We stand presently in a state of transition. At the time of writing this article, the most lucrative residential solar power incentive ever to be offered in the United Kingdom is days from being cut in half. So what does this mean for those still considering purchasing a solar energy system for their home or property? Will the new rates kill off the residential market completely, or is there some tangible evidence of the investment remaining economically worthwhile? Let’s take a look.

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The new rates have been announced and the primary one to focus on for all residential sized installations is the now reduced Generation Tariff:

• 4kW and >4kW Installations: 21 pence per kWh generated

This adds to the other two incentives that come from a) saving energy otherwise bought from the grid and b) exporting surplus when over-producing. The Export Tariff rate remains at the negligibly effective 3 pence per kWh, but exporting simply isn’t going to happen in the vast majority of households and properties. Of more importance is the savings rate will continue to reflect the price you pay per kWh from your energy retailer. This currently stands on average of 13 pence for residential properties.

So all in all, let’s conservatively say we are going to be generating solar kWh’s worth:

(21p Generation + 13p Savings) 24 Pence per kWh

Whilst this is a significant reduction in the previous tariff rates, if a few other factors come into play then solar installations will remain a worthy investment for many thousands of people.

Let’s have a look at some other factors that may determine the feasibility of solar installations for thousands of people across the UK.

Areas of Development and Promise

Reduction in Upfront Capital Outlay

The first and most immediate change that we will see in the residential solar industry is a substantial reduction in upfront cost of purchasing a solar energy system. This will involve not only less profit margins for their own businesses but better rates at which they buy components, in-house adaptations for scaffolding and accounts to avoid external expenditure, streamlining sales and marketing and essentially running as efficiently as possible.

We expect this to account for anywhere between a 15% to 35% drop in prices by the time we arrive at late January 2012. This means the most price competitive are set to get as low as £8,500 or even better. This alone would catalyse returns on investment to reach back to their 8%-12% mark, easily trumping rates achievable with bank savings accounts or ISA’s. Ultimately this in itself is enough to recreate interest from large numbers of home and residential property owners, but let’s consider some other possibilities that may work in tandem.

Community Groups

It is a common retail and purchasing philosophy that buying more of something results in a better price per unit. Solar power installations for residential properties are not alienable from this. Community groups that are geographically localised have a significant advantage in that they can receive discounts by purchasing a solar energy system collectively. So long as a reputable and knowledgeable organisational arm is employed to do this work, comparisons can be made across the local installers and the best possible deal brokered. This lowers the upfront capital costs for all involved on often sliding scales up to 20%. Solar Community Organisers here at Solar Selections are experts at organising and facilitating such an effort. Contact us today for more information.

Remote Power Opportunities

Whilst the majority of the population live in relative proximity to power plants and the main grid, properties that are on islands or over mountains usually pay much higher rates for their energy. In Australia, our parent company Solar Choice invented a unique approach to assisting communities in some of the more isolated regions of the land down under. Because they were paying more for their energy, their systems saved them more and the returns on investment improved. If you’re unsure about how much you’re paying for your energy, have a look at your bills or contact your energy provider.

Finance

A solar power system is a very straightforward, low maintenance and low risk investment once installed, and bank and credit institutions across Europe are warming to this slowly. At this point in the UK there are several commercial opportunities for finance from groups such as Barclays. Over time, residential markets will present another opportunity for banks to lend money and charge interest so the market is expected to open up. More information on this will become available as it comes out.

Conclusion

These suggestions are merely a handful of methods that the residential solar industry will utilise to adapt to the tariff changes. By watching the pricing and ensuring potential customers investigate all of the best prices available, consider organising a community  group and explore finance options, residential properties will find solar a worthwhile investment as soon as January 2012. For an up to date account of all the possibilities, contact Solar Selections today and speak to a dedicated member of staff.

Written by Jarrah Harburn

jarrah@solarselections.co.uk

T: 0844 567 9835

© 2011 Solar Selections Ltd

The High Court has agreed to hear applications by Friends of the Earth and two solar companies – Solarcentury and HomeSun – for permission to challenge Government plans to slash financial incentives for solar electricity on Thursday 15 December 2011.

Confirmation of the hearing follows an earlier High Court ruling [Friday 25 November 2011] rejecting permission for a legal challenge. The organisations are now asking the High Court to reverse the decision and allow a hearing into the legal challenges as soon as possible.

Friends of the Earth is also asking the High Court to cap its potential legal costs for the case. International rules specify that costs should be limited in public interest cases on the environment.

The legal challenges centre around Government plans to slash feed-in tariff subsidies – payments made to households and communities that generate green electricity through solar panels – on any installations completed after 12 December this year. The Government is currently running a consultation into feed-in tariffs – but the 12 December cut-off point comes two weeks before the consultation ends. Friends of the Earth says this premature decision is unlawful and has already led to unfinished or planned projects being abandoned.

Solar is a growing, successful industry. 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. Last week construction firm Carillion warned 4,500 workers their jobs are at risk because of the Government’s proposals.

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

“We strongly believe Government plans to abruptly slash solar subsidies are illegal, we hope the High Court agrees to allow our case to be heard as soon as possible.

“We’ve also asked the High Court to cap our potential costs. International rules say this should be allowed in public interest cases on the environment – we can’t afford to bring a challenge if we face unlimited liability for the other side’s legal fees.

“In a time of economic gloom, the solar industry has been one of the UK’s brightest success stories, enabling homes and communities across the country to free themselves from expensive fossil fuels.

“It’s short sighted for Ministers to move the goalposts and prematurely pull the subsidy – this will cost tens of thousands of jobs, bankrupt businesses and reduce Treasury income by up to £230m a year.”

The Government’s rationale for cutting the Feed-in Tariff for Solar PV so fast and so drastically is that it is a necessary measure in order to keep expenditure of Feed-in Tariffs in check. Many reports in the media and statements by ministers themselves have suggested that Solar PV is costing households a large amount on their energy bills (the Feed-in Tariff is considered levy on energy bills by the Treasury and therefore labelled a form of taxation). We are concerned that the Government and the large energy companies are not being transparent about how much of taxpayers money gets spent on the various energy technologies and misleading people into believing the cost of renewable is higher than it really is.

As an example, according to an email seen by Engensa from the energy regulator Ofgem, officials have calculated that the cost of the Feed-in Tariff to household energy bills is less than £1 per year. This agrees with Engensa’s own research found here. In contrast, the UK tax payer pays hundreds of times more than this towards the cost of decommissioning nuclear power stations and looking after the nuclear waste they generate. According to the Government’s own figures, £6.93bn of taxpayers money was given to the Nuclear Decommissioning Authority in 2010-2011, which equates to £260 per household.

As Green Party leader Caroline Lucas MP pointed out in a recent speech, when there are dozens of Big 6 employees working inside Parliament contributing to policy as secondees, and hordes of energy company lobbyists pushing for the decisions they want, it is very important that the Government is absolutely transparent about the costs and benefits of the various options so that the public, not big companies, can decide.

www.engensa.com

Commenting on news that services company Carillion has told 4,500 staff that their jobs are at risk following plans to halve subsidies on solar power, Friends of the Earth’s Energy Campaigner Donna Hume warned:

“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.”