After months of reported wrangles the government’s energy secretary announced a new subsidy for onshore wind power. It is more generous than some had feared but government uncertainty is still holding back some green technologies. Solar could be the exception.
A couple of years ago the Economic Partnership did a small piece of research into the barriers to growth of the environmental industries. Uncertainty over government policy was the major concern and things don’t seem to have changed very much but, despite government changes to the Feed In Tariff [FIT] solar power still looks attractive.
Some £200bn needs to be spent on the UK energy sector to replace retiring power stations and renewable power generation clearly has a part to play. But political differences between the two parties in the coalition government are scaring off serious investors.
The government has already trimmed subsidies for solar power but opportunities still exist for small businesses to make a 6-9% return on investment and generate an income for 20 years despite changes to the Feed-In-Tariff (FIT).
From 1st August the new rate for 4kW systems has been reduced to 16p/kWh but solar panel prices are now more than 50% lower than a year ago when the FIT was first introduced. The latest tariffs can provide the same returns as originally set out by the scheme.
With the cost of electricity rising at around 7% above inflation, the new tariffs, which will now be paid over 20 years instead of 25 years, should give a return on investment of over 6% for most typical, well-sited installations. It could be up to 9% for the larger bands. Investor income will also be boosted by the increase in the export tariff, which will increase to 4.5p from 3.1p.
Howard Johns, ex-Chairman of Solar Trade Association and MD of Southern Solar, said: “Installing solar PV systems is an excellent way for businesses to reduce overheads in the long term and improve bottom line. Not only does it make financial sense, especially in such a challenging economy, but installing solar PV also boosts a firm’s green credentials, which can be a crucial point of differentiation when trying to meet carbon emission criteria set by corporate clients".
A good case study is Harveys Brewery in nearby Lewes which invested in a 92,000 KWH system a year ago. It sells an average of 25% of the electricity generated back to the grid, benefitting from the FIT. To date the business has saved £5,520 on electricity bills and cut 45 tonnes of CO2.
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