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Monthly archives: October 2011

Yesterday saw an explosion in productivity at the rumor mill regarding the solar energy Feed-in Tariff (FiT) and it’s impending review. With sources from all over the industry and high exposure media such as Financial Times jumping on board the scaremongering bandwagon, let’s take stock once again and remember the facts of where we are up to.

To read the full article, click here.

The Feed-in Tariff Review

As we understand it, the Comprehensive Spending Review championing the government’s budget overhaul into spending includes a review of the solar FiT. The Department of Energy and Climate Change (DECC) is the authority on this matter, and only their official release will bring about the changes and outline to what extent cuts will be made.

One thing that figures from Ofgem are highlighting is that installation rates are much higher than what they anticipated. The current rates cannot be sustained at this exponential growth level. The boom is most certainly in full swing, and the bust now appears to be approaching in all its foreboding and unstoppable glory.

“Unless Earlier Action is Deemed Necessary”

The DECC, in speaking with industry sources has released the following statement:

“As we’ve previously said, all tariffs in the scheme are being considered in the Comprehensive Review and we will be consulting on proposals later this year. We’ve made clear that tariffs will remain unchanged until April 2012 unless the review indicates the need for greater urgency. There has been no announcement about the review so any rumors about its content are just that, rumours and speculation.” (Source)

In simple terms, nothing has changed at this point and we are no closer to understanding exactly when they will. The media storm has cracked through the sky, but the underlying realities of our situation remain. There is little doubt that the review will decrease the FiT rate by some extent, and also increasingly less doubt that the changes will be brought about before April 2012.

The only concrete truths the industry has to offer are that if you’re installed prior to the changes you will receive an enviable rate on your solar power for many, many years. If you do not, you won’t.

Written by Jarrah Harburn

jarrah@solarselections.co.uk

T: 0844 567 9835

© Solar Selections Pty Ltd 2011

 

 

There is a growing degree of speculation in the industry regarding the feed-in tariff (FiT) review that is approaching towards the end of 2011. Due to the incredible importance of the tariff to your average solar energy installation, such debate is healthy and ensures awareness of its approach. Speculation however, is not quite as beneficial, so this article will evaluate the current situation and explain what is to be expected when the review is announced and brought about.

The Comprehensive Spending Review

The government carried out what they called a Comprehensive Spending Review in 2010 in order to take better control of government spending. The Comprehensive Consultation into the Feed-in Tariff was a part of this review, and is the official name for the solar FiT review. It is carried out to ensure that the funding being spent to promote the uptake of solar energy installations via the FiT is under control and at a manageable level.

Expectations

International experience has taught us a lot when it comes to government incentives for renewable energy installations, especially solar power on a micro-generation (>50kW) level. The most successful solar industries in the world of Germany, Spain and Japan are perfect examples of this and we can review their developments to aid our predictions. In all of these countries:

  1. FiT’s were introduced and subsidised by the government to bring in solar uptake;
  2. Reviews on the FiT’s were carried out on loose timelines to control the government’s spending;
  3. The FiT’s were reduced over time and via these reviews in order to stabilise growth.

So by this example we can make one point clear;

1) A reduction in the FiT is by far more likely to occur than an increase or a continuation.

The second aspect we must consider is the degree of reduction we could expect to see.  At this point, it looks likely that the UK’s FiT reviews will be flexibly carried out to ensure the government reduces their risk in over-spending via the Comprehensive Consultation they have established. Whilst we have a rough date in mind, we need to analyse the uptake figures for a better idea on when to expect the changes.

Installation Figures of Solar Energy in the UK

The timing of the review

The government has stated that a review will take place upon a certain budget for the FiT being reached or if we reach March 31, 2012. Looking at the current uptake figures being offered by the regulator for energy in the UK, Ofgem, we can expect to reach 550MW before March 2012. This would very likely be a number surpassing the government’s budget, and we can then loosely establish our second important point,

2) The FiT review is likely to be introduced after November 2011, but before the end of March 2012.

