Even with the Government’s feed-in-tariff beginning in April, solar energy will take time to develop in the UK. However Solar’s long term growth prospects appear strong, says Toby Ferenczi. 

 ‘Solar energy in the UK? But we don’t have any sun?’ is the most common reaction to the suggestion of solar energy. Its true that the amount of solar irradiation we get in the UK is approximately half to two thirds the amount you get in southern Europe. Therefore for the same solar energy system, you can get twice as much juice if you put it in the Cote d’azur as opposed to Bracknell. So why bother putting an expensive bit of kit in Essex?

 As far as I can tell there are two reasons why we British residents, may bother – principles or money, and the latter of those two has historically been shown to be the more effective.  

 To those in the principled camp, you may like to know that despite having less sun in the UK, we still get a fair amount of solar energy hitting our island. To be precise, in London and across the south of England you get an average of 1000 kWh of energy per square metre of land (or roof) over the course of 1 year and with an average photovoltaic system you can capture about 150 kWh (or 15%) of that as electricity. Therefore, by covering a 10m2 portion of roof or garden you can get enough energy to cover 50% of your domestic need and save about 400kg of CO2 (and help save the world).

 To those of us burdened with the need to consider their finances, a few words of the costs of such an endeavor. Announced this summer the Government have agreed to give you between 30 – 40p/kWh for solar energy from next April. We don’t know exactly how much it is yet but it should be in that price range. That means that the energy you produce per year would earn you 500-600 quid a year for at least 20 years.

 Now for the key question: how much does it cost? At today’s prices such a system may cost on the order up to 7500 (5 pounds per watt peak for 1.5kWp system). That means that you would stand to benefit 2000 over the lifetime of the system, or an annual return of about 2.5% per annum. This is not a great return on investment. Most savings banks would undoubtedly serve you better, however it is a positive number. Previously those who wanted to help the world with a photovoltaic system would have to pay out a fortune for the privilege.

 A further critical point is that the price of solar energy systems is falling. During the first half of 2009, the cost of solar modules fell by as much as 50%. Couple this with the range of subsidies available and the initial cost of installing a system should fall significantly. As these cost reductions get passed on to the customer, the return on investment will increase.

 It is possible to envision that as costs reduce a 5-7% annual return on investment should become possible. For savers, such a system will become a credible alternative to an ISA, and for those with no capital but who have the willpower it should mean that a bank loan can be used to cover all the initial costs.

 Right now, solar power in the UK is only for those with time, spare cash and strong wills. From April, the economic benefits of solar will make it easier for those with principles to get involved. The decision to invest in solar energy from your home will always be based on a combination of financial interest and environmental concern. Overtime, financial benefits should become the primary motivator, with environmental benefits an additional.

The New York Time’s headline, ‘Green power takes root in China’ is representative of a dramatic move towards renewable energy which is taking place in China. The giant Asian power has traditionally been known for its use of fossil fuels with a strong media emphasis being given to pollution problems in China’s major cities resulting from coal burning and extensive carbon emissions from vehicles.

Certainly, with the Beijing Olympics of last year, the worlds eyes were focused sharply on the Chinese capital and the seemingly permanent smog covering which acted as a testament to Chinese heavy industry and the proliferation of vehicles in modern China.

However, it is a marked change in Chinese legislation which prompted the New York newspaper to run with the ‘Green power takes root’ line. The change has come in the form of a national renewable energy level stating that utilities must generate 8 percent of their energy by renewable means by 2020. The fact that this 8 percent figure does not include hydroelectric power adds to the importance which the Chinese are now placing on green energy.

The growing awareness of the lack of long-term sustainability in traditional coal energy sources has prompted the Chinese government to take action to maintain China has a major industrial power well in to the future. There has also been somewhat of a frenzy among private companies seeing the opportunities that will undoubtedly present themselves in the Chinese renewable industry, with a growing activity particularly in sectors such as wind and photovoltaic technology which will inevitably boom in China in the near future.

The New York Times was keen to use this Chinese government action to make comparisons with the comparatively weak efforts being made in Washington to spur the renewable sector in the United States. Indeed, in the United Kingdom, with the recent feed-in tariff legislation, members of the green energy industry will be hopeful that government action in the UK will have the same effect it has had on the Chinese market.

The New York Times asserted its almost neurotic view of Chinese renewable growth compared to that of the US by warning,

“You won’t just be buying your toys from China, you’ll be buying your energy future from China.”

China has a target in place to produce 8000 megawatts of energy by wind energy by 2010 which they are set to smash. If China continues apace to move towards green energy, they will surely shame efforts currently being made in the West to develop their own sustainable renewable industries

The future of the solar industry in the north eastern United States now looks much brighter following the massive injection of $20 million in federal money designed to act as a stimulus for the solar industry in Massachusetts. The cash stimulus will equate to 16 Megawatts of new solar installations in the state and will see the construction of some high profile solar sites including Logan International Airport in Boston.

Deval Patrick, Governor of the state of Massachusetts has made it his aim over recent months to make the state a leader in the field of photovoltaic investment and recent announcements regarding the cash that will be made available for large solar installations certainly backs up the political rhetoric coming from the governor’s office.

Speaking about the states renewable energy plans, Ian Bowles, secretary of the Executive Office of Energy and Environmental Affairs in Massachusetts stated that,

“With this infusion of federal funds, Governor Patrick is building the clean energy economy of the future for the Commonwealth”, going on to add that, “It’s phase one of the solar big bang”.

The current plans for solar installations in Massachusetts which will include new housing projects, public buildings and of course Logan Airport are part of a wider project which has been in place since the investiture of Governor Patrick. When he took office, solar installations in the state were around 3.5 megawatts and he has set the ambitious target of 250 megawatts of solar capacity by 2017.

The state of Massachusetts provides a good example of a solar industry growing with the help of government funding and root changes in attitudes with regards to the way our energy should be produced. As Seth Kaplan, spokesman for the Conservation Law Foundation commented,

“The amazing thing when you think about it is that we don’t have solar on every large flat roof. Any large flat roof without solar on it is a missed opportunity.”

Which such ambitions, the state of Massachusetts will be sure to provide a great opportunity for photovoltaic investors in the near future as they set their sights on a solar future.