Larger community renewable energy schemes to receive extra support

Energy and Climate Change Minister Greg Barker said: "The expansion of our reformed Feed-in Tariff will encourage even more communities to get on board.”

New proposals to benefit community energy schemes have been unveiled by the Government.

In its response to feedback from community groups on the type of financial incentive that works best for them, the Department for Energy and Climate Change (DECC) has said it will increase the generation threshold under which community projects are eligible for feed-in tariffs (FITs) to enable larger projects to benefit.

Support for community renewable projects over 5MW is currently available under the Renewables Obligation (RO). But this pays a lower amount per kilowatt-hour than that available under FITs.

The reforms, to be written into the Energy Bill and underpinned by secondary legislation, will permit community schemes up to 10MW in size to continue to benefit from the levels of support available to those below 5MW.

Projects such as solar PV on school roofs or panels on libraries, community owned wind turbines and hydro power from local streams could all benefit under the proposed new rules.

There is also money on offer to pay for excess power exported back to the grid.

Energy and Climate Change Minister Greg Barker said: "The Coalition is determined to drive a step change in the deployment of community energy.

"We want to help consumers, businesses and communities generate more of their own clean, green electricity locally, becoming less reliant on centralised power generation. The expansion of our reformed Feed-in Tariff will encourage even more communities to get on board.”

The announcement comes on top of the launch last week of a £15 million Renewable Community Energy Fund to help community groups with the cost of feasibility studies and seeking planning permission.

DECC is also keen to explore what needs to be done to kickstart even more projects across the UK, with a call for evidence currently underway and the UK’s first community energy strategy to be launched in the Autumn.

The call for evidence wants to hear about the potential benefits of community energy, the barriers to community energy, and what might be innovative and new approaches.

The proposed changes to the FITs rules will be made as part of the Energy Bill process. Once this Bill comes into force, the Government will consult on what it will mean in practice for community schemes.

The Solar Trade Association welcomed the proposals. Its chief executive, Paul Barwell, said: “Community solar farms on lower grade agricultural land help farmers diversify their risk away from increased weather risks to their land, while at the same time fostering dual purpose land use and biodiversity. Community ownership will help secure better community acceptance for more ambitious solar farms over the existing 5MW threshold.”

However, the STA  believes that there is still an issue which needs clarifying that is preventing many community schemes from getting off the ground.

Currently all solar schemes over 50kW (the size of e.g. a school scheme) are subject to very stringent capacity constraints. For example, in any quarter, if more than 200MW of capacity of 50kW+schemes is installed, this will result in a 28% cut in all the tariffs from 50kW through to 5MW.

Furthermore, for schemes over 250kW (larger commercial or community schemes), the FIT is too low to work, leading to just a handful of projects at this size since last July. This is despite schemes over 250kW being more cost effective than many large-scale renewables supported under the Renewables Obligation (RO).

STA Head of External Affairs, Leonie Greene, said: “Solar is being unfairly constrained. It is this 'normal' mid-size of solar, dominant in markets overseas, that needs urgent attention.”

The STA is currently finalising its best practice guidance for high standards in solar farm construction, which recommend avoiding prime grade agricultural land, and provide a set of criteria which developers, builders and land tenants can use to ensure best practice.

Should you consider the one technology whose feed-in tariff rate is increasing?

A micro-CHP unit installed in a kitchen: it generates electricity from gas and heats your water and building.

The Government will be hoping that Friday's announcement about Feed-in Tariffs will finally assuage the micro-renewables industry and provide some certainty for the future.

The Phase 2B Government Response to the consultation outlines the degression rate of different technologies, and the good news is that most technologies do not lose much support. One even gets enhanced support.

This technology is micro-CHP, which represents an opportunity for some householders and businesses to purchase a new boiler that not only heats the building but also generates electricity.

These gadgets run on gas and are fridge-sized. However, like their big brother, conventional CHP plants, they have high upfront costs which has deterred people from buying them. A unit can set you back anything from £6,500-£10,000.

It's in Japan that this technology began and has become relatively big-time, because many manufacturers are Japanese. The global micro-CHP market expanded by more than a third last year and was worth €466 million in 2011, but is set to expand to €1 billion this year, though mostly in Germany and Japan.

Baxi Ecogen's model (pictured above), for example, has a heat output of 24 kW (enough for three average homes) and a maximum electrical output of 1 kW, enough to maintain back-up power in the event of a power cut, or boil a kettle.

The rate of FIT payback is 12.5p for 1kWh. Suppose you had it going all year without stopping you would earn almost £1100. Simple arithmetic shows it would then take at least six years to pay off (though you would make further savings on electricity). But you probably wouldn’t have it on all the time.

Hang on a minute, you say, if it runs on gas, it's not renewable. So why is it being supported by the FIT? And if it is being supported, then when the Renewable Heat Incentive kicks in, surely owners will also get reimbursed for the heat they generate, too?

Besides the FITs announcement, the Energy and Climate Change Department has also just published for consultation its proposals on the non-domestic side of this scheme, which show what renewable heat technologies are supported and how much support they will get, so we can answer this question.

Up for support are biomass boilers and stoves, ground source heat pumps, and solar collectors for hot water and space heating.

But not micro-CHP.

So, the reason why it's being supported is purely because it makes more efficient use of the gas, making the boiler 90% efficient instead of, say, 55%. Not because it is truly sustainable.

This is interesting, because further down the line are different types of micro-CHP boilers which run on fuel cells, which can therefore, at least in theory, run on renewable energy.

As a result of this support, micro-CHP will see some increase in installations in the UK, but to really achieve this it will need far more public education.

In practice, the technology is very specific in application. The current crop of models are based on the Stirling engine, Organic Rankine Cycle (ORC) or internal combustion engine. The first two have high thermal efficiency and output but low electrical efficiency (10%), and this is a sticking point.

A 2007 trial by the UK’s Carbon Trust concluded that micro-CHP can cut electricity bills and overall CO2 emissions by 15–20% when they’re the lead boiler in larger contexts like care homes, district schemes, apartment blocks and leisure centres.

