was just over 1000kwh; which translates to over £430; with the additional benefit of 25% less energy consumed according to my electricity bill. So its a thumbs up from me!

Member
Adrian Phillips says:
11 June 2011

Thanks for correcting the information above to include the correct estimate of the subsidy – see comment 2.

I am an enthusiast for solar PV, and have benefitted from installing panels. Costs of installation was £8,700; annual tax free income in year 1 was £521; reduction in electricity bill was c.£75, so total benefit = £596, or 6.8% return on capital cost. That’s about twice the income I would get from investing this money in savings at current rates – and that income would be taxed. The capital value is in the house, so it is not lost. The income from the FIT is guaranteed for 25 years and is index liked. If my roof looked south (and not ESE) the income would be greater, perhaps up to 8% return.

There is one other point that no-one has referred to. You will normally get a remote reader with your panels that shows how much you are generating (and earning) at any time. This is fun. People talk about it, ask you questions, become interested in doing the same themselves.

And finally let us remember why this is bring done – to enable millions of people to make their own contribution towards becoming a low carbon economy. It is a scheme that WHICH should support.

Profile photo of ChrisGloucester
Member

Not quite Adrian.
Your array cost £8700.
Your annual benefit is £596 with FIT and reduction in electricity bills.
It’s reasonable to assume the £596 will be the annual average over the 25 year life of the system.
I think the bit you’re missing out is that if you had invested that £8700 somewhere else then at any time you could pull out and get your capital back. Not the case if you’ve spent it on a PV array, you’re locked in. So part of your figures should have taken into account “payback”, which will take 14.5 years (£8700 divided by £596).
Ok so you then go on to make £596 (or so) every year for the remaining life of the installation, thats maybe another 10.5 years or a total of £6,258. So that’s what you actually make over the 25 years expected life of the PV array which I suggest equates to approx 2.85% per year, and you see none of it until you’re in year 15 because until then it’s payback.
Now of course from year one you could be reinvesting “the profit” and over the 25 year life time of this exercise the final return would be a bit more than 2.85% but that is very dependant on where interest rates go.
So I think the way to “test” the investment is to say, over the 25 year life of the PV array how much money has it made after my initial £8700 is recovered?
And for you Adrian I think an expectation of just under 3% is more realistic and you’re locked in for the first 15 years.

Don’t get me wrong, I’m not saying this is a bad investment it’s just perhaps not as good as some would have us believe.
And there are also several unknown variables like;
The true life span of the setup (might last longer than 25 years, might start losing efficiency sooner)
Wheather variability and therfore the real power generation levels each year (who can say what average light levels will be over the coming 25 years)
The price of electricity you do have to pay for (night time consumption), fair bet this will increase which could improve on your benefit because you buy less.
Interest rates over the next 25 years, but who is to say how much that £8700 could otherwise make.
Decomissioning cost at the end of 25 years (unless you want to leave a non-functioning array up there)
Etc. etc.

One thing I would suggest though is that if you borrow to intall by perhaps remortgaging at perhaps 4% or 5% over 25 years I think you’re looking at an overall loss.
Of course your motives for going PV may well be to help save the planet which is commendable but you won’t be wanting to shell out too much to do so will you?
Good news is Solar will get cheaper through economies of scale so the deal may well get better year on year, if of course the FIT continues.

Member
Chris says:
11 June 2011

The scheme is dubious as it effectively subsidises those of us who can afford to “invest ” £10,000 on PV. Meanwhile everyone else s bill goes up. That’s a stealth tax in my book and likely to be regressive. The moral and economic arguments are not convincing either.
Firstly the science on global warming is not settled and indeed warming appears to have stopped in 1998 or so. Moreover warming has been going on for at;east 150 years so carbon dioxide is unlikely to have been the prime cause.Whilst it is true to say that resources are scarce , the switch to renewables are going to put up the cost of electricity and power dramatically over the next 20 years. This will render what industry we have left uncompetitive [wind turbines /pV are very inefficient] with deleterious effects on the exports and jobs.
Finally as pointed out above you have to bear in mind at the end of the period you wont get your capital back [sooner if you move home] so real income doesn’t start until well after [say 10 years ] first installation. There may well be maintenance issues too. During that time you have to consider the opportunity costs – that is you would also have got interest on your £10k[ if in the bank-rates are low now but will increase] or if in stocks dividends and it is possible that stock s and shares might have risen giving a capital gain, I doubt PV cells on a house will add much if anything to its value. The whole exercise is dubious . Even if CO2 is proven to be the prime cause of warming [looking increasingly unlikely] as other countries with far larger emissions are unlikely to follow suit.

