The Court of Appeal today (Wednesday 25 January 2012) unanimously rejected Government attempts to overturn last month’s High Court ruling that its plans to rush through sudden cuts to solar tariff payments are illegal.

The Government is now seeking permission to appeal to the Supreme Court. Friends of the Earth says the move will create yet more uncertainty for solar firms and after two courts have ruled their move illegal is urging Ministers to concentrate on safeguarding the industry rather than wasting more time and money on further appeals.

The High Court ruled shortly before Christmas that Government plans to cut payments for any solar scheme completed after 12 December – 11 days before the official consultation closed – were unlawful. The judgement followed legal challenges brought by Friends of the Earth and two solar firms, Solarcentury and HomeSun, last month.

Today’s judgement will prevent Ministers rushing through cuts to feed-in tariff payments in future, restoring some confidence to the UK’s clean energy industry. But Friends of the Earth warns that unless Ministers change other parts of their solar subsidy proposals, up to 29,000 jobs could be lost.

Friends of the Earth is urging Ministers to find more money – paid for from tax payments the industry generates – to safeguard the long-term stability of the solar industry. The environmental campaigning charity is also calling for crucial amendments to proposed Government solar payment changes, including re-examining over-strict energy efficiency rules that will prevent 90 per cent of houses from claiming solar subsidies.

Today’s ruling means that, subject to any further appeal to the Supreme Court, solar tariff payments will remain at 43.3p (p/kWh) until 3 March 2012 when – following Government moves last week – they will fall to 21 pence.

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

“This landmark judgement confirms that devastating Government plans to rush through cuts to solar payments are illegal – and will prevent Ministers from causing industry chaos with similar cuts in future.

“The Government must now take steps to safeguard the UK’s solar industry and the 29,000 jobs still facing the chop.

“Ministers must abandon plans to tighten the screw on which homes qualify for solar payments – and use the massive tax revenues generated by solar to protect the industry.

“Helping more people to plug into clean British energy will help protect cash-strapped households from soaring fuel bills.”

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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

Government plans to rush through cuts to solar tariff payments are illegal, the High Court ruled today (Wednesday 21 December), following a legal challenge by Friends of the Earth and two solar firms – Solarcentury and HomeSun.

The court agreed that proposals to cut feed-in tariff payments for any solar scheme completed after 12 December – 11 days before the official consultation closed – were unlawful.

Friends of the Earth is urging the Government to come up with a new proposal which would allow solar payments to fall in line with reduced installation costs, while ensuring the solar industry continues to play a key part in developing a cleaner future.

The environmental campaigning charity is also calling for more money to encourage solar installations – paid for by the revenue the industry raises for the Treasury, the removal of planned restrictions that would prevent poorer households from installing solar panels and more support for community-owned schemes.

The Government’s own independent advisors say the economy must be weaned off of increasingly expensive fossil fuels like gas by investing in clean energy and slashing energy waste. Friends of the Earth’s Final Demand campaign is urging the Government to launch an investigation into the role of the Big Six energy firms in stopping people in Britain having energy we can all afford.

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

“These botched and illegal plans have cast a huge shadow over the solar industry, jeopardising thousands of jobs.

“We hope this ruling will prevent Ministers rushing through damaging changes to clean energy subsidies – giving solar firms a much-needed confidence boost.

“Ministers must now come up with a sensible plan that protects the UK’s solar industry and allows cash-strapped homes and businesses to free themselves from expensive fossil fuels by plugging into clean energy.”

“Solar payments should fall in line with falling installation costs but the speed of the Government’s proposals threatened to devastate the entire industry.”

As the Government’s solar energy Feed in Tariff is reduced to 21p per kilowatt generated, and the 2012 deadline brought forward; consumers have been left confused as to what this means for the future of solar energy in the UK.

Save Energy Renewables, part of the Save Energy Group, has been in the renewable energy sector since 2002, long before the government feed in tariff was introduced in April 2010.  The introduction of the tariff, at 41p per kilowatt generated, was designed to kick start the take up of renewable energy in the UK and bring us in line with leading European countries such as Germany.  In its second year the tariff increased to 43.3p, but was widely regarded by the industry as high and unlikely to sustain.

The tariff is reviewed on an annual basis and was due to change again from March 31^st 2012, with much speculation as to what that might be.  The announcement came on the 31^st October that the new figure would be reduced to 21p, however, what the industry was not expecting was the 12^th December 2011 cut off point – fast-tracked from the original 2012 deadline.  Therefore, only solar PV systems installed and commissioned by this date would be eligible for the 43.3p tariff.  This put an unprecedented strain on the renewable energy industry, and will almost certainly result in many smaller companies, or those with a less than perfect infrastructure going out of business.

As to why this date was brought forward, lies heavily in the surge for ‘free solar’ with companies setting up to take advantage of the tariff by renting roof space from consumers who benefited from reduced energy bills, while they reap earnings from the tariff for the next twenty five years.  The budget put in place to assist homeowners simply ran out.

The new tariff rate of 21p is now set at a sustainable level for the long term. It will ensure the tariff is available for its predicted lifespan, until the cost of the energy rises to meet the percentage that can be earned through the tariff – namely grid parity.   Steve Randall, Sales & Marketing Director: “This is extremely good news and represents a very healthy 8-10% increasing return on investment for those who choose renewable energy as the way forward.  It also represents twice what can be achieved by the high street banks.  As a business we count ourselves among the lucky ones, with a strong infrastructure both logistically and financially.  As we have been in the business for over a decade we also have strong buying power with suppliers, savings we can pass to our customers.”

Solar energy has been embraced by the UK for many years due to the inevitable savings on energy bills.  The fact that the cost of energy will only rise will see consumers continue to do so with the added benefit of the feed in tariff which is all the more attractive here in the South which enjoys far longer hours of daylight than the North.

Steve Randall concludes:  “The best way for consumers to judge whether solar energy is for them is to look at their electricity bill today, and multiply that by the life of the tariff which is twenty five years.  The option is rent your energy at a rising cost per year, or take ownership of it today. There is further good news in the marketplace as we have seen product prices lower and level out, so when visitors come to our showroom we are able to share more attractive pricing terms.

steve.randall@saveenergygroup.co.uk