With two significant reductions in the feed-in tariffs for commercial systems taking place within the last twelve months, it’s understandable that the UK industry is taking stock of what has occurred. It’s obvious now that the government incentives introduced for commercial solar power were too generous to sustain. It’s also becoming increasingly evident that the Department of Energy and Climate Change(DECC)  will use its power to swiftly alter government incentives when they deem necessary. What needs to be contemplated forwards from this is that with an experienced and industry conscious awareness commercial solar power can still establish viability in the UK. This article will explain why.

Utilising the economies of scale and potentially significant savings that companies and business owners can make on their energy usage, the commercial market holds a great deal of potential for investors. There are nuances to consider however, and the handling of the feed-in tariff incentives by the UK Government has not added to the security of the prospect for many people. This does not mean that potential projects have become more risk than their worth, it simply means that project management must protect investments using the lessons of the past and innovations of the future to minimise risk and maximise gain. Sound like a familiar set of circumstances for most kinds of investment? It is, so let’s analyse this in greater detail.

The Current State of Commercial Solar Incentives

Feed-in Tariffs

All information provided in this article is based on the proposed changes to the feed-in tariff, outlined on the DECC website here.

There are two purely financial benefits that arise from the feed-in tariffs.

1. The ‘Generation Tariff’ is paid for every kWh generated by an eligible system whether it is used on site or exported to the grid. The proposed new rates are:

• Tariff for >4-10kW PV installs = 16.8p/kWh (in year one*)
• Tariff for >10-50kW PV installs = 15.2p/kWh*
• Tariff for >50kW – 150kW = 12.9p/kWh*
• Tariff for >150kW – 250kW = 12.9p/kWh*
• Tariff for >250kW – 5MW = 8.5p/kWh*

*This rate will only apply for the first year of the systems operation. It will then increase based on the Retail Price Index’s (RPI) inflation over it’s 25 year lifespan.

2. The second aspect is the ‘Export tariff’, and this remains unchanged from the DECC proposals. It is a flat rate of 3 pence per kWh generated from an eligible system, unused on site and sent onto the grid.

Energy Savings

The third benefit that comes directly from generating solar energy from a system concerns the energy usage and bills on site. Earnings can be significant, and are established when property owners compare the new tariff rates with current bills. The rise of energy prices make this aspect of clear benefit, and just as importantly more effective the sooner the installation is carried out.

The ‘Energy Bill Savings’ are calculations on what the cost would have been to buy a kWh from the grid when it is instead generated from the solar power system and used on site. More complicated to calculate because it relies upon an analysis of the tariff times and rates of the properties energy bills, a Solar Selections Commercial Broker is trained to assist customers with establishing these figures and their influence on rates of return.

There are also a number of environmental, corporate image and sustainability benefits that are associated. Solar Selections Commercial designs projects that take into account these goals and provides suggestions for how to maximise their impact on the installation. It’s case specific, and again best discussed with your project managing broker.

Primary Areas of Development and Potential

Finance

The reality of many investment opportunities is that they are often capitalised upon during unexpected times. So long as the commodity in question is deemed to be a) increasing in value, b) possessive of a rare quality and c) stable, investment will find it and want to share in the profits. Commercial solar power is an investment in renewable energy, and all three aspects are most definitely upheld by this commodity. Renewable energy is considered a viable investment in the world today, and this is upheld despite the tariff changes in the UK.

For these reasons, private investment is expected to come into focus for the commercial market here moving into 2012. Through conglomerates and syndicates lines of capital are being opened up across the UK for these projects, through firms such as Solar Selections. These lines of capital will come into play as soon as the appropriate figures regarding returns on investment are established. So let’s look at some ideas on how this can happen.

Suggestions

First of all, the price per watt of solar components needs to continue to be driven down. In the UK we have excellent prices considering our almost complete lack of onshore manufacturing and assembly plants, but more can be done. One stigma that immediately needs to be overcome is the focus towards brand name solar products, especially on panels. Distributors and importers alike need to develop more robust relationships with the largest manufacturers in the world such as Suntech, Trina, JA Solar, Yingli and First Solar and educate their customers on the technical differences and advantages on these modules. Moreover, the public need to be educated on the differences between panel brands in a more objective manner.

Secondly, finance when sourced for large scale solar installations needs to become more comprehensively advantageous to business. Zero upfront capital outlay, tax benefits and perpetually positive cash flow positions are a small number of unique approaches as yet unexplored by the mainstream finance market; see our full article for further details. Solar Selections Commercial is in the process of introducing an exclusive package currently operating in our other countries for our clients that addresses these points and many more benefits. We encourage interested parties to contact our commercial management team for further information.