Member
Adrian Phillips says:
12 June 2011

Dear Chris
I am not sure if you are the same Chris who also replied to my message but assuming you are:

– your comments re my own experience don’t really undermine the economic case for my investing in solar PV, especially as 1) the income from the FIT is tax free,whereas the income from most alternative investments are not; 2) the investment in solar panels is in the capital value of the house (just like a gas boiler or a wood burning stove); 3) yes, the day-to-day weather is uncertain, but over 25 years one would expect sunshine amounts to average out; 4) you ignore what is happening to the costs of other forms of energy, with oil and gas prices rising, the attraction of generating some of one’s own energy from solar etc. only increases with time.

And if if you are the same Chris, it is regrettable that you are churning out a whole lot of stale nonsense on climate change etc. The world did not stop warming in 1998, nor is the role of CO2 being questioned by serious scientists. I rather suspect that your scepticism re solar power may be an extension of your denial of global warming.

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Adrian,
I think you are replying to different arguments from two people called Chris.
I’m not the climate change sceptic Chris. I’m sure climate change is real and I’m also sure we must reduce fossil fuel Co2 not just for “planet saving reasons” but also to get away from our reliance on foreign oil and gas imports.
I’m also the Chris who is against the FIT money coming from energy bill payers rather than from general taxation, it’s simply unfair, and the Chris who is sure the economics of PV arrays are not as good as people who have them think they are (including you).
As I said not a bad investment but the return is nearer to 3% per year over the 25 year life of the array and payback takes at least 12 years. So 12 years (or in your case using your own figures, 14 years) before a penny profit is realised.

I’m all for PV but don’t borrow to do it because you’ll very probably lose money. and if you buy outright be aware of real economic performance expectations , which as I said before are not as good as some would have us believe.

Member
Bill the Bear says:
11 June 2011

I’m in Brighton. Had solar hot water since 2003 (OK – I did have a grant to encourage me). Payback time – as suggested by my installation company – around 5 to 6 years. Main problem is on switching to new energy supply company they set monthly payments too high.

Recently installed solar PV – I do profit from the FIT that gives me a return of around 10% p.a. on my investment of £9000 installation costs (OK – not taking into account full-lifetime costs of replacing worn-our parts – so possibly 5 to 7%).

As a result of this I can afford more expensive green tariffs from my supplier – using my profit to encourage power companies to expand the green generating. I can also support other green initiatives with my profit. My footprints are also smaller! And more of them are being offset!

If it encourages “the country” to have solar panels on every Southern facing roof in (say) Brighton to reduce the UK carbon footprint then I think it is a good thing.

The fact that some households gain and others do not applies to almost every grant/subsidy/benefits scheme in existence. Should we all object to electric car users paying less car tax the rest of us are susidising them?

Individual households need to do the maths – I have friends in Glasgow that looked into FIT and found that it was not financially viable even with the generous FIT payments. As a taxpayer I’m subsidising the increased health costs of the West of Scotland – but I don’t care. We are all part of “team-UK”.

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Some grant if the payback is only 5 to 6 years?
Your outlay could not have amounted to any more than about £300?
Which I doubt so if I were you I’d take another look at the sums.

Although using any solar power is good if you think you’ll live to see the payback on a hot water system think again.

Member
Tony Dutton says:
11 June 2011

Note: The illustration shows a continental two pin plug!
Surely for a solar or other type of “green” generator the outlet must be a socket
and preferably a British flat pin type.

From Tony Dutton

Member
Damn Young says:
30 July 2011

It would be beneficial if all appliances had a standard 12V DC supply socket, which would allow easy connection to PV panels. It wastes a lot of power to convert the PV DC power into 240V AC, because once inside your appliance, it is often inefficiently converted back into DC again. Modern LED lit TVs no longer need to use high voltages. Only synchronous motors, found in hoovers and the like, need AC power. They could be designed to use 12V DC motors.

