A number of business owners have been looking at generating their own electricity since April 1, when the government introduced considerable financial incentives for those who create their own solar, wind and water power. Participants in the Feed-in Tariff (Clean Energy Cashback) Scheme are paid above market rates for all the electricity they produce.
Since the scheme was introduced, the number of small-scale power generation devices has multiplied five-fold.
However, take-up of the scheme is still some way behind government targets. There have been only 3,721 installations in the UK since the scheme began, with solar panels representing by far the biggest proportion, accounting for 3,634 of the total, according to the latest figures from Ofgem, the energy regulator.
Some 83 wind turbines have been installed and only four water-powered generators. The total represents less than 0.5% of the 780,000 installations the government hopes will result from the scheme by 2020.
“That number is clearly disappointing but it is very early days and I wouldn’t jump to any conclusions just yet,” said Greg Barker, minister for climate change and energy.
“For the average consumer this is an entirely new proposition and it’s just not on their radar screen,” said Barker, adding that the last government “barely promoted it at all and certainly wasn’t enthusiastic for it”.
Philip Wolfe, a veteran of the renewable energy industry who set up the solar power division of BP, was one of the consultants who helped devise the scheme. He believes the potential income from feed-in tariffs is only beginning to register with most people.
“Feed-in tariffs have put a bomb under the sector,” he said. “There is a very wide range of people interested, from individuals to businesses and hospitals to schools.”
Wolfe now works with Ownergy, http://www.ownergy.co.uk/ a consultancy that is specialising in setting up projects to capitalise on the scheme. He is liasing with the landlord of a business park on a disused airfield near Aylesbury, Buckinghamshire, to install about 5,300 solar panels on an old runway.
The 2MW facility will provide almost a third of the energy used by the 40 or so businesses on the site.
Farmer Andrew Ingram installed 300 square metres of solar panels on the roof of his barn at Greenfield Farm in the Chiltern Hills in May.
“It’s like having an oil well, where every gallon that comes out of the ground makes you a bit wealthier,” said Ingram, who makes most of his money selling 15,000 Christmas trees every year. “If it’s a hot sunny day I might go to the meter two or three times to see how it’s going — you become really interested in the weather.”
Ingram spent £110,000 to buy and install 156 photovoltaic solar panels, but he has calculated he can make a profit of £180,000 thanks to a new green energy scheme.
Venture capitalists are also getting in on the act. Foresight Group is negotiating a deal with the Wyndham Hotel Group under which it would install solar panels on the roofs of up to 100 of its British hotels, including the Wyndham Grand in Chelsea.
That’s just one of a number of projects the firm is looking at. Under these deals, Foresight would pay for and own the installations and reap a large portion of the revenues generated. In return, the host organisations would get up to half off their electricity bills.
The returns will be much higher for most people who take part in the feed-in tariff schemes because they will install their own technology rather than host that of others.
When all the elements are factored in, the average household should make £986 a year, according to the Department of Energy and Climate Change, a figure that will rise each year in line with inflation. Most households can expect to use half of the electricity they generate.
The scheme allows for much bigger installations, accommodating projects generating anything up to 5MW — enough to power 1,100 houses.
Of course, many people will not be in a position to fork out the £8,000 needed by the average household, let alone the sums required for a larger installation, to enable them to benefit from what seems to be a very generous scheme.
It’s a point that Barker concedes: “Too few financial institutions have engaged properly in this sector... I will be looking at whether I need to bang the drum more by promoting the opportunities.”
Under the Feed-in Tariff Scheme, a typical household would install a 2.5kW system of photovoltaic solar panels for about £8,000. This would guarantee a payout of about £25,000 over the tariff’s 25-year life that would be index-linked — a tax-free profit of about £17,000 in today’s money. The profits on a similar-sized wind or water system are similar, although tariff lengths and payouts vary.
The owner of a typical household solar installation receives 41.3p for every kilowatt hour of electricity generated, whether they use it themselves or “export” it — when the panels are generating more power than the owner needs, they receive an additional 3p per kilowatt hour by selling it to the local electricity grid.
Every kilowatt hour generated and used in the home is one less drawn from the grid, adding to any saving.