Finally, there are the more generalised energy efficiency and sustainability overhaul approaches to commercial properties that are to be more widely and professionally used. This involves considering a complete energy efficiency upgrade plan for a property with solar energy merely one aspect among a wide range of implementations to be considered. By way of example this may include installing energy efficient/motion activated lighting and monitors, condensing CPU and modem hardware into micro-managed energy efficient hardware and software, advanced telecommunication and video link software to curb travel and conference logistic costs and simpler measures such as anti-draft stoppers under doors or power point energy savers. Considering the DECC’s proposals regarding implementation of Environmental Performance Certificates (EPC) into eligibility for the solar feed-in tariffs, such practices may indeed become necessary for solar projects with the coming of 2012.

EPC’s are essentially a summary of a property’s energy efficiency and carbon dioxide emissions. They are used as ratings for all properties bought, sold or rented in the UK. The DECC’s suggestions have centred around only allowing properties with certain minimum EPC ratings to be eligible for solar FiT’s, effectively closing off the tariffs to properties judged too inefficient.

Once again, Solar Selections will be at the forefront of this approach offering options from our network of energy management consultancy firms to our clients that comprehensively address energy efficiency and emission standards.

Conclusion

A midst the controversy and decisive nature of the UK government’s cuts to the solar feed-in tariffs last year, the truth of the matter is that it has been the most successful 12 months in the solar industry’s history. The Commercial solar industry has experienced only a glimpse of it’s true potential, and whilst it is hard for some installers and potential investors to see right now, the sector has its best years ahead of it. By developing and utilising proven approaches to aspects such as finance, energy use reduction and energy efficiency, feasibility will be re-established and become accessible to many thousands of business owners and investors. The international examples are there for all to see, and with the exciting development of prospects such as our Operational Lease arrangement, Solar Selections will be at the helm of the budding commercial solar industry of 2012 and beyond.

Written by Jarrah Harburn

jarrah@solarselections.co.uk

T: 0844 567 9835

The Government has halved the payments for any solar electricity scheme completed from today, which will almost double the payback period for homes, businesses and communities.

Later this week (Thursday 15 December 2011) Friends of the Earth and two solar companies – Solarcentury and HomeSun – will ask the High Court for permission to challenge Government plans to cut the payments.

The premature cuts could cost up to 29,000 jobs and lose the Treasury up to £230 million a year in tax income, a report commissioned by Friends of the Earth and Cut Don’t Kill – an alliance of solar firms and consumer and environmental organisations – revealed last month. Earlier this month construction firm Carillion warned 4,500 workers their jobs are at risk because of the Government’s proposals.

Countless schemes have already been abandoned, denying cash-strapped homes and businesses the chance to free themselves from soaring fossil fuel prices.

Friends of the Earth’s Executive Director Andy Atkins said:

“These Government cuts will cast a huge shadow over our thriving solar industry and pull the plug on thousands of jobs.

“We don’t oppose modest payment cuts in line with falling installation costs – but the size and speed of these proposals will decimate an industry that could play a key role in weaning the nation off of expensive fossil fuels.

“Ministers must think again and give their support to an industry that could and should be at the cutting edge of a clean energy revolution.”

“This is just the tip of the iceberg – if Ministers push ahead with plans to slash solar subsidies tens of thousands of jobs could be lost.

“A fraction of the cash the Chancellor set aside this week for more roads and dirty energy would throw a lifeline to the solar industry and the thousands of skilled workers currently facing unempolyment.

“The solar industry has a crucial role in reducing the nation’s dependency on expensive fossil fuels and developing the clean future David Cameron has repeatedly promised – Ministers must abandon plans to pull the plug on it.”

Whilst roof-top solar no doubt has its place, an innovative company based in Scotland and Somerset, SolParks, has looked further afield and brought another variant of solar PV to the UK market – the solar car canopy.

The solar canopy is a structure built over a car parking space with solar PV panels mounted on its top. The canopies bring a number of direct user benefits such as shelter in poor weather, keeps cars shaded from the heat of the sun and can add further to user amenity, by adding in electric vehicle charging points (powered by renewable power, rather than mains) and using LED lighting under the canopies, which can be sensor operated, rather than large street lighting, to provide bright, safe car parking.

The power generated by the solar PV can be supplied direct to the car park owner, or can be supplied to the national grid.

The environmental and user benefits are obvious but also extend to easing legal issues between landlord and solar PV operator.

Elliot Roe of Solparks says “we researched the market for more innovative solutions for solar PV and found car park canopies in both France and USA, where the markets are far larger.   The benefits in the UK are obvious as well and we are innovating even further by using the FITs to enhance the financial benefits for users.”