Whether changes are brought about immediately or postponed until April 1st, 2012 is uncertain and depends on the government’s perception of the uptake and budget. Here at Solar Selections all we suggest is for people to educate themselves on their options, ensure they understand the returns and benefits for the solar installation and then proceed as soon as they feel comfortable.

The scale of the review

The other important aspect of the review when it does come around is the scale of the reduction in the FiT to expect. The growth of the market here in the UK is not expected to be sustainable for another year, so reductions between certain percentages can be expected.

3) The FiT cuts could be in the vicinity of 25% to 40% of the current tariff levels.

Only a cut of this magnitude could stabilise the spending that is at the forefront of the governments concern. Whilst such reductions would be damaging to the growth of the industry, they do serve as incentive for people to consider their options now and sign up for the 25 year indexed to inflation rates on offer.

The most important consideration with these three conclusions is that time is of the essence. We here at Solar Selections do not condone the pressured selling tactics that can be used in the industry to make customers feel forced into a decision without doing research. We do want to ensure that as part of a potential solar energy customer’s education they learn that if the review is changed and the installation incomplete, the new tariffs will apply and that they are likely to be significantly less attractive than what is available now.

In Conclusion, once a project’s feasibility and interest is established, any further delays in the decision making process serve only to expose the project to the risk of lower tariffs.

To establish your project’s feasibility and your own knowledge and interest, get in touch with us today for free, intelligent advice.

For the full article, please click here

Written by Jarrah Harburn

jarrah@solarselections.co.uk

T: : 0844 567 9835

© Solar Selections Pty Ltd

Commenting on publication today of a safety review of the UK nuclear industry following the Fukushima crisis in Japan earlier this year, Friends of the Earth’s energy campaigner Tony Bosworth said:

“This report does nothing to alter the Alice-in-Wonderland economics of nuclear power – it’s a gamble we don’t need to take.

“After more than five decades of nuclear generation the industry still relies on huge public subsidy, while solar is set to operate without taxpayer support within a decade.

“Getting tough on energy waste and plugging in to the UK’s vast green power potential will meet our energy needs and build the new job and business opportunities our economy is crying out for.”

Long before he became the Department for Energy and Climate Change’s chief scientific advisor, David Mackay lectured a course at Cambridge on how to perform back of the envelope calculations called ‘Order of Magnitude Physics.’ To teach the course, Prof. Mackay used a series of example calculations based on renewable energy. Little did I know that the examples he was using would later become part of a book he was writing (and little did he know of the fame and career change that it would bring) but it was listening to these lectures during my undergraduate that confirmed my ambition to work in the solar energy industry.

Already extremely concerned by the growing evidence for ‘human-caused’ climate change, Prof Mackay’s course taught me some astonishing facts, such as how the amount of solar energy delivered to the Earth is ten thousand times the total amount of energy we use over the course of a year. He made me realise that human civilisation has a huge amount of work to do to halt its greenhouse emissions, but he also gave me the hope through new technologies, we really can wean ourselves off fossil fuels without impacting our quality of lives too severely.

After a PhD and several years working in solar photovoltaics for a large company in Germany, I returned to the UK and was astonished to find that the Government has extremely low ambitions for solar energy and even more astonished that it is using David Mackay’s analysis, at least in part, to justify this. At present, the Treasury’s £360m cap on Feed-in tariffs means that support for solar PV at all scales will end by mid-2012 and limit solar PV capacity in the UK to less than 3% of Germany’s current installed base.

When I re-read Mackay’s key book ‘Sustainability Without the Hot Air,’ I find it paints a very compelling argument for solar energy. Prof Mackay repeatedly points out that solar energy can deliver far more energy than any other renewable energy technology in the UK, as illustrated by the fact that the amount of solar energy we receive in the UK is fifty times the total amount of energy we use, including transport and heating. At the time of writing, David Mackay singled out two hurdles for widespread solar adoption in the UK; cost and space. It seems as though these hurdles have been interpreted by the Government as insurmountable barriers, whereas careful re-examination of these hurdles using up-to-date figures reveals them to be significantly less onerous than Mackay first assumed.

