Enlightened energy

“If you’ve got a bit of spare cash, it’s better to invest it in solar photovoltaic than putting your money in a building society,” says Charles Couzens, executive director of Ecos Trust, a Somerset-based charity that provides advice on sustainable building. He points out that you can get a healthy financial return of between 6 and 9 per cent, tax free.

The sea change for photovoltaic (PV) panels and other green electricity sources has come about through the introduction of feed-in tariffs in Britain in April 2010. This means that anyone installing small-scale electricity generation in homes, schools, hospitals or businesses can claim a substantial tariff – 41.3p a unit – for what they produce. And they get a further 3p a unit for any surplus electricity exported to the grid – as well as saving the cost of buying electricity in.

“Before feed-in tariffs were introduced, the advice to householders was that solar PV was an easy technology but very expensive,” says Couzens. That’s completely changed. He thinks that people want to do the right thing but the financial incentive makes a big difference – now it’s considered an ethical investment opportunity.

Until recently, Britain was a notable laggard on domestic renewable energy generation. Other countries are ahead of the game. For example, in Germany, a national system of feed-in tariffs has turned a mostly cloudy country into a world leader in domestic solar panels. More than 250,000 people are employed in the industry and Germany is exporting components around the world.

Other European countries, most notably Spain, Portugal and Austria, have tried to emulate this success with incentives of their own. This has not been overwhelmingly successful. For example, in Spain the market for solar energy faltered when the tariff was significantly reduced, as the government – feeling the effects of the financial crisis – took fright at the cost to the taxpayer. To be fair, the market had overheated with developers and investors funding large-scale installations to take advantage of generous incentives, meeting the government’s 2010 target by the end of 2007.

At the end of 2010, there were fears that the UK government might also reduce the feed-in tariffs offered. However, it has now confirmed that the system won’t be reviewed until 2012, unless the uptake is substantially “higher than expected”. The government hasn’t made clear exactly what this means, but plans to do so shortly.

In the first nine months of the scheme, there were 18,455 installations, of which more than 93 per cent was for solar PV (the rest were mostly for wind power, with a smattering of mini hydro generators). Jeremy Leggett, founder of Solar Century, one of the companies offering PV installation, says that his business has increased by three or four times in this period.

Can everyone benefit from solar power? Contrary to many people’s preconceptions, modern photovoltaic panels – the term simply means generating electricity from sunlight – are suitable for colder northern climes as well as sunnier regions. And the new generation of panels are more efficient in their use of sunlight, meaning that they can generate electricity on cloudy days.

The most important factor is that you have a south-facing roof. It’s also important not to have any part of the solar panel obscured by shade – a tree or a chimney pot, for example, might substantially reduce its efficiency.

For householders fortunate enough to have other space available, the panels need not be on the roof of the house at all. Roger L’Estrange chose to put his on top of a pergola at the bottom of his north London garden. He had to adapt the roof, with an A-frame, to allow the panels to face the sun. Now he hosts summer dinner parties under a doubly useful roof that has become a talking point for guests.

An initial drawback was that one of L’Estrange’s neighbours was unenthusiastic about the addition. Concerns about visual aesthetics are not uncommon. In fact, among the homeowners we spoke to in the UK, most reported one or two neighbours expressing reservations at the outset. However, the panels are almost universally welcomed once installed. Putting up panels no longer requires planning permission, except in conservation areas or on listed buildings.

Probably the biggest obstacle for most people is the cost of installation. Most households are likely to be looking at initial costs of between £10,000 and £20,000.

John and Alison Austin, who live near Guildford in Surrey, paid £17,200 for their top-of-the range PV panels – they installed 16 of them. John explained that they were the highest rated panels available and can produce up to 3.8kW per hour of electricity, which is close to the maximum permissible under the feed-in tariff scheme. Their panels were installed in September 2010, and they’re monitoring output carefully.

