Archive for December 2011

Bright future for solar dims after feed-in tariff cut

It can come as no surprise that the Department of Energy and Climate Change lost the feed-in-tariffs case (Report, 22 December). No matter what the motivation, you cannot make changes prior to the close of a consultation period. However, after the celebrations or commiserations, ministers will hopefully take the opportunity to address the two fundamental problems that still exist: lack of a sufficient budget to support this growing industry, and a proposed structure that disadvantages smaller companies.

The decision to decrease the percentage return on solar photovoltaic to single figures is sensible and expected. However, to base these rates on budget levels calculated as part of the comprehensive spending review, set in November 2010, is out of line with the current economic picture. Since the decision was taken last year to create a fixed budget for the tariff, the government has changed its overall strategy and now recognises the need to inject funds into the economy to stimulate business and create jobs. The emerging renewable energy industry is showing sustained growth, with companies investing millions to satisfy the growing demand for solar microgeneration, creating thousands of new jobs. This is now in jeopardy.

Second, one of the fastest-expanding industry sectors – small businesses installing solar PV – will be squeezed out of the market if the government’s plans on linking feed-in tariffs to energy efficiency measures goes ahead. Most SMEs are specialist installers not geared up to install energy-efficient measures such as cavity or solid-wall insulation. Only larger companies who can invest in the infrastructure necessary to offer a total installed solution would be able to cost-effectively operate in the marketplace.

If the model set out in the consultation goes ahead, the industry will no longer be one dominated by SMEs. It will unfairly favour large organisations which can offer a far more diverse package of products. The sustainable energy industry is one of the few success stories where performance is going in the right direction. With a little care and foresight, it will gather momentum and stimulate economic growth, while contributing to energy security.
Paul Roche
Director of renewables and sustainability, Grafton Group

Unlikely Coalition Joins Forces to Recommend Changes to Ontario’s Feed-in Tariff Program

December 22, 2011

By Paul Gipe

Renewable energy advocates and a solar industry trade group filed a joint submission on December 14, 2011 as part of the province of Ontario’s scheduled two-year review of its groundbreaking feed-in tariff (FIT) program.

The 100-page report by the Green Energy Act Alliance and Shine Ontario Association to Minister of Energy Chris Bentley urged the government to stay the course and maintain the integrity of the FIT program while proposing significant changes to details of the program.

Ontario launched a comprehensive feed-in tariff program in the fall of 2009. The first of its kind in North America, the program set feed-in tariffs as the mechanism for procuring new renewable generation from wind turbines, solar panels, hydro-electric plants, and biogas generators. Administered by the Ontario Power Authority (OPA), the program included a review after two years.

The Green Energy Act Alliance (GEA) was the major public interest organization advocating for a feed-in tariff program in Ontario. The GEA is a who’s who of Canadian environmental groups and renewable energy advocates, including Environmental Defence, the Pembina Institute, World Wildlife Fund, the David Suzuki Foundation, the Ontario Sustainable Energy Association, and the Community Power Fund among others.

Shine Ontario is a new Ontario trade association representing solar photovoltaic (solar PV) manufacturers, project developers, and installers. The association includes the largest solar PV manufacturer in Ontario, Canadian Solar, whose plant near Guelph is capable of 250 MW of modules per year, and SkyPower a major developer of solar power plants.

The joint submission is unusual because the objectives of renewable energy advocates often differ from those of trade associations. However, the disparate groups and businesses agreed on several key recommendations.

 

  • Raise Ontario’s sights–set annual targets of installations by technology
  • Keep integrity of the program: Keep FITs for all technologies, all sizes
  • Cut Solar PV tariffs from 11% to 32%
  • Introduce annual tariff degression targets for Solar PV
  • Introduce new Solar PV “brownfield” tranche
  • Add new technologies to the FIT program including solar hot water, ground-source heat pumps, small wind, and energy efficiency
  • Make price-setting and grid connection more transparent
  • Establish a carve-out for FIT contracts by community and aboriginal groups
  • Reduce wind costs by introducing differentiated wind tariffs
  • Revise future FIT reviews to allow more time for stakeholder engagement

Significantly, the joint submission urged Ontario’s Minister of Energy Bentley to set annual installation targets for each technology that would result in more than 15,000 MW of new renewables by 2018, including more than 6,000 MW of solar PV and more than 7,000 MW of wind. Under Ontario conditions, this mix of new resources could generate more than 30 TWh, contributing a modest 23% to the province’s supply of electricity.

The report notes that many other jurisdictions have much more aggressive targets for new renewable energy than the proposed program.

As part of the report, proponents commissioned a California consultant, Robert Freehling, to construct a model for estimating the impact of the proposed program on Ontario ratepayers. Freehling calculated that the mid-cost scenario would add about 10% to ratepayers’ cost of electricity through 2018, the midpoint of OPA’s planning horizon.


Disclosure: Paul Gipe participated in the Green Energy Act Alliance’s contribution to the joint submission by the GEAA and Shine Ontario Association.