The best individual building for them therefore is a medium-to-large, moderately well-insulated one, maybe with solid walls, solid floors and no loft space, that is hard to insulate well and has a relatively large heat demand. Or they could be used in a cluster of buildings.

This is why there is, sensibly, no condition attached in the feed-in tariffs scheme for micro-CHP, announced last Friday, to having a certain level of energy efficiency in the building, as there is with the other technologies.

In the above context, micro-CHP units can potentially deliver carbon savings of 5–10%; fewer than a condensing boiler, since capacity is likely to be best matched to demand, for both heat and power.

This morning I was in a 200-year-old energy-inefficient house heated by a gas-fired Aga. Although it is the middle of summer (if you can call it that) the Aga had to be on in order to boil a kettle. Consequently, the doors were open to prevent the kitchen from overheating.

Micro-CHP is the only reasonable, more efficient upgrade option possible for such a house that gives them the same level of comfort and ease of use. Biomass wouldn't do that because of the space and labour requirement for pellets or timber. Modern pellet-fired boilers can also consume a fair amount of electricity in their motors. The roof of this particular house faces east-west, so no form of solar power is appropriate.

Micro-CHP offers limited benefits for smaller and newer dwellings, however, because they are more energy-efficient or have too little requirement for heat. The key to success in micro-CHP is matching the thermal output to the building’s pattern of use, so that they operate not intermittently but for many hours at a time, making the value of electricity generated, which will be helped by the feed-in tariff, pay for the marginal investment in as little as three years in a typical family home. It therefore works best with a buffer storage tank to save the surplus heat for later.

Grid connection for electricity export is crucial to micro-CHP’s widespread acceptance. On average, half of all electricity generated by a typical 1kWe micro-CHP device is exported to the grid, as it’s not needed at the time.

Reliability is also a key issue; service agreements will be essential.

So you shouldn’t yet trade in your condensing boiler, which has about the same overall heating efficiency without also producing electricity, but you might keep an eye on developments.

Superinsulated homes will have to wait until the next generation of machines, based on fuel cells. These generally come in two types – proton exchange membrane fuel cells (PEMFCs) and solid oxide fuel cells (SOFCs). They have a heat to power ratio that is approximately equal, so for example they could produce 5kW of heat and 5kW of electricity.

It's an interesting technology. As the Government is fond of saying: “we need a mix of different generation technologies in this country". The same is true at the micro level. There is no one size fits all. Micro-CHP has a valuable part to play, as long as it is installed in the appropriate spaces.

Next stop: the Supreme Court. Isn't this a waste of taxpayers' money?

DECC's decision to ask the Supreme Court to overrule yesterday's unsuccessful High Court appeal against its recent ruling on solar PV feed-in tariffs means continued uncertainty for the industry.

Lord Justice Moses at the Court of Appeal ruled that on the question of whether the Secretary of State "has power" to apply a tariff cut before a consultation period is over: "In my view, he plainly has no such power".

As campaigners celebrated their victory, Energy and Climate Change Secretary Chris Huhne said: “The Court of Appeal has upheld the High Court ruling on FITs, albeit on different grounds. We disagree and are seeking permission to appeal.

“We have already put before Parliament changes to the regulations that will bring a 21p rate into effect from April for solar PV installations from 3 March to help reduce the pressure on the budget and provide as much certainty as we can for consumers and industry.

“We want to maximise the number of installations that are possible within the available budget rather than use available money to pay a higher tariff to half the number of installations. Solar PV can have strong and vibrant future in UK and we want a lasting FITs scheme to support that future and jobs in the industry,” he said.

Industry reaction to the High Court decision is relief mixed with apprehension. Chris Hopkins – Managing Director of Ploughcroft and successful contestant on the BBC’s Dragons Den, called it "excellent news for homeowners".

But the Electrical Contractors’ Association (ECA) warned of a "wild ride" ahead for an industry that is "already reeling from Government announcements in the last few months".

Paul Reeve, its Head of Environment, cautioned: “Before anyone celebrates, we should remember that future funding for FITs is not unlimited. "Some of the available cash could now be used up in a second ‘rush to install’ before 3 March, when FITs will be halved to 21p/kWh,″ he said.

The first ‘rush to install’ took place up to 12 December to beat the Government’s initial deadline for halving FITs and resulted in far more PV installations than DECC had planned. These will now be receiving the high rate for 25 years.

"A second rush now could put even more pressure on future FITs,” observed Reeve.

Nathan Goode, Head of Energy, Environment and Sustainability at tax auditors Grant Thornton, agreed that the "judgement is prolonging the agony. Whatever the theoretical rights and wrongs of the case we need to get to a position of stability as quickly as possible to provide the solar industry and investors with the certainty needed to allow them to move forward".

The Renewable Energy Association (REA) called for an end to the "fiasco" so that "the UK solar industry can get back to business".

The Solar Trade Association and Friends of the Earth continue to warn ministers of risks to 29,000 jobs as a result of subsidy losses, arguing that the tariffs could be paid for from tax payments which the industry generates.

They put this figure at ￡330m per year minimum, from income taxes, corporation tax, and VAT.

But Energy and Climate Change Minister Greg Barker said in the Government's defence that the higher tariff will cost consumers ￡1.5bn over 25 years and sought to blame Ed Miliband for the chaos, as he introduced the system.

Howard Johns, of the Solar Trade Association, countered that it wasn't the cut, but the way Greg Barker's department had managed it which was the problem.

The coalition of campaigners also wants the Government to look again at what FoE calls "over-strict energy efficiency rules that will prevent 90 per cent of houses from claiming solar subsidies".

This refers to a new rule that, from April 1st 2012, properties must have an Energy Performance Certificate (EPC) rating of C or above, to be eligible for the feed-in tariff.

This will penalise many old, solid-walled properties which, even with double-glazing, low-energy lights, a condensing boiler, thermostatic radiator controls and loft insulation, can only score D or E on the EPC due to a lack of wall insulation.

