No feed-in tariffs? No problem for commercial-scale roof-top solar power

Users of commercial buildings will still harness significant benefits from solar power after 1st April, says the company responsible for solar power in Gloucester cathedral.

Many in the renewable energy sector responded with dismay to the news that the Government was ending feed-in tariff payments for new renewable energy schemes after 31st March this year. But solar power company, Mypower, says their disappearance won’t adversely affect roof-top commercial-scale solar energy and should lead to its increased use within the corporate and industrial world. Commercial-scale solar power has been standing on its own two feet financially and competing in the open market with ‘conventional’ energy generation for some time, offering significant financial and operational benefits to those installing it on their buildings.

The systems are now 50 per cent more efficient and cheaper than 10 years ago meaning larger-scale commercial installations currently generate electricity at around 4-6p/kWh for at least 25 years, compared to 14-15p for energy from the Grid. Remembering that electricity is generated during the day when the energy demands of commerce, farms, and industry are at their peak, building users are able to replace a significant amount of everyday electricity with cheaper solar power, producing a ROI of 14-15 per cent.

Mypower has been supplying solar PV systems to SME’s, corporates and farmers since 2010, and believes that removing the FITs will make it easier and more attractive for these systems to be introduced onto commercial buildings. Ben Harrison, Managing Partner, explains:

“Ending feed-in tariffs removes reliance on Government policy which is a positive move for companies and farmers. Previously, there was uncertainty about how Government policy would change the FIT, plus steep cuts to tariff payments led to widespread negative reactions from the marketplace. Add to this the perception some companies’ had of the FIT scheme being bureaucratically complex and, all-in-all, the effect was to dissuade many companies from considering solar power full stop. Plus others wouldn’t consider taking subsidies as a matter of principle.”

The ceasing of FiTs should remove these barriers so the significant benefits offered by solar power should shine through on their own merits. Commercial-scale roof-top solar power also increases energy security for the building users. As the electricity is generated on-site, users have control of the PV electricity supply, supply isn’t dependent upon electricity imported from other countries, and there’s no energy loss during transmission from the generating plant to the end user. Added to this is the fact that PV systems have no moving parts so long-term maintenance is easy and cheap.

For those companies with sustainability and CSR policies, using roof-top solar power also makes a significant contribution to reducing carbon dioxide emissions – a factor which can be used as a marketing advantage which attracts more customers.

Demonstration of the consistent financial viability of commercial-scale solar electricity:

The table below considers a number of high spec solar PV systems installed by Mypower. Each system is of a similar size (50 kW) producing around 48,000 units p.a, using panels with a 25 year warranty and inverters with a 10 year warranty.

2012201420162019
Supply & install costs£79,000£62,000£51,000£37,500
FiT subsidy15.2p/unit 12.1/unit 4.39/unit 0/unit
ROI Year one14.3%15.9%13.5%15.2%
Payback7.0 years6.3 years7.4 years6.6 years
Typical SME Grid electricity price9.8p/unit10.2p/unit12.0p/unit14.5p/unit
Equivalent forward purchase price of Solar electricity fixed for 25 years (includes capex & opex costs)8.6p/unit7.1p/unit6.1p/unit4.8p/unit
Difference between solar and grid electricity price.-1.2p-3.1p-5.9p-9.7p

Based on 70 per cent of the solar electricity being used on site with the remainder being sold to the grid.

These are year one figures; the savings will increase due to electricity inflation – predicted to be around seven per cent, Annual Investment allowance can offset the capital cost against income tax in year one. 100 per cent asset finance is now readily available to fund the project.

The reduction in subsidy to zero over the years is offset by the increased efficiency of the panels, reduced cost of the system and significantly increased grid electricity costs as Ben explains:

“We now have an energy solution far more affordable to businesses, easily leased or financed and not reliant on subsidy. With the increased AIA tax break, it will be just as compelling without subsidy as it was during the boom years of 2012-2015.”