In relation to costs, David Mackay states ”it will be wonderful if the cost of photovoltaic power drops in the same way that the cost of computer power has dropped over the last forty years.” This is exactly what has been demonstrated over the last 5 years. Jenny Chase, a solar energy analyst at the research firm Bloomberg New Energy Finance claims “In 2011 we expect an oversupply of solar panels which will put continued downward pressure on system prices.” In his book, David Mackay uses a solar electricity cost of €0.25 per kWh which is 4 times current wholesale electricity costs, but only twice the price of retail electricity, and seeing as prices have continued to fall exponentially since the time of writing in 2008 we can expect this gap to be closed fast. In fact, the cost of solar energy is falling much faster than that of any other energy technology to the point where it is the expected to compete with unsubsidized retail electricity prices in UK latitudes by 2014/2015 [1]. In contrast, the cost of nuclear energy has risen 5 fold since 1970 according to a recent study by Yale University’s Arnulf Grubler [2]. By supporting the solar industry now, it will soon be able to support itself without subsidy.

Digging deeper into the Government’s original modelling of overall ambition for PV, the Renewable Energy Association has found that a mid-range future fossil fuel price scenario was used which assumes a cost of $80 per barrel of oil in 2020 (which is unlikely considering current prices are frequently above $100). By using such unrealistic forecasts, the value of investment in solar energy is being systematically undervalued.

The second issue that Prof Mackay raises is with the amount of area required to get large amounts of solar energy. Whilst there is a vast amount of solar energy available to us in the UK, that energy is disperse, meaning you do indeed need to cover a considerable area in solar panels to cover our electricity needs. Prof Mackay points out that to get our current electricity (50 units of electricity per person per day) needs would require 200m2 per person. This is a huge amount of area, but it’s important to realise that reaching that target is highly plausible. The total amount of roof space per person in England is 47m2, domestic gardens 114m2, and roads and open spaces make up 60m2 and 2300m2 per person respectively [3], so by using a proportion of roof space and a small proportion of open space we could certainly get close to 200m2. Its important to point out that open space does not mean prime farmland, there are many brown field sites that could be put to good use. Nor do solar panels on open space prohibit the use of that land for other means. When placed in fields for example, solar arrays can still permit some animal grazing and in other countries, solar arrays are often positioned along motorway banks or as canopies above car parks.

Obviously getting between 100m2 and 200m2 of solar panels per person in the UK would be a gigantean undertaking and one that would change the look of our country, but this would be just one of a long line of gigantean undertakings that have taken place in our history. The expansion of organised farming, the construction of road and rail networks, and more recently the construction of electricity and mobile phone grids were all projects that have profoundly changed our country and its appearance. Just because the task may be large, does not make it impractical. In the UK we happily resurface 60m2 of road per person every 5-10 years.

Solar energy has already proven itself highly popular in the UK. It is one of the few technologies that can be produced effectively on a domestic scale giving power to families to generate their own electricity. Solar energy can also be deployed staggeringly quickly. In 2010 alone Germany installed 8GW of solar energy distributed among over 200,000 individual installations. That is equivalent to over two nuclear power stations, and there is no way those nuclear power stations could be built so quickly.

There is a misconception that micro-generation does not result in large amounts of energy, but multiplied thousands of times, the amount of energy we can harvest from small solar installations is enormous. The UK will of course need a balanced mix of different energy technologies, but lets give solar its rightful place alongside the other major forms of energy generation. As Prof Mackay points out; ‘to complete a plan that adds up, we must rely on one or more forms of solar power. Or use nuclear power. Or both.’

1. AT Kearney Report; ‘The True Value of Photovoltaics for Germany’ 2010
2. Arnulf Grubler, Yale University; ‘The costs of the French nuclear scale-up: A case of negative learning by doing’ Energy Policy, 2010
3. Department for Communities and Local Government, Land Use Statistics (Generalised Land Use Database) 2005, www.communities.gov.uk/publications/planningandbuilding/generalisedlanduse

Dr Toby Ferenczi