Member
Mike suttill says:
12 June 2011

feed-in tariffs are inherently unfair as they are funded from everyone’s utility bills but only the comfortable middle class upwards will be able to take advantage of the subsidy. Most lower middle class and working class people cannot afford the capital outlay and could only be locked into the schemes where companies rent your roof space and they receive the income or not participate at all (more likely) – thus they who can least afford it will be funding the slightly smug sounding people above who are able to afford the investment. As Chris points out above the return on investment is much less than people think and is totally locked into the scheme. It would be far better for the government to stop offering to subsidise all energy schemes and draw up a coherent energy production and management plan that gives direction to utility companies. Market forces (don’t laugh) would quickly identify those that are viable and affordable and energy companies would pursue those – offering wind farm subsidies and FIT etc distort markets at the tax payers expense. If you think you can afford to invest in PV and can sell your energy to a company then fine – but why do those who cannot afford it have to help you to make money? Central government is useless at putting in place policies that will not be taken advantage of by commercially aware entrepreneurs – always at the tax payers expense!

Member
Bill the Bear says:
13 June 2011

I’m not sure where Chris (above) gets my usage figures or installation type from when he tells me I must have my water heating solar panel savings calculated incorrectly.

Years prior to Water heating solar panel – household gas usage 14691.63 Kwh.
Years after installation – 10652.16 Kwh.

Saving 4039.46 Kwh per year. In 2003 prices (1.237p per Kwh) = Annual saving £416.40.

Install costs : £2351. Payback time 5 years and 160 days.

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Sorry Bill still think your numbers are still wrong.
You say the annual saving was 4039.46 Kwh and the price per Kwh was 1.237 pence per kwh in 2003. That is £0.01237 per kwh. Now £0.01237 times 4039.46 comes out at £49.97 on my calculator. That’s pretty much as I was suggesting before.
On your £2,351 investment and an annual saving of £49.97 comes out at a payback of 47 years. (these are your figures, I’ve only corrected the maths)

But nevermind 2003 prices, today a Kwh of gas is about 3p and solar hot water installations don’t come much cheaper than £4000. So assume a similar annual saving of a similar 4000 kwh of gas. £0.03 times 4000 equals £120 and a payback on £4000 of 33 years.

However I think an annual saving of 4000 kwh is a bit optimistic because my monthly hot water cost using a gas combination boiler is about £9 or £108 per year at 2011 prices and you only need the hot water you need, so you can only save an equivilent to what you normally use.
You won’t be getting much solar benefit October to March so if we assume solar works for 6 month of the year and provides all your hot water during this time (even that is perhaps a bit optimistic) that’s £54 or 1800 Kwh (at 3p per Kwh) and a payback on a £4000 installation of 74 years.
Now as gas prices increase, and they will, over coming years the payback will admittedly reduce but we will still be looking at a payback of several decades.
Which ever way you look at it, whatever assumptions you might make a 5 year payback it most certainly ain’t.

But as I said before Solar is good, the sunlight is CO2 free, you’re helping save the planet, and reducing our reliance on foreign oil and gas suppliers. I’d like to see much bigger grant support for many more solar hot water installations on many more houses.
But perhaps to encourage bigger grant support I’d also like people who have already paid for solar hot water installations to stop kidding themselves it’s the great money saver it clearly, currently, is not.

Member
mike says:
17 June 2011

i inherited a roof hot water solar panel on a holiday home bungalow that I bought 2 years ago on south coast. it produces very hot water even during winter months, too hot to put your hand under when running water in a sink to do the washing up. the technology does not rely just on intensity of heat of the sun as implied in comment above although less daylight does make a difference. i think the previous owner of the bungalow qualifed for a grant when having it installed. Not as good a return on investment as the FIT scheme but every little helps….

Member
Stu says:
1 July 2011

From what I read here most people are mainly interested in how much they can “earn” from feed-in tariffs. I have a 5.6kw array installed for 5 years now and although I missed the boat for the full FIT I still save a grand a year from NOT having to buy from the grid. I live in the country and my only choices are oil and electric. We use a lot of electric in our home and the solar PV covers around a third of it. I also installed solar thermal panels last year and already I am seeing huge savings on the reduced consumption of heating oil.
People need to look at renewables as a way to SAVE money, not just earn it.
Also, my installations costs are all fixed now and energy prices go up every year. This accelerates pay-back time.

