There have been widespread predictions that green energy technologies, such as solar and wind power, would not be able to survive the government’s closure of the feed-in tariff (FiT) scheme for small scale renewables at the end of March this year.
For many suppliers, this has certainly been the case. The number of registered solar installers, which blossomed to 6500 by 2014, is now less than 1000 in May 2019 – equating to just a few hundred companies.
But for those who have managed to hang in there, the signs are that this tariff-free future could, in fact, herald a new golden age of solar photo-voltaics (PV) without the hindrance of continual FiT deadlines.
The great gamble by the government seems to have paid off and the material prices for PV have now reduced significantly to the point where, so long as the generated solar power is used within the building where the system is installed, small/medium scale commercial solar PV systems do not need a feed-in tariff to be viable.
Four years ago the cost of a 50kw PV system was in the region of £65,000. The same system, including design, structural engineers report, mechanical and electrical (M&E) support and the installation itself, is now circa £40,000. Whether the building owner consumes all of that power themselves or the same is sold to the tenant on a competitive power purchase agreement of 12p per kWh, the investment rate of return (IRR) can be expected in the region of +12%. That does not take into consideration the annual increases to the cost of electricity which would boost this return still further.
Even if the system owner opts for a full life-time operating and maintenance package, the IRR is still in the region of 8%, which provides a very healthy return on investment, given system lifetimes are well over 35 years currently.
On top of this, PV still delivers on its initial promise of reducing carbon dioxide, with a 50kw system saving more than 20 tonnes of carbon emissions per year compared to existing electrical consumption.
With the government signalling that climate change targets are likely to get even more challenging, commercial building owners can once again look at PV as a well proven, low impact method of generating green energy, as well as a very profitable investment.