Solparks is looking for installations of 12 car parking spaces up to 100.   Roe goes on to say “we can provide the installation to a site owner without any cost to them.  We undertake the planning consent, construction works, grid connection and pay for the canopies and solar PV.  The user in return receives discounted power and gains the benefits for their car park users.   The power they can’t use on site is exported to the grid.”

Using the power generated from solar PV on site can save the landowner power costs and can provide a valuable hedge against the threat of rising electricity prices. It also sends a strong, visible, message to customers about green credentials.

Roe says “ we are happy to work with any size of car park owner; however, an ideal customer would be one with multiple car parks. That way the customer achieves wide spread benefit, and the amount of power generated becomes a meaningful contribution to reducing their power bills.”

Solparks feels its solution offers much more simplicity for building owners.  The solar PV doesn’t compromise the core building, no structural surveys or reinforcements are needed and we can also accommodate re-development much more readily.

So why, given all these advantages, is the product limited to 100 spaces in any one location ?  Roe comments that “the changes in the FIT from 1 August make it very difficult, with the FIT alone, to achieve the sorts of levels of returns that are needed to fund a roll-out on a larger scale.  There are other commercial solutions that could be looked at to achieve much larger deployments however and we would be delighted to hear from any potential Solparks customer”

Solparks provides a fully turn-key service to those wanting to purchase rather than lease.  The service includes planning, grid connection, Ofgem accreditation, procurement of all materials and onsite installation. Solparks can also provide an ongoing operation, maintenance, monitoring and reporting service.

The Solparks product comes with a full 25 year warranty over the steel and PV installations plus a 2 year workmanship warranty.

And what of electric vehicle transportation ?    Solparks believes solar car parking can play a large role in the infrastructure needed for electric vehicles – both cars and scooters.    Roe says “adding charging points below the canopies, powered by the sun, is an easy next step and can provide further amenity to customers”.

Given the benefits, we expect to see many Solparks installations starting to appear, and provides large car park owners with another potential revenue stream from an asset that they already own.

For more information email elliot@solarfeedintariff.co.uk

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Thin film solar modules

I’m particularly interested in certain thin film modules that have now demonstrated their reliability and are starting to gain market acceptance. Some thin film PV companies have been around for over 20 years and many have fallen by the wayside. The surviving companies however are now looking very strong. Their products have now proven themselves in the lab and in the field, and the companies that make them have found ways to reduce production costs and improve efficiency. Thin film has inherently lower manufacturing cost than crystalline silicon, and the potential for efficiency improvement is greater. Therefore I’m confident that over time we will be seeing more thin film get installed.

Storage

A common theme of this years show is storage. Every inverter manufacturer had some kind of energy storage product on show this year. Most solar inverter manufacturers offer back-up energy storage systems that use batteries (typically Lead-acid or Lithium Ion). These provide day/night storage so that solar energy can be used after the sun has set in the evening. Batteries however are not great for storing energy over long periods, so they don’t solve the problem that more energy is produced in summer months than during the winter.

To deal with this problem, Fronius have unveiled their ‘Energy Cell,’ a hydrogen fuel storage system for the home. During the summer, an electrolyzer uses excess electricity from the PV system to split hydrogen from water and store it in a tank. During the winter, this hydrogen is then turned back into useful electricity via a fuel cell. The system has already been a prototype for several years, but this year’s Intersolar showed the system as being almost ready for the mass market. Of course the technology will start out very expensive, but it shows that solar energy can deliver constant power, and its only a matter of time before the cost of the technology falls.

How the Fronius energy cell works

Inverters

We spent some time with SolarEdge who have strengthened their product range and now offer a wider range of inverter sizes, all fully accredited for the UK. They have also been developing their system to be used on larger installations, so people may use them on commercial jobs as well from now in. They also launched a new solar ‘tetris’ game for Xbox Kinect – has to be seen to be believed!

Racking

Hilti have just launched their new flat roof mounting system and it looks amazing. It will make flat roof installations much more secure and manageable, and mean much lower risk of damaging the laminate. Also cool is this robot, used for cleaning solar panels on large arrays. It has 20 moveable sucker pads on the bottom that allow it to hop around cleaning the panels without falling off!

Solar panels cleaning robot

Secure, low-carbon and affordable energy requires investment of £250bn, in electricity alone, if the Coalition is to meet the target of providing 30% of energy from renewables by 2020. This target is in danger of not being met due to lack of action being taken now to invest in a future smart grid that can intelligently connect users and suppliers.

Prof. Roger Kemp from the Institution of Engineering and Technology said: “The report takes a simplistic view of the subject and plays down technical issues. It refers to offshore turbines as having ‘very low running costs’ without factoring-in the potential routine maintenance of large structures in a highly aggressive environment and the lack of significant long-term operational experience in areas like the North Sea.