Green electricity supplier Good Energy commented that, "it looks as if rather than encouraging greater energy efficiency, the EPC standard is just another way of discouraging FIT take-up".

Campaigners also want the Government to keep housing associations, schools, councils and other community projects on the higher tariff rate.

"Helping more people to plug into clean British energy will help protect cash-strapped households from soaring fuel bills," said Friends of the Earth’s Executive Director Andy Atkins.

Much of the industry laments the chaotic way the Government has managed the situation. Andy Boroughs, CEO of Organic Energy says he "understands that solar payments must be cut in line with falling costs, but the Government must now accept that its illegal actions were putting the industry and thousands of jobs at risk.

“The industry needs stability," he said, adding that "if the Government is serious about its commitment to the renewables, it should accept this ruling and get back down to the business of supporting a sector which is helping to grow the UK economy as well as creating sustainable jobs”.

DECC's consultation on feed-in tariffs closed on 23 December with over 2,000 responses.

Greg Barker has promised that the outcome will be announced by 9 February 2012, in time for any resulting legislative changes to come into effect from 1 April 2012.

"Our aim is that this announcement will be accompanied by a set of reform proposals for the next phase of the comprehensive review of the FITs scheme, which will be the subject of a further consultation," he added.

All of which means that the solar industry will soldier on through a fog of insecurity for some time yet.

Afterthought: Germany currently has the highest power prices within the EU (24.4 cents per kilowatt-hour), but a recent survey by Forse for the German Association of Municipal Utilities found that an overwhelming majority of Germans are willing to pay the price as long as they get green power in return.

Community energy schemes receive funding but mixed messages from Government

The first 82 local energy projects run by communities throughout England have won funding from the Government's ￡10m Local Energy Assessment Fund (LEAF).

But at the same time, many community-led solar PV projects are still waiting to hear if they will receive enhanced support from feed-in-tariffs.

LEAF is managed by a consortium of community networks administered by the Energy Saving Trust.

The money given is intended to be used for understanding energy efficiency and renewable energy generation issues at a local level and to help communities to prepare for new opportunities in sustainable energy and climate change arising from the Green Deal, Renewable Heat Incentive and feed-in-tariffs.

There was a high volume of applications for the first round of awards. The second round is open until 20 January and the website above contains full details of how to apply.

Many of the winners are part of the Energyshare network.

￡50,000 is the average size of the award for each successful bid, but it depends on the proposals put forward. Any work needs to be completed by end of March 2012.

Peter Lipman, Chair of Communities and Climate Action Alliance said: “Hundreds of communities responded fantastically to the opportunity afforded by LEAF with imaginative and innovative schemes. It’s wonderful to see that many of them will be funded and so will have a chance to show just what those communities can deliver.”

Feed-in-tariffs confusion

Government support for communities wanting to engage with the low carbon agenda has come under renewed criticised lately over the removal of their ability to claim high returning feed-in-tariffs for solar electricity.

"Why on earth have [the Government] not excluded housing associations, schools, council and other community projects from the damaging proposal to give multibuilding projects ever lower financial support?" asked Lord Judd during last Thursday's Lords debate on the Government's green record.

Lord Marland, speaking for the Government in reply, gave no sign that it would give way on the matter and revise its position on the tariffs.

On Friday, the judges at the Court of Appeals postponed their decision on the Government’s appeal against the High Court’s recent finding that its cuts to the photovoltaic feed-in tariff (FIT) rates were unlawful. A decision is expected later this week.

The Renewable Energy Association’s Gaynor Hartnell commented that no one has liked how the government has carried out the FIT review process, and that the judges should "ensure that the Government thinks twice about acting in such a cavalier manner again".

However, she added that "the majority of our members want to draw a line under this affair, look forwards, and get on with installing systems at the new tariff rates".

The Department of Energy and Climate Change has issued a statement saying that once the court arrives at a decision "we will consider our options and make an announcement on the way forward to provide clarity to consumers and industry".

Amongst the clarity required by communities is whether a much lower tariff will now be applied to schemes where an organisation receives payments from multiple installations on different sites, as happens in some cases (the proposed cut is of 80%), or, whether genuine community renewable energy projects will be given special levels of support in recognition of their enhanced efficiency and the spin-off benefits.

The benefits of community energy

These benefits include social cohesion, reduced crime, a better local environment and spreading awareness of renewable energy and energy efficiency, all aims of the LEAF scheme.

Many projects have been cancelled or put on hold as a result of the confusion over FITs.

The situation means that the community-scale schemes that are now proceeding are more likely to be privately owned.

E.ON is one utility giant that is pushing into this market. Its Sustainable Energy division specialises in district-level or 'distributed' energy, employs 500 people with a turnover of ￡100m, and is rapidly expanding.

The UK situation is in stark contrast to that in Germany, where most of its $100 billion of private investment in renewable energy is not owned by companies but by communities and individuals; a total of 51% according to Paul Gipe.

40% of this 51% of renewable energy generation is owned by individuals, and 11% is owned by farmers. Just 13% is owned by power utilities. The rest is owned by a combination of developers (14%), investment funds (11%), industrial ownership (9%), and “others” (1%).

"German farmers, community leaders and entrepreneurs are not only democratising electricity generation and renewable heat, but are also setting their sights on an equally ambitious prize, the transmission system itself," comments Gipe, an advocate of community wind power since the 1970s.

Though Britain has a long and proud history of community and co-operative ownership, it is perhaps hard for us to imagine how, if this pattern were to be repeated here, it would affect our attitude towards energy supply.

Communities everywhere clearly want to have more engagement with renewable energy, but for decades the Renewables Obligation financing system has unfortunately inhibited this natural inclination and meant that there is only a handful of community-owned windfarms.

One example of such a community is Sustainable Wallingford, established in 2003 by residents of this Oxfordshire town, and which is one of the LEAF winners announced today, for a project to use thermal imaging to show where energy is leaking from homes, and provide advice on energy efficiency and solar power.