Ontario is planning to build two new nuclear power plants within the next decade. Freehling calculated that if the new renewable generation offset the construction of the new nuclear plants, there would be little or no additional cost to Ontario ratepayers for the renewable generation.

The solar industry participants in the joint submission provided data on installed costs, annual operating costs (including substantial lease fees for rooftop installations), and their desired return on equity. This data was used to calculate “indicative” tariffs for the different solar PV tranches in the proposed program.

As part of their call for increased transparency in Ontario’s FIT program, the proponents placed their tariff calculations and Freehling’s costing model in the public domain. OPA, the Ministry of Energy, and the public have full access to both models.

Previous tariff calculations were made by OPA using a proprietary discounted cash flow model. The model used in the joint submission adapts the Profitability Index Method developed by Bernard Chabot. The latter method uses fewer key variables than required in a discounted cash flow model, allowing for more transparent rate setting.

Chabot had advised the Ontario Sustainable Energy Association in 2005 for its first report to the Ontario Ministry of Energy for what eventually became the Standard Offer Contract program. Chabot has presented workshops on his methodology for tariff setting across Canada and the US.

Now that both the model for calculating indicative tariffs and the model for estimating program costs are in the public domain, they can be used by proponents of feed-in tariffs elsewhere in North America.

The joint submission also urged that Ontario expand the feed-in tariff program to include solar hot water, ground-source heat pumps, and energy efficiency as recently pioneered in Great Britain.

The report also recommended that Ontario revise the tariffs for wind energy by moving to differentiated tariffs like those used in Germany, France, and Switzerland. Adopting differentiated wind tariffs would have the effect of cutting wind tariffs at windier sites in the province while keeping the base tariff the same as in 2009.

 

-End-

The sun hasn’t yet set on domestic solar energy

With just six weeks’ notice, the Government announced that it would be slashing the Feed-in Tariff (FIT) payments for solar panels by more than half.

The cuts, which came into force last Monday, could threaten 25,000 jobs in the renewables industry but, as a homeowner, if you were thinking about improving your home’s energy credentials, is it still worthwhile fitting solar panels?

“We knew and accepted that the current subsidy level of 43.3p for smaller domestic and commercial solar PV installations was coming to an end. What shocked us and the industry as a whole was the extent of the cut and the speed with which it is being implemented,” says David Hunt, a director with energy company Eco Environments.

The FIT scheme has been understandably popular; you get cash payments as an incentive for having solar panels on your roof to generate your own energy. However, the Government has reduced these payments from 43.3p a kilowatt-hour to 21p (from next April) for any new installations registered after 12 December.

Those who already have solar panels in place get to keep the top rate for 25 years but, in the scramble to beat the deadline, many customers have been left unhappy after failing to get their installations completed in time. They will now earn less than half of what they had hoped from their investment.

Solar panels used to be a fairly easy sell with the more generous feed-in payments but the cuts are likely to put many people off.

“It used to take nine or 10 years for the systems to pay for themselves, and now that is increasing to around 17 or 18 years. On the old rate, you could make £1,200 a year. But with the new rate, that drops to £650 and the payments are only guaranteed for 25 years so you haven’t got many more years to make a profit on it,” says Sylvia Baron, a Which? energy expert.

There is no doubt there is now a big gulf between those with existing solar PV systems and anyone getting one installed today, but it is important to remember that these feed-in payments are still tax-free and inflation linked (to the retail prices index). Also, because the electricity companies pay for all the energy generated, whether you use it or not, any excess electricity is exported back to the national grid for extra cash.

Rising fuel prices and lower installation costs going forward could mean that solar panels still offer a decent combined return and saving. The cost of having solar panels fitted has already fallen some way in the past 12 months, while electricity bills have continued on an upward spiral and in an industry that has had the rug pulled out from under its feet, there are bargains to be had.

“Considering the economic climate the prospect of a Government-backed, income-tax-free and index-linked investment return at above 5 per cent means that it is still very worthwhile to invest in solar energy,” says Toby Ferenczi, a co-founder of energy company Engensa. “Prices have fallen so much that the returns are almost as good as they were when the scheme was first introduced last year.”

One company, EvoEnergy, has now cut the price of its cheapest system by over £3,000 so a 3.92kw system with 16 solar panels could be fitted for £9,777. EvoEnergy say that a typical south-facing home could earn £759 a year from the FIT and save £219 on their annual electricity bill, equating to a 10 per cent return.

However, the sticking point could be that from next April, full payments will only be available to those with an energy performance certificate graded C or above. This essentially means you’ll need loft and cavity-wall insulation, although the Energy Saving Trust says this makes sense as there is little point generating energy only to lose it through the roof and walls.

Even so, it may be that only very new homes qualify and everyone else could receive less than half of the reduced standard payments. The message, therefore, is to do your research, make the calculations, and if you’re looking at this purely from an investment point of view, consider other options.

There are so-called “free solar” or “rent-a-roof” deals where you can get the panels fitted for nothing (and still benefit from energy bill savings) on the proviso that the supplier gets to keep the feed-in payments. Several companies, including British Gas and Eon, have already stopped taking on new applicants in light of the cuts but you can still get free financing with the likes of HomeSun, Isis Solar and Engensa. These deals are potentially more attractive now that you have less to lose in terms of feed-in payments and more to gain from rising energy prices.

