COMMENT: FiT for a change

Rupert HigginWith recent articles on solar's fall from grace following cuts to the feed-in tariff and reduced returns, is investing in solar still a good idea? Rupert Higgin, managing director of Cheshire-based Green Electrician Group, explains policy changes and why smart money is on solar.

In October 2011 the Government announced the first in a series of cuts to the FiT; aimed to reduce the cost of the programme, subdue demand and drive down installation prices. Whilst the poor handling of the announcement caused an uproar, the customer ultimately benefited from a reduced capital outlay as the component and installation prices for solar PV fell.

We estimate customers are now seeing a return of as much as 14% on installations completed before the 1 August 2012. These returns are higher than last year, due to deflation among installers, whilst the new top rate of 16p after 1 August, will bring it back in line with this time last year with returns of up to 12%. Additionally the cost of electricity is expected to rise over the life of the solar panels, which will bring additional cost savings – your own self-generated energy is free after installation.

A new government initiative, introduced in April, tightened the rules of eligibility by making only buildings with at least a Category D energy efficient rating eligible for the full FiT. This reduces the opportunity for nearly 50% of UK properties, meaning they are only eligible for a FiT of 9p, unless they upgrade their property's efficiency. This indicates how going forward businesses will need to take a more collective approach to energy management.

For the properties that do qualify for the full FiT rate, it is clear that there is still a significant return to be had both now and after the change in August. Interested parties should also consider that, whilst the lifetime of the FiT is reduced by five years to 20 years from 1 August, it will continue to provide an income stream and a reduction in the cost of energy bought in, with savings increasing as electricity prices rise. These FiT returns are still tax-free for the domestic customer, with the added bonus of an increasing export tariff for any electricity exported to the grid.

With the greatest rewards going to energy efficient buildings, it is increasingly apparent that to achieve the best returns, organisations need to take a look at their total energy footprint that includes their energy needs, uses and efficiencies. Only then will they see the true picture of the benefits available and the real returns that can be achieved.

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