The Government continues to send out mixed messages on community energy, but the message from LEAF is that communities do want to be empowered.

Huhne claims that the Green Deal will cut business energy bills

The Green Deal will "kickstart £14bn investment over the next decade, supporting at least 65,000 insulation and construction jobs by 2015", Energy Secretary Chris Huhne claimed yesterday as he launched consultations on key areas of climate and energy policy enshrined in the Energy Act 2011.

Speaking prior to the defeat by 71 votes of the Labour motion to block the Government's proposed changes to the solar Feed-In Tariff on Wednesday night, Mr. Huhne told Parliament that "rising world gas prices will push up bills for both gas and electricity, but our prices will be moderated by our policies."

The Energy Secretary was referring mostly to domestic energy prices, which he said would overall be 7% or £94 lower in 2020 than if these polices were not in place and we had to rely on fossil fuels.

However, the story is not the same for businesses.

While many businesses are able to access the advice of the Carbon Trust, who, for example, recently pointed out that simply by switching to more efficient variable motors and drives, a medium sized business with an electricity spend of £50,000 could save £5,000 per year, Mr Huhne acknowledged that some firms are not able to make significant efficiency savings due to the nature of the industrial processes they employ.

Additionally, many businesses pay energy prices that are closer to the wholesale level, and therefore price rises seem to have a harsher impact: the Government's own estimates are that by 2020, policies could add 19% to the average energy bill of medium-sized business energy consumers, whereas the figure for large energy intensive users could be anywhere between 2% and 20%.

It is partly so that Government policies on climate change do not impair their international competitiveness, Mr. Huhne said, that "the Government is committed, before the end of the year, to announcing a package of measures for those energy intensive industries".

He said this is also why he is working with Vince Cable's Business Department, and giving more powers to Ofgem, such as allowing it to extend the role of Elexon in regulating the wholesale market, in another consultation that has been announced this week.

Announcing the consultation on the Green Deal as well as making the Annual Energy Statement, Mr. Huhne underscored that businesses as well as homes will be able to take advantage of the deal.

The scheme will let them install energy saving technologies such as insulation at no upfront cost, with repayments made over time out of the energy savings.

Mr. Huhne also claimed that there will be at least a 3% increase in green exports plus future growth from policies like the Renewable Heat Incentive.

Exactly how the financing of the Green Deal will work has yet to be explored, but he promised that up to £150 in cashback could be available for those taking out a Green Deal as part of efforts to make the scheme as attractive as possible.

Mr. Huhne even said that a net saving on domestic energy bills will be possible as early as 2013. "This assumes a central gas price estimate of nearly 70p/therm in 2020," he said. "If the gas price were to be higher, householders will be even better off."

Help for the fuel poor

Mr. Huhne confirmed that the Energy Company Obligation, which is also being consulted on, will force energy companies to provide £1.3 billion a year to target Green Deal measures at those in fuel poverty and solid walled properties.
But to ensure that not only the big energy companies benefit from the financial benefits of the work, the ECO consultation specifies that up to 50% of it should be executed by other providers, such as local authorities and other Green Deal providers.

Mr. Huhne said that this would "help make ECO more cost effective for consumers, and get more competition into the market" so that "smaller providers aren’t crowded out".

Some far-seeing companies that have already been installing solar PV systems under the FITs scheme, and who know that they are going to have to offer energy efficiency measures in future as part of the proposed changes to the way the scheme is offered to households, are already considering how they can take advantage of this opportunity.

The plight of those on low incomes was highlighted today by two new pieces of research from the Rowntree Trust which show that those in deprived neighbourhoods contribute the least to climate change but are likely to be the worst affected by it.

Understanding the social impacts of UK climate policies reveals that wealthier households have the highest energy use and people in the 45–55 age group emit 50% more carbon than the under-25s.

In terms of climate change impacts, Yorkshire and Humberside are the most disadvantaged regions due to the combination of high social vulnerabilities and high likelihoods of flooding, but nearly a quarter of all London neighbourhoods are most likely to suffer and least likely to be able to cope with the effects of heat waves.

The Trust is therefore calling not only for more support to address fuel poverty, but also protection for these regions from the dangers associated with climate chaos, and help for those who have difficulty in obtaining insurance against damage caused by it.

The Energy Statement was welcomed by RenewableUK, especially the news that the current cost to the ordinary household of support for wind power is 18 pence per week, and that in 2020, the cost to consumers of support for large-scale renewables will be less than £2 per week, or 3.5% of an annual energy bill, "far less than opponents of renewables claim".

“The figures in the Government’s Annual Energy Statement demonstrate this simple truth – that green measures, far from being expensive, can actually save us money," said RenewableUK Chief Executive Maria McCaffery, "and we’ll have tens of thousands of new green-collar jobs, thanks to that investment”.

Garry Worthington, Head of Green Deal for Climate Energy, commented that he was “pleased to see the proposal to appoint a Green Deal oversight body and an ECO administrator", and hoped they would "promote and facilitate regional and local Green Deal schemes".

Other features of the deal proposed by the consultation are:

• an accreditation framework for installers
• provision for collection of finance repayments through the electricity bill and remittance to Green Deal providers or nominated finance providers
• partnerships and localised delivery of the Green Deal and ECO to ensure that Green Deal finance and ECO support are seamlessly combined behind the scene
• a consumer protection regime.

The solar PV feed-in tariff crisis is one sign of a maturing industry

The furore over the change in the Feed-in Tariffs to small-scale photovoltaic (PV) electric power in the UK, with Friends of the Earth (FoE) and some companies threatening legal action, is just one part of a larger upheaval that is affecting the solar electricity industry globally.

Prices are falling, companies are going under, and a trade war between the US and China is looming.

At the same time, the number of installations and the generation capacity of PV are at a record high.

In Italy, experts are predicting that solar power will cost the same as ordinary electricity in 2014, with the rest of Europe following up to 2020.

As I have to speak on the subject at this week's Solar Flair '11 conference, I've been taking a closer look at the solar industry.

