Are FITs going to work for the general public?

[Kombi]

Since the announcement I have been busy looking at numbers to see how would things stack up for me, and for people in general and comparing with our neighbours who already have an FIT. For the general public to go "crazy" about PV (that seems to be one of the declared objective of the FIT) there needs to be a robust financial case and people will expect a good ROI before splitting with their money. And, in my opinion, this is where the current proposal fail.
According to my rough calculations (they may well be wrong), and assuming optimum azimuth and slope, a 4kW system will take about 10 years to break even, ignoring such things as settling-in time and performance decay over the years. Smaller systems and roofs with different orientation and slope will take slightly longer. Is such a length of time going to appeal to the general public?

Thinking purely from a financial point of view, I consider FITs quite similar to corporate bonds. Both provides a regular income over a period of time. And I don't think PV installations fare well in this comparison, even with the tax benefit. Most people I have spoken to about having PV fitted to their house now that there is an FIT scheduled say that the ROI period is too long and that their money would be better somewhere else.

Germany is always branded as a success story for PV. When modified in 2004, the German FIT was paying about 54p/kWh. The French FIT, still in launch period and having great success, is offering 55p/kWh. The Belgian, also in launch, is offering 54p/kWh. What makes the British think that 36.5p/kWh will work???
 

[Paulh_Boats]

Kombi,

Good points - it all depends how much they tax dirty energy to pay for green energy. That's how the German system works, so Government needs to be bold when it sets the dirty energy tax.  The Greens were dominant in German politics due to proportional representation, hence they struck a good deal. Time will tell at the next election!

Most people forget that other investments kill the planet - very few businesses have a zero carbon footprint, any investment in manufacturing will use huge amounts of energy and the entire mining, chemical, plastics, agriculture and transport industries use huge amounts of oil and gas.

My assertion is that you cannot have good economic growth without raping and destroying the planet.....so all those "better" investments have a hidden price tag. I predict that sooner or later the "dirty energy" tax will apply to everything you buy or consume.

I'd like to see finance packages built into a PV package, so that you pay over several years instead of up-front. That makes it more affordable and the PV package could be sold along with a house sale.

-Paul

[Patrick123]

Small correction though:

Belgian FIT = 0.45€/kWh (+ meter running back), guaranteed for 20 years, and this has been so for several years now.

+ tax rebate of 40% off the investment

Makes PV quite interesting over here.

Prices are 4-4.5 €/kwp (installed) and all installers are fully booked for the rest of the year

For installations after 1/1/2010, FIT will be 0.35€/kWh, guaranteed for 20 years.

FIT's are payed by taxes on the energybill (some 0,0...%), tax-exemption for PVowners, so the FIT's don't cost anything for the government

FIT and tax rebate only applies if installed by accredited installer

[Patrick123]

and a selfcorrection: taxes to fund the FIT's is not 0.0...% or so, but 0.0xx€ct/kwh, not much on a household-electricitybill, but counts up for industrial users.

[billi]

Germany is always branded as a success story for PV. When modified in 2004, the German FIT was paying about 54p/kWh.

2009 its 43 cents per Kwh
2010 it will be 39.5 cents per kwh   

costs in germany for an installed PV is 3000-3500  per Kw installed (10 Kw upwards)

Sadly there are rumours that the new elected government wants to cut back payments and increase run time of the Nuclear power stations 

Billi

[Kombi]

I did not mention any other incentive on purpose as the UK has none (bar savings on your own bill but this is not a driver for people). I could add that for France you get an €8000 tax credit on top plus the tariff is increased in line with inflation every year.

For Germany I chose 2004 as it is the year where they changed the FIT to a much higher level. The take up was so great that they are now in the second phase, ie reducing the FIT every year.
In the UK the decline is already scheduled from the 2nd year onwards. That does not leave much time then!

Patrick, the figures I quoted for Belgium were given to me by a Belgian guy on a PV forum. He did say that the payment made was 0.45€+0.17€. What is the 17c relating to?

[Ted]

I've just got home from a FITs workshop where the majority of attendees were responsible for community-level projects (social housing, etc) rather than single households.

The 25 year term was one of the major points raised during the day with a strong feeling that this was too long with a desire to see a higher tariff paid over a shorter period of time. But, as I understand it, 25 years was chosen on the basis of manufacturers statements of the likely working lifetime for their products. If payback was guaranteed over a shorter time then demand would be increased too high - which is not what the government are trying to achieve.

You have to realise that the FIT rates have been selected to manipulate the market demand for micro-renewables to a certain level - no higher and no lower.  If they fail to do this then the future FIT reviews will adjust the rates accordingly - either up or down.

[billi]

For Germany I chose 2004 as it is the year where they changed the FIT to a much higher level. The take up was so great that they are now in the second phase, ie reducing the FIT every year.

And this reduction runs parallel to the falling prices of PV . Would be interesting to find out how high the prices were in 2004  (ill find out )

They recently introduced  a scheme in Germany , that you can get paid as well if you use the units at home rather then export .... about 25 cents (EURO) + the saved price for the units between 15-20 cents

So many now go for that option as bought units will increase ...

