Government clarifies solar feed-in tariff rate as industry uncertainty escalates

[rondurrans]

Fair enough Ted – however through my literature review it is clear pre-FiT that overcompensation was an issue and must be avoided if possible – that is setting the tariff to an appropriate level based on two decades of worldwide FiT experience. The hurdle rate of 5% is related to the cost of installation and therefore is relevant – also the success of the FiT should be based on take-up but not at any cost!

I know my study is rather insignificant in the scheme of things but it is interesting to see what is the ‘real’ cost per kWh of the up-take in the first and second year of the FiT, particularly when there is a 20+ year indexed linked legacy (specifically related to PV).....in other words they are not just overcompensated in the first year it goes on and on............. 

I talked with a Dr John Constable of the Renewable Energy Foundation late last year and he finds it incredible that we do not know what the ‘actual’ generation (kWh) we (UK Bill Payers) are getting for the money being spent on through the FiT – refer to section 4.0 of his paper entitled - The Feed-in Tariff for Renewable Electricity: Performance in the First Year, 2010 – 2011 - http://www.ref.org.uk/publications

Bear in mind my sample of 102 shows an average ROR of 10.9% for 2010 - 2011 - this could be potentially higher for people who installed post 31st March 2011. Therefore the hurdle rate of 5% may of been right but the tarriff was possibly 25% above what it needed to be to achieve the 5% ROR.

Ron

[brackwell]

ROI in south england could now be 30%

£8K for a 4kwp system on a south facing roof ,no shading and a optimum angle of 39deg would give 5000 kwhr/yr  @ 44.8p/kwhr = £2240+ reduction on household bill say £300 = £2540 which gives 31.75%  !!!

I see a very confused picture brought on by
1) Wildly different production figs across the UK
2) Many less than ideal installations -shading etc
3) Significant variation in installation costs and usage of elec.

It has been a difficult thought process but i have come to the conclusion that the gov should scrap the FITS and have net metering. This will have the following consequences-

1) It will get the FITS burden of the gov/tax payers/fellow bill players and the moral auguments of poor subsi
2) people can understand "no elec bill" whereas "a bit of this +50% of this + some of the other and in any case we cannot tell you how much you can produce"
3) promote/encourage/reward only good installations in good parts of the country.

Takeing the above example   5000kwhr/yr x say 14p = £700  Thus a ROI of  8.75%

The change of elec meter could be the time to fit the smart meter.

[Ted]

Overcompensation was an issue because this would indicate mis-calculation of the appropriate hurdle rate.

I hope you have also researched the background of Dr John Constable and the REF.

[rondurrans]

I will give him a wide berth in future thank you - that said I think the issue RE: actual generation (kWh) should be available to us to calculate the true cost of the FiT.

Must admit I may be getting confused here I thought:-

1. Hurdle rate = percentage ROR required to achieve forecast uptake
2. Agreed at 5%
3. Based on x cost per kWp to install PV - cost and assumed cost increase of grid electricity - export cost of PV generated electricity

Therefore tariff + forecast increase cost of electricity + export electricity + electricity used from PV and offset purchasing of grid electricity = income

Therefore if the Capex cost is a lot less from the 1st April 2010 than used to work out what tariff is required to meet the 5% ROR and therefore uptake, the real ROR from the outset was say 10% - I would question why would/should it be 10% when the calcs. clearly show the hurdle rate only needed to be 5%.

[Ted]

Ron, I assume you've also seen this report for DECC - http://www.decc.gov.uk/assets/decc/11/consultation/fits-comp-review-p1/3365-updates-to-fits-model-doc.pdf

[M]

Ken, I like the net metering idea.

Is there any other subsidy / grant scheme that faces the hurdles that PV does. I.e. for the same installation cost, a home owner will receive a differing amount of generation / income, depending on national location (up to 20%), and roof orientation (up to 20%).

If the government supports northern investment, the south is seen to be overly rewarded. Get the south right, and the north doesn't get to play.

I like PV, and I believe it should be supported in these early days, but I struggle to see any fair way of running this scheme. I actually pity those in the background, it must be an administrative nightmare.

It did occur to me that you could have a sliding scale of FITs, that benefits lower generation slightly more than a good location. But that of course defeats any attempt at efficiency optimisation - headache!

Mart.

[rondurrans]

Yes thanks Ted. 

[Ted]

The FiTs rates are all set (supposedly) so that the target return is available to anyone with an optimal location. It is recognised that the return will always be lower for sub-optimal sites as DECC are not trying to incentivise renewables in those locations.

And the North gets less sun but more wind - so it's horses for courses.