What I've found shows that, although they may be right about the government's mis-timing of the tariff change, FoE and their supporters are wrong to insist that the tariffs stay high.

To see why, we need to look at the wider context.

The state of the solar industry

Along with the whole of the renewable energy sector, which globally is seeing growth rates of up to 70% every year, PV is booming, despite the economic recession and public finance crises in many parts of the world.

But it is experiencing disruption caused by its transformation into a mature energy sector.

The latest figures show that the total installed PV capacity in the world is now 40 GW. This generates a huge 50 TWh/yr (EPIA 2011).

Last year, the EU installed over 13GW and the rest of the world installed over 17GW. For the first time ever, during 2010, Europe added more PV than wind capacity.

The new kid on the block, concentrating PV (CPV), is also doing well, with 0.02 GW connected to the grid worldwide during 2010 and early 2011.

Meanwhile, fossil fuels' annual growth is in the low digits, and nuclear's share is further shrinking.

But scratch a little deeper and you see that things could be better still.

PV is still generating less than 0.2% of total global electricity demand.

With the IEA projecting that electricity demand (18 trillion kWh) will rise by 76% to 4.7TWh by 2030, even if PV keeps up its current expansion rate it will barely keep pace with the increase in overall demand.

To make a real difference, deployment must increase at an even faster rate, which requires strong, international political will.

Falling prices

But the real good news is that the price of PV modules is falling fast.

In seventeen months the lowest price of mono-crystalline modules has been cut by 45% from €1.65/Wp to €0.91/Wp.

The more efficient multi-crystalline module price has fallen by somewhat less: 28% to €0.93/Wp.

The price of thin-film modules has fallen 32% to €1.3/Wp (prices from Solarbuzz).

And next year this downward trend is projected to continue with a further 10% price reduction.

Despite this, the cost of PV at the global average utility scale is still 3-4 times that of onshore wind & biomass.
Nevertheless, at this phenomenal rate of reduction, the forecast is that prices will be between €0.08 and 0.18/kWh in 2020 (depending on the application), matching the price of conventional grid electricity in many areas of Europe.

As the EPIA says in this year's market survey: "The price of PV modules has decreased by over 20% every time the cumulative sold volume of PV modules has doubled."

Falling revenues

This success is partly the cause of the industry's turmoil.

Although in this quarter revenues are forecast to rise by 22%, next year they are forecast to drop by 25% because of three factors: major cuts in solar incentives, a weak project financing environment, and the module price crash that is causing downstream companies to offload their stock or face significant write-downs.

So in the first three months of 2012, the market in Europe is projected to be down 72%, with the ground mounted (solar farm) segment the hardest hit and the residential sector the least affected (down 41%).

But Greece (fortunately for its financial state), Spain, and UK are still slated to provide the highest incremental market share growth opportunities.

Falling share prices

All these forecasts are hitting share prices.

German market leaders SolarWorld and Q-Cells are among the solar companies suffering, because last year they ramped up production to meet the surge in demand from Germany, UK and Italy due to the feed-in-tariffs.

SolarWorld, Germany's number two solar company by sales, has cut its projections and no longer expects 2011 revenue to reach 2010's €1.3 billion.

The situation is no different in China.

Shanghai-based JinkoSolar has forecast a 10% reduction in quarterly module shipments to 210-220 megawatt (MW), and expects revenue to be down by a similar amount at $270-$280 million.

Similarly, Daqo New Energy, Yingli Green Energy and ReneSola Ltd have also cut their shipment and profit margin forecasts.

First Solar, Suntech, Yingli, and Q-Cells (once the world's largest maker of solar cells) all have their shares down by around 25%.

American backlash

Even more dramatic shakedowns have been happening in the American solar industry, with Energy Secretary Steven Chu taking huge political flak for making a half-billion-dollar loan to California solar company Solyndra, that later went bankrupt partly because of the fall in module prices.

This and other bankruptcies and layoffs are being blamed by some on competition from China, whose solar cell prices are undercutting those of US manufacturers. (The cells are often assembled into modules by different companies.)

As a result, there are calls for an import tariff, which would lead to a crazy China-US trade war.

The industry is already divided amongst itself on the issue.

Germany's SolarWorld, which owns American factories, is pitched against a new body called CASE, or the Coalition for Affordable Solar Energy.

This is comprised of Carbon War Room, MEMC, SolarCity, SolarFirst, Sungevity, Suntech America, SunRun, Trina Solar, Verengo, Yingli Americas, Recurrent Energy, and others.

Billions of dollars are at stake, plus tens of thousands of jobs (the US solar industry, one of the world's largest, employs 100,000).

"The imposition of tariffs will be a setback to the US solar industry," is the view of Kevin Lapidus, Senior VP and General Counsel at SunEdison, part of MEMC.

My view is that this makes complete sense. It is hypocritical of anyone in the US to fight market forces, which are making solar power more affordable for everyone.
The US should quit moaning, import the cells from China as cheaply as it can, and make money on the rest of value chain - module manufacturing, installations and service.

The British solar storm

The US situation makes the UK FITs fiasco look like a storm in a teacup.

The proposed tariff fall of 50% from 42p to 21p per kWh more or less mirrors the fall in the cost of the modules themselves.

Installers are able to buy their products at discount prices now. They'll need to change their marketing tactics, and there will be less business, but sensible installers will diversify into renewable heat and energy efficiency, for which subsidies are also coming.

Indeed, not all installers oppose the cut. Sheffield-based company A Shade Greener doesn't believe its own business will be hurt.

The wrong technology

The real question is: is PV cost effective in the UK? In other words, if the government has limited cash to spend on cutting carbon emissions, which it does, is it worth spending it on PV?

