Power of the sun: a photovoltaic array in Colorado
If an investment scheme offered to pay £1,100 tax-free each year for the next 25 years, in return for an upfront payment of £12,500, the promoters would have people queuing round the block.
Yet that’s pretty much the deal that has been on offer since last April, when the then-government revealed the return it would pay to those prepared to install electricity-generating solar panels on their south-facing roofs. The introduction of the so-called feed-in tariffs followed a campaign by environmental groups to promote an easily installed source of renewable electricity.
If you missed it, the offer runs like this. Pay £12,500 to install a typical 2.5kW solar photovoltaic (PV) system to your home, and you will initially be paid 41.3p per kilowatt hour (kWh) generated, dropping to 37.8p in 2013—whether you use the power or not. This might not sound much, but it’s roughly four times what you currently pay for your electricity.
Assuming you have the right sort of roof, you can expect an annual income of £950 plus £140-a-year savings on your electricity bills, provided you are able to use the power during daylight hours when the panels are working. The tariffs are tax-free and are guaranteed to rise in line with inflation for 25 years. In reality, they come from your electricity supplier, and are paid for by a small levy on every British electricity bill.
Not surprisingly, several thousand households have taken up the government’s offer and installed panels. They now have the opportunity of free, green electricity and an equivalent financial return of between 7 per cent and 9 per cent, depending upon whose figures you believe.
The scheme was intended to sit at the heart of Britain’s commitment to produce 15 per cent of its energy from renewable sources by 2020. However, less than a year since the policy was introduced, people are already asking whether the feed-in tariffs are too generous—not least because the City, sensing easy and sizeable profits, has piled into the market.
Some also question whether the scheme is capable of achieving its stated aims. Last year, one of Britain’s most influential environmental campaigners, the Guardian writer George Monbiot, amazed his peers when he denounced the scheme as an £8.6bn “solar panel rip-off.”
“Solar PV is a great technology—if you live in southern California. But the further from the equator you travel, the less sense it makes,” he wrote. “It’s not just that the amount of power PV panels produce at this latitude is risible, they also produce it at the wrong time. In hot countries, where air conditioning guzzles electricity, peak demand coincides with peak solar radiation. In the UK, peak demand takes place between 5pm and 7pm on winter evenings.”
Acknowledging that if you own a suitable house and can afford the upfront investment, “you’d be crazy not to cash in,” Monbiot went on to argue that the £8.6bn cost of the scheme would be better spent on large-scale wind and tidal projects, or even on double glazing and loft insulation.
His interjection may have surprised environmental campaigners, but it did little to dampen the enthusiasm of a solar industry that can’t hire installers fast enough. Several companies are so attracted by the projected returns that they are offering to fit PV panels on suitable homes at no cost to the householder in return for the 25-year stream of tariff income.
Elsewhere, large “solar farms” are set to spring up across the country. In Cornwall alone, more than 60 domestic and foreign companies have expressed interest in developing schemes that would see significant areas of countryside covered in solar panels. Ministers are increasingly concerned that the tariff levels could have been wrongly set, and environment secretary Chris Huhne in February announced a review, with particular focus on potential payments to large-scale producers.
So where does this leave individuals wanting to generate low-carbon electricity and make some money at the same time?
Alan Simpson, sustainable energy adviser to Friends of the Earth, one of the leading campaigners for the introduction of feed-in tariffs, says solar power still has a vital role in Britain’s future energy system. “Solar and wind power already meet the whole of Germany’s weekend energy needs—the UK could achieve the same. The government’s feed-in tariff review sends a confusing message to people thinking about installing solar panels on their homes. But what the government should be doing is trebling targets for running homes and communities on green power. Solar has a big part to play in this, and in creating the thousands of new jobs that go with it.”
As Monbiot says, if you have a suitable house and enough cash, it makes a lot of sense to install solar panels. Just don’t hang about—it looks as though this deal is not going to be around forever.
Also in Prospect’s energy special:
Dieter Helm: Fossil fuels are not running out. That’s our biggest problem—and our big opportunity
Simon Henderson: The main security risk for Europe lies in Moscow
Malcolm Grimston: Nuclear may make sense, despite concerns
Roger Harrabin: Battery power is the way ahead for transport
If an investment scheme offered to pay £1,100 tax-free each year for the next 25 years, in return for an upfront payment of £12,500, the promoters would have people queuing round the block.