John estimates that in one year, the total return will be about £2,200, combining the 41.3p per unit feed-in tariff with the 3p per unit paid for electricity exported back to the grid, along with the saving of about 12p per unit during the day by not paying the electricity company for what he generates and uses himself. And that money is tax free. If he also subtracts the money he would otherwise have spent on electricity, he says the return would be about 6 per cent – that’s better than an ISA.

But what about people on lower incomes or those with young families who are unlikely to have enough money to spare? There is an alternative – a number of companies in the UK, and in other countries too, are offering consumers the chance to have solar panels installed and benefit from the energy they produce without having to pay a penny for them. Under most of these “rent-a-roof” schemes, the householder makes savings on their electricity bills, but gets nothing of the feed-in tariffs – these accrue solely to the panel owner.

Sue Welland from HomeSun, which offers free solar panels on this basis, says that there are a number of advantages for customers. Apart from costing nothing upfront – assuming you have more than 30 metres square of suitable roof space – the main benefits are that the company will carry out all the technical research necessary, and cover any maintenance costs, for 25 years. The company has a vested interest in the panels producing as much electricity as possible and working well, because that’s how it gets its return. In financial terms, the householder will get free electricity for anything they use that’s produced by the panels – generally about one-third of the total bill.

Critics are concerned that it’s not always clear to consumers that the panels will not be theirs and that their returns could be as little as £100 a year – although even that is pretty good for zero investment. Jasmine Birtles, a financial adviser working with British Gas, advises consumers to “check the conditions” on any solar offers, as some are available only to people with very large roofs. HomeSun says that customers can buy the panels outright at any stage of the 25-year contract, without penalty, so you’re not tied into the company’s scheme.

Soon, all of this may matter less. Gaining exposure to a burgeoning market fuelled by public subsidies has enabled solar power companies to invest heavily in new production and research, which has markedly reduced the cost of manufacturing the panels. The entry of China into the market has also helped to bring down the prices of solar components.

While the price for solar energy is coming down, the costs for traditional energy generation are soaring. Jeremy Leggett of Solar Century agrees with other analysts in their prediction that the costs for energy generation from both sources will be on a par by 2013.

Leggett says that the really important point is that we won’t be able to rely on energy imports in the future and so need to encourage as much domestic generation as possible. “Although the introduction of feed-in tariffs has only expanded the UK market from minuscule to tiny, it’s going in the right direction,” he says.

And for anyone considering putting solar PV panels on their roof, the financial incentives in the government subsidy should tip the balance. Early adopters, if the rules remain the same, could keep their place in the sun for the next 25 years.

www.decc.gov.uk for further information on FITS and a list of licensed suppliers

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Renewable energy: Germans lead the way in generating green power

The race to overcome fossil fuel dependence puts Germany in the lead by a long way. The UK, like many countries in Europe, needs to ratchet up its renewable agenda fast to pave the way for a sustainable future, write Bruce Millar and Tamzin Baker.

FiTs are raising awareness in the UK – as well as cutting carbon emissions a little – but according to some green pressure groups the scheme’s weakness is lack of ambition: only 0.8 per cent of UK electricity will be produced under FiTs by 2020, even according to government figures. Since launching the feed-in tariff programme in April 2010, the UK has added just 20 megawatts of photovoltaic generating capacity.

In contrast, Germany has emerged as a prototype on which other feed-in policies are modelled. “In the last year alone, Germany installed 6,000MW of generating renewable capacity,” says Alan Simpson, a former MP who now acts as a consultant to Friends of the Earth on energy and climate policy. “Germany installed more renewable energy systems in one year than the UK has accumulated over the last decade.”

Many German towns and cities are already driving the renewable agenda, according to Simpson. Munich, for example, has installed solar systems on all appropriate roofs. As well as reduced fossil fuel dependency, German feed-in tariff schemes have generated almost 300,000 green jobs in the last four years alone.

FoE says the scheme represents a “chance for households, businesses, communities, local authorities, farmers and others to take some control over their energy supply away from the energy companies, to cut their carbon emissions, protect themselves against future fossil fuel price prises and gain a stake in creating a low-carbon economy.”