The short answer is: no. And here is the evidence.
According to the last available comparative figures, from the government's Explanatory Memorandum To The Electricity And Gas (Carbon Emissions Reduction) Order 2008, the cost in pounds sterling of saving one tonne of carbon for each renewable technology in the domestic sector is as follows, in order of ascending price:

Community heating with wood chip: £3
Ground source heat pumps: £42
Wood chip CHP: £49
Wood pellet boilers (primary): £58
Micro Hydro (0.7kWp, 50% LF): £60
Log burning stoves: £110
Mini-wind 5 kW, 20% LF: £125
Wood pellet stoves (secondary): £126
mCHP: £176
Photovoltaic panels (2.5 kWp): £218
Solar Water Heater (4m2): £346
Micro Wind (1 kWp, 10% LF): £685
Community ground source heat pumps: £697

This makes PV seventy times more expensive than a district heating system using woodchips and five times dearer than ground source heat pumps.

Saving energy saves public money

And this doesn't even take account of energy efficiency measures.

Again, on the government's own admission, as the AECB recently pointed out, properly insulating buildings saves ten times more greenhouse gas emissions per pound spent than the current Feed-in Tariff (FIT) for renewable electricity - and will still offer five times the abatement per pound, even if the tariff is cut.
As the AECB's Andrew Simmonds says, energy consumers are being told to finance a vast increase in electricity generation and transmission, but if demand was cut few of these new power stations would be needed.

Put another way, properly insulating buildings offers the same carbon and energy benefit as building offshore wind turbines at around a fifth of the cost.

Looked at from this angle, the FITs policy is the gift of a sledgehammer for climate loony James Delingpole with which to attack the Government's climate and energy policy.

He is, for once, not entirely wrong to point out in these cash-strapped times, with fuel bills high anyway, the government is pushing them up still further by financing a form of power generation that doesn't even work efficiently in most of the UK because it doesn't get enough direct sunshine throughout the year.

If you need more evidence, here's another table, adapted from the same government source, detailing the number of kilograms of CO2 saved per pound spent by technology, if they are delivered as a single measure (we ought to include energy efficiency measures, because the goal is really to save carbon emissions):

Existing community heat to CHP: 88
SWI* internal to U of 0.45W/m2K: 42
SWI* external (semi-det house): 25
Wood pellet boilers (primary): 24
Fuel switching to green tariff: 24
SWI external (flat): 23
Loft insulation (prof virgin): 21
Micro Hydro (0.7kWp, 50% LF): 16
Ground source heat pumps: 14
Replacing old boiler (65% by 88.3%): 13
Air source heat pump: 13
MCHP (revised): 9
Glazing E to C rated: 8
Loft insulation (prof top-up): 7
Heating controls - upgrade with new heat system: 6
Mini-wind 5 kW, 20% LF: 4
Solar Water Heater (4m#): 4
Flat roof insulation (whole house): 3
Underfloor insulation: 3
Photovoltaic panels (2.5 kWp): 3
Community heating meters: 3
Draughtproofing (ie not with glazing): 1
Micro Wind (1 kWp, 1% LF): 0
* SWI = solid wall insulation

By the way, I don't believe the figure for draughtproofing, and the one for micro-wind would only be true in urban areas, but the rest of it looks convincing.

Again, PV is more or less at the bottom of the list for cost-effectiveness: 14 times more expensive than internal solid wall insulation.

And look at how combined heat and power (CHP) comes at the top of both lists. Why is it so backward on supporting CHP?
The government has achieved its other policy objectives for FITs: heightening awareness of renewable energy and climate change amongst the public and bringing down the price of solar through upping demand.

It is absolutely right to link the FIT in future to energy efficiency measures.

But why-oh-why has it implemented the whole set of policies back to front? The Green Deal for energy efficiency should have come first, followed by the Renewable Heat Incentive, and only then, possibly, Feed-in Tariffs for electricity.

Solar prices will continue to fall anyway, improving the payback period for those who do want to install PV modules.

My advice to the solar industry: your sector is growing up. It will soon survive without subsidy if you go where the sun is, which is where it makes sense financially anyway.

Ecotricity launches ‘Ecobonds’ as Government faces FITs legal challenge

Ecotricity, the UK's largest renewable energy company, is launching a second issue of its popular 'Ecobonds', worth £10 million.

The move comes as Friends of the Earth issue a challenge to the Government to revise its plan to change the Feed-in Tariffs (FITs) given to owners of solar photovoltaic installations.

Ecotricity's 'Ecobond Two' will enable any UK-based individuals, companies, trusts, charities and other legal entities to invest directly in building new sources of green energy in the UK, starting with a minimum of just £500 of investment.

Its first Ecobonds, issued thirteen months ago, were heavily oversubscribed, exceeding a £10 million target by 50%, and becoming the UK's largest ever private bond issue.

They funded the construction of the UK's first 1MW Solar Park at Fen Farm in Lincolnshire, a third wind turbine to power Ford's Dagenham Diesel Centre, and a wind turbine at the G24i plant in Cardiff that makes solar panels.

Director Dale Vince expects 'Ecobond Two' to be just as popular. "Our ecobonds give people the opportunity to share in the financial benefits of green energy without the needing to stick anything on their roof," he said.

"And crucially we cut out the middlemen, the banks, and pay people the same rate of interest on ecobonds that banks would charge us if we borrowed the money from them."

The capital raised will contribute towards installing 19 wind turbines, already with planning approval, and a further 78 for which it is seeking planning approval.

"This might prove an attractive option for people who want to be green and also get an attractive rate of return, but can't - or don't want to - put solar panels on their roof, especially in light of [last] week's Feed-in Tariff (FiT) rates fiasco," said Vince.
Feed-in-Tariffs

Friends of the Earth has written to Climate Change Minister Greg Barker saying that unless the Government agrees to amend its proposals by 4pm on Friday 11 November, it will apply for a judicial review of its proposal to impose lower feed-in tariff payments on installations completed after 12 December.

It has taken legal advice that says this cut-off point, two weeks before the Government's consultation ends, is unlawful and will lead to unfinished or planned projects being abandoned.

Friends of the Earth's Policy and Campaigns Director Craig Bennett said: "The Government is breaking the law with its plans to fast-track a solar industry kill-off - as well as jeopardising thousands of jobs and countless clean energy projects across the country.