Yet that’s pretty much the deal that has been on offer since last April, when the then-government revealed the return it would pay to those prepared to install electricity-generating solar panels on their south-facing roofs. The introduction of the so-called feed-in tariffs followed a campaign by environmental groups to promote an easily installed source of renewable electricity.
If you missed it, the offer runs like this. Pay £12,500 to install a typical 2.5kW solar photovoltaic (PV) system to your home, and you will initially be paid 41.3p per kilowatt hour (kWh) generated, dropping to 37.8p in 2013—whether you use the power or not. This might not sound much, but it’s roughly four times what you currently pay for your electricity.
Assuming you have the right sort of roof, you can expect an annual income of £950 plus £140-a-year savings on your electricity bills, provided you are able to use the power during daylight hours when the panels are working. The tariffs are tax-free and are guaranteed to rise in line with inflation for 25 years. In reality, they come from your electricity supplier, and are paid for by a small levy on every British electricity bill.
Not surprisingly, several thousand households have taken up the government’s offer and installed panels. They now have the opportunity of free, green electricity and an equivalent financial return of between 7 per cent and 9 per cent, depending upon whose figures you believe.
The scheme was intended to sit at the heart of Britain’s commitment to produce 15 per cent of its energy from renewable sources by 2020. However, less than a year since the policy was introduced, people are already asking whether the feed-in tariffs are too generous—not least because the City, sensing easy and sizeable profits, has piled into the market.
Some also question whether the scheme is capable of achieving its stated aims. Last year, one of Britain’s most influential environmental campaigners, the Guardian writer George Monbiot, amazed his peers when he denounced the scheme as an £8.6bn “solar panel rip-off.”
“Solar PV is a great technology—if you live in southern California. But the further from the equator you travel, the less sense it makes,” he wrote. “It’s not just that the amount of power PV panels produce at this latitude is risible, they also produce it at the wrong time. In hot countries, where air conditioning guzzles electricity, peak demand coincides with peak solar radiation. In the UK, peak demand takes place between 5pm and 7pm on winter evenings.”
Acknowledging that if you own a suitable house and can afford the upfront investment, “you’d be crazy not to cash in,” Monbiot went on to argue that the £8.6bn cost of the scheme would be better spent on large-scale wind and tidal projects, or even on double glazing and loft insulation.
His interjection may have surprised environmental campaigners, but it did little to dampen the enthusiasm of a solar industry that can’t hire installers fast enough. Several companies are so attracted by the projected returns that they are offering to fit PV panels on suitable homes at no cost to the householder in return for the 25-year stream of tariff income.
Elsewhere, large “solar farms” are set to spring up across the country. In Cornwall alone, more than 60 domestic and foreign companies have expressed interest in developing schemes that would see significant areas of countryside covered in solar panels. Ministers are increasingly concerned that the tariff levels could have been wrongly set, and environment secretary Chris Huhne in February announced a review, with particular focus on potential payments to large-scale producers.
So where does this leave individuals wanting to generate low-carbon electricity and make some money at the same time?
Alan Simpson, sustainable energy adviser to Friends of the Earth, one of the leading campaigners for the introduction of feed-in tariffs, says solar power still has a vital role in Britain’s future energy system. “Solar and wind power already meet the whole of Germany’s weekend energy needs—the UK could achieve the same. The government’s feed-in tariff review sends a confusing message to people thinking about installing solar panels on their homes. But what the government should be doing is trebling targets for running homes and communities on green power. Solar has a big part to play in this, and in creating the thousands of new jobs that go with it.”
As Monbiot says, if you have a suitable house and enough cash, it makes a lot of sense to install solar panels. Just don’t hang about—it looks as though this deal is not going to be around forever.
Also in Prospect’s energy special:
Dieter Helm: Fossil fuels are not running out. That’s our biggest problem—and our big opportunity
Simon Henderson: The main security risk for Europe lies in Moscow
Malcolm Grimston: Nuclear may make sense, despite concerns
Roger Harrabin: Battery power is the way ahead for transport
