Dear customer,
This week has seen UK Feed in Tariff rates for solar PV slashed by more than 50% by the UK government and the solar industry react with dismay. Hestia wants to apologise to our customers who have been affected by this unexpected radical action, and assure you that we are doing everything we can to ensure as many of our customers as possible make the 12 December deadline for current rates. We are currently engaging in individual conversations with each of our customers to assess the possibility of fast track installations, but please understand that capacity and time are both limited. If you have planning and DNO permission in place, we urge you to act immediately.
In the long run, the issue around the December 12 2011 deadline shades the true fact that returns from solar PV will continue to be robust. "Almost every asset class seems to be fraught with danger these days. Equities have suffered two bear markets in just over a decade and remain vulnerable to a rich-world recession; government bonds offer little protection against a resurgence of inflation; commodities are volatile and hostage to a possible drop in Chinese demand; property is still suffering from indigestion after the past decade’s boom." The Economist Oct 15 2011. It is indeed a sorry pass at which investors have now arrived.
Despite the general gloomy market investment outlook, the UK still has some of the highest paying solar PV tariffs in Europe. Although solar PV returns will be reduced from their current high, a business requiring large amounts of electricity to run their operation will still be able to realise 10% returns on a solar installation, a similar business exporting most of their electricity will realise 8% returns on a solar installation * - a very attractive rate of return compared to almost any other category of investment. With high risk corporate bonds generating only 12% returns, it is not surprising the government reduced the tariffs on solar PV, as businesses and farmers have recently been achieving 14% returns and upwards on solar installations.
Solar PV will also continue to enable a business to build in predictability and protection against steeply rising electricity prices and save on electricity bills. Recent Ofgem data shows how annual customer energy bills have risen sharply in the last few years, and their ascent shows no sign of abating.
The new FIT rate may cause many companies exit the UK solar PV market, but companies like Hestia who have been in business for 20 years, will remain in business, and we will crack on with the new reality. We are hopeful the government will now start to employ a regression mechanism that pulls the tariffs down to a set average rate of return each time the cost of solar panels drops to a level where people are generating average returns eight to ten per cent. This will help all businesses in the industry to plan ahead and will encourage customers to engage with the product steadily. We expect that in the coming years, as the cost of modules continue to fall, the Feed In Tariff will be reduced in relation to the drop. Please note, that if the cost of modules decrease, the cost of installation will not go down by an equivalent amount (modules make up 40% to 50% of the cost of the installation).
As we understand it today, under the NEW Feed in Tariff (FiT) arrangements (which are still subject to an eight week consultation period) :
- You will be paid for every unit of clean electricity you produce for 25 years. This is the ‘Generation Tariff’.
- You can consume all energy you produce.
- You will be able to sell energy not consumed back into the grid, and receive an ‘export’ payment.
- FiT payment income will increase annually in line with RPI for the next 25 years.
- The new FITs will be applied on or after 12 December 2011.
- New multi-installation tariff rates will be applied for aggregated solar PV schemes i.e. where a single individual or organisation owns or receives FIT payments from more than one PV installation, located on different sites. The new tariff rates would apply to all new PV installations that are part of an aggregated PV scheme.
- The link between FITs and energy efficiency will be strengthened by introducing a new energy efficiency requirement for FITs for solar PV. The new requirement would apply to all new solar PV installations with an eligibility date on or after 1 April 2012 which are attached to or wired to provide electricity to a building. Once you have installed, your rates are locked in and index linked.
Proposed new Feed in Tariff rates
|
Band (kW) |
Current generation tariff (p/kWh) |
Proposed generation tariff (p/kWh) |
|
≤4kW |
43.3 |
21.0 |
|
>4 - 10kW |
37.8 |
16.8 |
|
>10 - 50kW |
32.9 |
15.2 |
|
>50 - 150kW |
19.0 |
12.9 |
|
>150 - 250kW |
15.0 |
12.9 |
|
>250kW - 5MW |
8.5 |
8.5 |
We would appreciate your views on the proposed changes, and if we can do anything to help, we will. If you would like us to reassess your quote or options please do not hesitate to contact us.
Solar is a technology which has a very bright future on the global renewable energy platform and still remains a profitable green investment. Your commitment to solar PV will secure one of the best paying tariffs in Europe.
Hestia works with a team of specialists and has the experience and technical expertise to guarantee quality, as well as time assured installations. We are one of the most established renewable energy firms in the UK. Founded in 1993 and operating nationwide we are solar PV specialists, providing quality photovoltaic solutions for farmers, home owners and businesses. Hestia offers an all inclusive full turnkey project management end-to-end service and is able to support the financial modelling of any installation and supply market leading products and warranties. We are a well respected and established provider of independent energy efficiency advice services and a leading contractor of the Energy Saving Trust and are set to become a Green Deal advisory and integrator service.
* 50kW south facing, 30deg tilt installation in Birmingham