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I would strongly support this comment.

Inflation of energy costs will make up the bulk of the savings for this equipment. The trouble is that inflation isn’t guaranteed, but it appears that authorities seem to like it. People write about property markets being “boyant” “firm” or “strong” (all positive words) when prices rise, yet it is the rise in house prices that have so damaged the world economies and fed through to everything else.

Solar thermal panel systems need a relay adding so that the immersion heater cuts out on sunny days (or just switch it off manually if you remember.)

You can get a 16A relay with 240V coil for a few pounds on eBay and an electrician could add it for a couple of hours work. Connect the coil to the solar circulating pump and the contacts (to open when the coil is energised) in series with the immersion heater.

Member
Damn Young says:
18 July 2011

The place for large scale industrial solar arrays is a desert.
To use farmable land for that purpose is ridiculous, as we need it to grow crops.
We have no deserts in the UK.
What we do have is an abundance of private rooftops, and they need to be covered with solar collectors.

Member
Family Man says:
19 August 2011

Just had a 3.92Kwp system installed. The FIT scheme is designed to encourage the take up of this technology as part of a long term govt strategy to reduce our dependence on other energy sources.
having no energy policy is not an option. It is easy to say that the FIT scheme is not perfect but the govt have already taken action to adjust the rules to focus the resources more at the intended users. In April the domestic rates will change as well. At a personal level the economics looked great so I did it. In that respect the govt scheme has added 1 more solar pv system to the grid. You cannot condemn businesses or individuals for taking advantage of attractive investments. If you need to blame somebody then it should be the scheme designers. In the meantime, what are you waiting for? There may never be a better time to invest! And when the RHI scheme starts properly next year it may be worth taking a serious look at that as well.

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Hi – how will organisations delivering these solar pv installs going to survive? Will they have a problem reducing their total operational costs? What is the survival strategy? Or is it about survival or mere reduction of profits? Would welcome thoughts ….

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Adrian says:
4 November 2011

The debate is reopened as the government has now decided to hit the domestic FiT with a cut of over 50%. Which was quick to support the earlier reduction in support for field arrays on the grounds that “more of the FIT payments – which come from people’s pockets – will be protected for households, communities and small businesses”. I hope they will not be so supportive of the government’s latest action which effectively undermines a large part of the domestic solar energy market. The FiT has in fact achieved its aim by creating a market in which the costs of solar installation have fallen by 30%, so a reduction in the FiT was right. But the cut should be phased in more slowly (over 6 months say) and be of the order one third. As it is jobs and businesses will be lost and the fledgling solar industry largely destroyed.

Member
NPaignton says:
31 August 2013

I fitted PV and a solar thermal a few years ago. It is not a particularly good investment but I was interested in having solar energy production. It has not been without hassle as G4S has to check your meter every 2 years. They say they have visited but could not gain access. There is no evidence of the G4S visits and the the electricity company then say they are suspending your feed in tarriff until the meter is checked. It is well known that G4S pretends that they are doing government work when they are actually sitting on there hands. Remember the security debacle at the Olympic games.
Considering the hassles I have experienced I could not recommend Solar PV to anyone. Also when I had solar thermal installed to heat the hot water cylinder I was told there was a solar thermal feed in tariff about to be introduced and that was 3 years ago. There is still no solar thermal feed in tarrif.

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Unfortunately delivery drivers, and presumably also meter readers, can call at the wrong house, find no one in, and leave a telephone card. Of course this gets thrown away as no one is going to spend a couple of hours listening to music interspersed with bare faced lies about “your call being important” just to tell them that they called at the wrong house. [Important calls are not queued at a call centre.]

As to PV, the FIT is only part of the reward. Assuming that the homeowner paid for the panels, the alternative is to invest money and use the income to pay the electricity bill. This income is subject to income tax. If you have solar panels, you are simply not buying the electricity, so there is no income tax on the value of the electricity you use on site.

What would be better than a FIT would be to have meters that read backwards when you export. This means that people could have credit in the form of electricity stored for them to use at night and on dull days.