Still all are struggling  to find a solution  to power up their houses during a power-cut   

Here is a history about prices and more....  my translation is written in blue  hope it makes sense

Billi

http://www.solarwirtschaft.de/fileadmin/content_files/preisind_0209.jpg

 

[Paulh_Boats]

Ted,

Thanks for the update....lets hope the Conservatives organise it properly. I expect they will favour it for ideological (right wing) reasons like independence and reducing imports.

Billi

Glad to see the graph goes in the right direction! Wifey gives me a hard time every power cut..."we've got all those panels and we have to use candles!" 


cheers
Paul

[Patrick123]

Patrick, the figures I quoted for Belgium were given to me by a Belgian guy on a PV forum. He did say that the payment made was 0.45€+0.17€. What is the 17c relating to?

We get 0.45€ cash for every kWh produced, and the meter is running backwards which means an extra 0.17€/kWh reduction on the electricity-charge (depending on tariff-scheme)

[wookey]

If anyone wants to do some sums here's my spreadsheet on the subject. Fill in how much the install will cost, the output in kWh from the EU PVGIS site, how much you pay for electricity per kWh and a factor from 0-100% for how much power you will export (this actually makes relatively little difference - the fraction you use locally moves the price you get between 41.9 and 49.9p/kWh. The higher user you are the closer to the top you'll be.

We have also done some ROI calculations - getting answers between 1% and 81% depending on the assumptions you make (you really can prove anything with statisitics - thsat was a fascinating excercise!). A realistic ROI is between 5 & 9%. That's pretty good by current bank standards, but if you have to borrow the money for the project then it starts to look marginal.

Bear in mind that once the LCPB grants run out then the sheet needs modifying.

http://wookware.org/solar/PV/

[Ted]

5% to 9% is around the target that FITs is looking to achieve without the LCBP grant - so that looks to me as if the tariff is still a little too low.

One of yesterday's workshop participants was planning a PV install and had also done the same calculation and came up with 5.9% for a 2kW PV system inclusive of the LCBP grant.

So unless PV costs come down a little more (maybe in response to the Spanish situation where FITs rates have been dropped and caused a huge reduction in demand leaving the market over-supplied) then the present level of FIT rates will not achieve the takeup that the government want.

(FITs having the ability to effect unintended market manipulations was another of the topics I brought up at the workshop).

[Kombi]

FITs having the ability to effect unintended market manipulations

Very true. This is well explained here.

As I have said before PV installations need to be attractive financially to lure the man in the street. And currently, with the FIT proposal as it stands, I don't see it happening. Many good investment grade bonds will give you 6%+ and you get your capital back at maturity.

Let's compare with France for example as it is the FIT I know best. Installations are capped at 3kW for maximum benefits (reduced VAT, best FIT). I will assume an average output of 850kWh per kW installed, which is about what Calais would get. I have not included any of the many financial aides offered by the various regions (up to 2500€)

3kW installation using top quality modules and integrated in roof: 19000 euros
Tax rebate (8000 euros per household, extra 200 per kid)            8000 euros
left to pay                                                                        11000 euros

estimated earnings per year: 850x3x0.60176                             1534 euros
break even point: 11000/1534                                               7.17 years

To compare with the 11 to 12 years in the UK... And this was done ignoring the increase in the FIT which takes place every year. The same calculation in the South of France would give a break even point of less than 5 years...

I think the FIT team set the tariff in line with other european countries, may be forgetting that the sun doesn't shine as much here...

P.S.: You can find a summary of FIT in Europe here. Just download the PDF document called overview of national support scheme.

[Ted]

Kombi, thanks - that's very interesting.  But could you clarify the situation in France for me please?

The second document you linked to has details for France that gives figures that don't seem to tie in with yours. i.e.

1. The tax rebate is stated as 8,000 for a single and 16,000 for a couple. Is that right?  Are there any qualification limits on this?

2. The 0.60 rate you quote is only for BIPV - for normal on-roof PV it is only 0.32 - so payback period is immediately doubled.

3. There is a 'Cap' that seems to say the full rate is restricted to generation for 1500 hours per annum. Over that is only paid at 0.05.
That shouldn't be an issue as a 3kWp system would be limited to a claim of 4500 kWh at 0.60 - but at 850kWh/kWp you are only going to actually generate 2550 kWh. So what is the reason for this Cap - it seems it would never apply.  Is it to restrict payments if you get lucky and the sun shines all day every day for the whole year?

(I'm very interested in the nitty-gritty details as I have a friend who lives near La Rochelle and who has a massive roof on a barn - about 300m² - who could be sitting on a gold-mine.)

[Kombi]

Hi Ted,

It's French so nothing is simple!!! There are many rules to follow and criteria to meet, we could be at it a long time! It might be worth having a moderator creating a new thread if you want to discuss the minutes details of it.

1) 8000/16000 is the allowable amount, of which you get 50% as a tax rebate, ie EUR8000 for a couple, a bit more if you have kids

2) 0.60 is only for BIPV indeed; but the diff with BAPV is so substantial that everyone goes for BIPV

3)Another example of useless complication. Do not even attempt to understand the cap as it won't affect any fixed installation, unless suddenly the sun never goes down!! There is a proposal to uplift the limit for certains technologies like trackers for example.

Nicolas