"Significant time and money has been invested planning solar schemes for homes, schools and libraries - giving them just six weeks to install is completely unacceptable, and schemes have already been scrapped.

"With soaring fossil fuel bills and mounting anger about the Big Six energy firms, the Government should be encouraging people and communities to generate their own clean electricity."

High rate of return

This is precisely the aim of Ecotricity's Ecobond Two. This will provide a fixed rate of return of 6.5% for four years for existing or new Ecotricity customers. Non-customers will receive a return of 6%.

Although lower than last year's 7.5% rate, this would be above the 4.5% - 5% rate available through Feed-in-Tariffs (FITs) for solar PV installations under the revised levels likely to be introduced after December 12.

Profits at Ecotricity have dipped in the last financial year, due to increased overheads and its acquisition of 71% of local club Forest Green Rovers FC for £695,000, according to its latest accounts for the year ended 30 April 2011.

Pre-tax profit fell to £1.7m, compared with £3.8m in 2010, although turnover grew by more than 19.8% to £44.2m.

It is a 'not for dividend' company with no outside shareholders to answer to.

Its plans include building over 1,000MW of renewable electricity generation capacity and supplying over 500,000 customers in the next ten years.

Its current base is 53 wind turbines at 17 wind parks, and 55,000 clients, up 30% on the previous year.

A spokesperson added: "Since the start of May 2011, on the generation side of the business, we've opened the UK's first large-scale solar farm in Lincolnshire and installed another wind turbine to power one of the biggest manufacturers of diesel-engines.

"In addition we now have 19 windmills ready to go with with planning permission and another 78 going through planning at various sites around the country."
Investment gap

Dale Vince recently criticised the 'Big Six' energy companies, saying, "There is a big problem in the energy market, but it's not only about how much money the big six energy companies are making - it's about what they are doing with that money."

He observed that out of the £125 they each make per customer per year, only £5 is spent on building new green energy sources.

"The reason for the lack of investment is not just weak regulation but because four of the Big Six energy companies are foreign owned and their interests are not aligned with the interest of the British public," he said.

"These multinationals take bill money from customers here in Britain and spend it in Germany or France or pay out dividends to shareholders."

He said that, by contrast, Ecotricity "invests more per capita in building new sources of green energy than any other UK electricity company".

It is the only energy supplier supported by Oxfam and the Soil Association.

Ecotricity is one of a new breed of renewable energy companies that also include Good Energy, Ebico and Ovo Energy.

Ecobond Two will be issued by Ecotricity Bonds plc, a wholly-owned subsidiary of the Ecotricity Group Limited (Ecotricity), which has guaranteed the payment obligations of Ecotricity Bonds plc for Ecobond Two.

Green bonds

The popularity of these green bonds can be seen in relation to the refusal by the Treasury to let the Green Investment Bank issue state-guaranteed green bonds to pay for the development of clean energy infrastructure.

Such a move was advocated by the cross-party Environmental Audit Committee last March.

Such bonds are already issued by institutions like the World Bank, and the idea was originally proposed in June 2010 by the former chairman of Merrill Lynch in Europe Bob Wigley, leader of the Green Investment Bank Commission.

Bu the Government has rejected the idea of letting ordinary people buy such bonds as a way of raising the much-needed finance to build low carbon Britain.

Its reasons include the fact that the National Association of Pension Funds, whose members would be major customers, said they would expect to be bribed with a higher yield because the market in the bonds would be "illiquid compared to the broader sovereign market".

Additionally, some way would need to be found to ensure that the bonds did not count as UK state debt for accounting purposes.

The Treasury was also worried that green bonds could crowd out its own funding programme.

But if Ecotricity's new bonds proved to be as popular as the first issue, this would show that there is a strong public appetite, whetted by FITs, for investment in renewable energy.
Green football

Interestingly, Ecotricity intends to make its acquisition Forest Green Rovers the UK's first green football club.

Dale Vince has become chairman of the Blue Square Premier side since purchasing the club and has started greening it by ordering its grounds to be made solar powered and the creation of an organic grass pitch.

He has also stopped players eating red meat and banned the selling of all red meat products at the grounds.

The Feed-in Tariffs review fiasco

With a stroke, DECC has undermined the competitiveness of the UK solar industry in the export market.

Over 80% of respondents to the Government's review of Feed-in Tariffs opposed the deep cuts to the incentives with most calling for more modest cuts and for the retention of high levels of support for community-scale installations for schools, hospitals and offices.

Many investors are now changing their minds about supporting the industry.

The funding for Feed-in-Tariffs comes from everybody's electricity bills - estimated at an average £3 extra per bill by 2016. DECC's argument for the its U-turn on tariffs is that the £860m pot allocated for it cannot get any bigger because consumers would not tolerate the consequent higher bills, especially at a time when energy prices are rising anyway.

Its prime aim is to encourage awareness amongst the general public of the need to save energy and the importance of renewable energy rather than cost-effectively tackle climate change.


Putting solar panels on lots of homes is seen as the best way to do this. It wants to put the money from the FITs into the pockets of householders and not into the pockets of larger concerns.

It's a shame that this is an either-or alternative.

Because unfortunately, those large concerns are not just big companies but community groups and farmers, which flies in the face of the Government's localism agenda. It needs to make an exception in these cases and reinstate the higher tariff bands for PV.

But how successful is the policy at tackling the aim of reducing the country's carbon emissions? Pound for pound of investment, solar PV does not represent good value for money when seen from an environmental point of view in the UK when compared to some other technologies.

The UK does not get a lot of sunshine, except in the very south and south-west, the sun only shines some of the time, and so investment in technologies that can produce renewable and sustainable power all of the time more efficiently will therefore produce more carbon savings [see p. 40-44 of this CERT doc. for the supporting evidence that shows which domestic-level measures produce the most cost-effective savings].