“When talking about wave energy, the report assumes that the limiting factor in adoption will be economics, while we consider that technical viability could be equally important.

“Demand response will have a central role to play, but the challenge of moving from the current ambition for smart metering to a smart grid with full public involvement is only hinted at.  The need to engage the public is crucial.”

There are many engineering and social issues to be resolved before the optimistic ambitions contained within this report can be achieved.  Its publication coincides with the publication of the government’s infrastructure adaptation report and combined they highlight the extent of the engineering challenges and opportunities presented by climate change.

www.theiet.org

The investment mandate for the Bank is to deliver the Government’s aims on economic growth, facilitate the transition to a green economy and support the UK’s industrial transformation. Much of the focus to date has been on investment in the manufacture of low carbon goods and the rollout of green infrastructure.

Dr Tony Whitehead, Director of Policy at the IET said: “Energy conservation and efficiency should be amongst the first priorities of a sustainable energy policy.

“Energy is set to become increasingly expensive in the future, and to survive in the global market, UK firms will not only need to produce new products, but to produce them at competitive prices. This means driving costs down wherever possible.

“The manufacture of low carbon technology is often seen as a panacea to meet the UK’s carbon reduction requirements whilst at the same time creating a renaissance in UK manufacturing. Yet the manufacture of low carbon goods is not in itself automatically green. A green industrial revolution should first focus on greening manufacturing processes to reduce energy and resource use.

“For the UK to achieve its targets on carbon emissions there needs to be extra support for green manufacturing processes. Energy conservation and efficiency in the manufacturing sector should be a priority for the Department of Business, Innovation and Skills and more widely across government.

“In addition, access to the Green Investment Bank by SMEs will be paramount. SMEs are able to develop and commercialise products rapidly in niche areas. By its very nature, green technology and processes will require innovative solutions; an area where SMEs can develop a competitive advantage for UK plc. SMEs should have priority access to the Green Investment Bank to spur green growth and technology.”

Construction partner James Flynn, who specialises in the renewable energy sector, advised client SOLON SE, one of the largest manufacturers of solar modules in Europe, on the agreement with Rockspring Property Investment Managers. Rockspring owns the site of the plant, part of an old RAF airfield at Westcott Venture Park in Buckinghamshire.

SOLON will be responsible for the design, construction operation and maintenance of the plant, as well as the manufacture and delivery of the solar modules themselves.  Construction work on the site has already begun and is due to complete in June this year. The park is expected to deliver a peak power output of around 408 kilowatts.

James said:

“This deal represents one of the few large-scale solar projects to go ahead in the UK following the Government’s publication of its plans to reduce the Feed In Tariff for large scale solar plants.  It is fantastic that the parties involved have managed to continue with this project.  We hope this will encourage others within the industry to follow suit, and that the project can be used as an example with which to encourage Government to change its attitude to large scale solar projects.

“At a time when many larger solar projects have been scrapped, this deal sends out the clear message that large European solar specialists like SOLON remain dedicated to helping UK businesses develop renewable energy projects.”

James added that Heatons continues to build on its service offering to the renewable energy sector:

“As a firm, Heatons has consistently demonstrated its commitment to the renewable energy industry.  We are now at the cutting edge of this sector, having also advised on the country’s first project funded AD (anaerobic digestion) plant, and we hope to continue to use our experience to help get these projects financed and built,” he said.

http://www.heatons.co.uk/

The government and in particular the Department of Energy and Climate Change (DECC) has made it clear that they would like to stifle investment in large scale ‘solar farms’ and instead concentrate on household roof-mounted solar projects. This, IMS believe will destroy the potential for industrial scale solar projects in the UK, something which they suggest will be the downfall of the industry in this country. Certainly, where feed-in tariffs have proved successful elsewhere, larger scale projects have proved extremely effective in helping to create competition and bring costs down over a longer term.

IMS Research has stated that,

“Effectively making solar energy uneconomic for commercial organisations demonstrates the Government’s lack of commitment to renewable sources. It also has an implication for the management of public buildings, such as hospitals and schools, for whom solar power will no longer be financially viable. Limiting solar power to small-scale installations means the sector will simply never take off, other than creating a niche industry. And while countries such as Japan, Italy, Germany, China and the U.S. have said that they will be giving greater financial support to solar power and already have substantial solar PV capacity in place, the UK government has taken the opposite approach, making it clear that nuclear energy is definitely part of the plan for power generation in the UK.”

At a time where job cuts appear daily in national newspapers and politicians expound the notion of a return of a British manufacturing sector, the reduction of solar feed-in tariffs for industrial scale projects is unsurprisingly being met by criticism. It will be hoped that the government does not retract tariffs any more than it has done, otherwise UK solar may just not survive infancy.