This is where anaerobic digestion (AD) comes in. With a feedstock that can keep it generating every hour of the year, it is also an emerging technology that requires support to get it up and running. It may not be as sexy as PV modules, but it does the job.

The AD industry lobbied for much more support and has been devastated by the result. What it got was an increase in the FIT rates of just 1p. They are now 14p/kWh for schemes up to and including 250 kW and 13p/kWh for schemes up to and including 500 kW.

This is not nearly enough to stimulate further investment in the technology, as Lord Redesdale, chairman of the Anaerobic Digestion and Biogas Association (ADBA) has warned.

With a capital cost of around £7,745 per kWe, AD has the highest cost per MWh of any form of heating for district heating schemes - almost £250; twice the cost of a community biomass combined heat and power (CHP) plant. But put this in perspective: it is not as much as an energy-from-waste CHP plant.

And it has other benefits besides producing heat and power - such as discouraging N2O (a very potent greenhouse gas) emissions and nitrogen pollution by processing farm slurries, and the production of compost which can be sold for soil enrichment.

It is ideal for district heating. The main benefit of moving to district heating a declared Government aim - is saving carbon emissions. Here, anaerobic digestion CHP scores way higher than all other technologies, at around 5,100 kg of carbon dioxide per year compared to a conventional system. (Incidentally, air source heat pumps used for this purpose actually cost carbon compared to a conventional system.)

By the way, these figures are taken from a report commissioned by the Department of Energy and Climate Change itself two years ago on renewable heat and district heating networks.

So it is surprising to hear DECC's Greg Barker say that there is not enough evidence to support the industry's case for greater help.

Its own research shows that if you take into account the implied carbon abatement cost, anaerobic digestion actually ends up being one of the cheapest forms of renewable district heating at less than one fifth the cost of a community boiler using natural gas.

It is still not the cheapest by any means, but this is because the plant is doing more than just burning a feedstock, and because the technology is relatively new.

And the whole point of the Feed-in Tariffs and Renewable Heat Incentive is to bring down the cost over time.

The National Grid itself has said it can see a time in the not too distant future when up to 50% of the gas in the networks is renewable, much of it coming from anaerobic digestion of organic waste.

The Coalition Government is to publish a new anaerobic digestion strategy later this month. While this is not expected to include any more financial help, the more it can do to boost this potentially highly valuable technology, the better.

Feed-in Tariffs review: let’s subsidise what works

The Government has announced a review of the Feed-in Tariff subsidies (FITs) for solar photovoltaic installations.

Energy Minister Chris Huhne is worried that large PV 'farms' of over 50kWp will soak up most of the budget for FITs. The Government said it would cut the amount it would spend on FITs up to 2014-15 by 10% to £360 million in the November Spending Review.

The industry is crying 'foul'. It complains that other technologies are allowed up to 5MW per installation and that no solar farms greater than 1MW are in planning. It accuses the Government of attacking jobs in the very green tech sector it says is going to bring growth to the UK economy.

But it's worth asking: what are the subsidies for? Here are a few possible answers:

1. Huhne talks of making renewable technology seem normal by being visible on lots of roofs.

2. It's said that households with the modules become more conscious of green issues and energy efficiency.

3. By increasing demand, the price of modules is supposed to come down over time.

4. It creates jobs in an emerging sector.

5. It cuts carbon emissions.

But do these stand up to scrutiny and represent value for money?

FITs are a fantastic success, particularly for PV, in stimulating demand for renewable energy among the public. There are now over 21,000 schemes of all technologies registered.

Up to the end of December, when there were 16,384 installations, PV had the vast majority with 15,236 - over 15 times more than wind in second place with 977 with hydro lagging at 154.

Are these large PV schemes? No. By the end of last year there was only one over the 50kW size, at 55kW. The vast majority were under 4kW with the average at 2.6kW. Most of these will be receiving the full tariff value of 41.3p per unit.

On the other hand almost all the hydro and wind installations were over 4kW, many over 10kW. Most of these will be receiving only 26.7p per unit.

By contrast, if PV farms were to register for the Renewables Obligation subsidy - an older, different subsidy for larger schemes - they would receive payments of around 8p/kWh plus export payments of 5p/kWh (though this is to be reviewed).

So PV receives almost twice as much under FITs as wind and other technologies. You can see why it is so popular. But is it value for money?

Let's remember that the installed capacity of PV doesn't equate to what will be generated: this depends on the location - the amount of sunshine.

Solar module manufacturers quote figures for the “peak power” of their products. These are what they would generate if one kilowatt per square metre of the sun’s energy were to fall on them.

But for most of England and Wales, the summer insolation is a fraction of that figure. London gets 198W and Edinburgh 172W in July. In December, the figures are 22 and 13 respectively - a lot less - and that’s when you need more power.

By contrast, wind and hydro ratings are significantly closer to what you actually get out of the plant.

So if you're looking for saving the most carbon per £, these technologies are a better choice for support.

But let's remember also who pays for the subsidies. The money comes off a levy on everyone's electricity bills. This means we all help pay the income of those who can afford to install the solar modules.

Since those on low incomes pay a disproportionate amount of their income on fuel, they are essentially subsidising the better-off.

On that basis the Government is right to prevent this subsidy going to large landowners and companies seeking to install solar farms.

Instead, it should support installations by such groups as housing associations like the Peabody Trust, who are putting PVs on the roofs of social housing.

(However it is cheaper to build larger installations than smaller ones – because savings on overheads and systems mean costs are reduced per kW. So these would make financial sense if the cash came instead from investors.)

In America this week, Energy Secretary Steven Chu announced that he wants to spend $27 million to cut the cost of installed solar power by 75 percent to about 6 cents per kilowatt hour in order to let the US compete with China's takeover of the solar market.

Fine for them - the southern states are where solar power works brilliantly. By contrast, even in the UK's southernmost counties, the financial paybacks are 30-50 years - all costs included.

What the UK is rich in are wind and ocean resources. If it wants to generate future jobs and save carbon, with renewable technologies that can work domestically and be exported throughout the world, it should focus its limited resources on these.