“These might become slightly more competitive. Before we said don’t go for a rent-a-roof scheme because you would lose out on a lot of money but that is not the case anymore. However, be careful about the contract; in the past we have seen a few problems in the terms and conditions to watch out for,” says Ms Baron.

It is important to remember that you have to lease your roof for 25 years and any financial contract of this length is a serious undertaking so legal advice is a must.

Watch out for contracts that are heavily in the favour of the solar panel company, for example, it may stipulate that you need consent to sell up, or make any home alterations near the system during the contract. It may even state that you must compensate the company for missed feed-in payments if you need to repair your roof at any point. Even if you are allowed to sell your home within the 25 years, bear in mind that finding a buyer happy to take on a house with a roof that is rented out may be tricky.

If you do decide to go ahead and get solar panels fitted, whether financed from your own savings or through a rent-a-roof scheme, there are some basic rules. First of all, check if you need planning permission although you generally won’t unless you have a flat roof or live in a listed property, or conservation area. You also need to inform your mortgage provider and insurer that you are getting solar panels installed. Then once you’ve chosen your solar PV company, ensure that they are MCS (Microgeneration Certification Scheme) certified and a member of the REAL (Renewable Energy Assurance Limited) Consumer Code.

Case Study

Jo Kelly, 64, Basingstoke

Despite the cut to the feed-in tariff, Jo Kelly, went ahead with a solar panel installation on her three-bed Victorian home last Thursday.

“I had been thinking about it for some time and then the Government changed the goalposts. It didn’t put me off though. I think it’s the way that everybody has got to go. My money was sitting in the bank doing nothing,” she says. “It might as well stay on my roof instead”.

Jo used EvoEnergy to install six panels, which cost just shy of £7,000. The company has estimated that she will make £273 a year from the new feed-in tariffs but that doesn’t factor in the money she save on her own electricity bill and for Jo, any extra payments are a bonus.

“People shouldn’t get so hooked up on what kind of return they can get. If they want to leave something behind for grandchildren, this is a great way of doing it”.

New British and Malaysian FIT Programs Launch

World First–British Feed-in Tariffs for Renewable Heat

Solar DHW Tariff Scheduled for Fall 2012

Malaysia Seeks 1,250 MW of Solar Photovoltaics by 2020

December 4, 2011

By Paul Gipe

Two innovative feed-in tariff programs launched last week. Malaysia methodically stepped into the fray of developing countries moving aggressively toward renewable energy. Meanwhile, despite the Eurozone’s debt crisis, strikes, and turmoil in its FIT program for electricity, Britain quietly launched a groundbreaking program to pay feed-in tariffs for renewable heat.

Regardless of uncertainty in world financial markets, the launch of these long-planned, long-discussed programs indicates that the march toward more countries using feed-in tariffs to develop renewable energy continues undiminished.

The British program, dubbed the Renewable Heat Incentive (RHI), for non-domestic generators opened for applications on Monday November 28, 2011. Malaysia opened their electronic doors to applications December 1, 2011. Both programs expected a flood of applications.

Britain’s RHI

For the first time, a program will pay for the heat generated by solar panels. Britain’s RHI will pay £0.085/kWh ($0.13/kWh) for metered heat from solar thermal systems up to 200 kW in size. The program will also pay £0.043/kWh (~$0.07/kWh) for heat from ground-source heat pumps less than 100 kW in size, and £0.03/kWh (~$0.05/kWh) for heat pumps greater than 100 kW.

The original program proposed to pay £0.18/kWh ($0.28/kWh) for heat from residential-scale solar domestic hot water systems. Implementation of the residential heat program has been delayed to October 2012.

 

Malaysia’s Advanced Renewable Tariffs

Unlike some developed countries, Malaysia launched a full-featured program of Advanced Renewable Tariffs from the start. The tariff schedule is fully differentiated by technology and size, and includes bonus payments for locally manufactured products.

The ambitious program expects to develop more than 3,000 MW of new renewables by 2020, of which more than one-third will be from solar photovoltaics alone. Biomass will contribute another one-third.

 

DECC: Renewable Heat Incentive

Malaysia Adopts Sophisticated System of Feed-in Tariffs

ITC Ruling Will Initiate Complete Investigation Into Solar Disparity

by Michael Bates on Friday 02 December 2011

The International Trade Commission (ITC) has made a preliminary determination in its anti-dumping and countervailing-duty investigation into Chinese solar cell and module trade practices, having voted 6-0 this morning that there is a “reasonable indication” that those practices are detrimental to the domestic solar industry.

With this vote, the U.S. Department of Commerce (DOC) has been given the green light to continue investigating the allegedly unfair or illegal importation of Chinese crystalline-silicon photovoltaic products – namely, that cells and modules are being sold in the U.S. at prices under fair value and that the Chinese government is unfairly subsidizing its own manufacturing base.

Hanging in the balance of these investigations is whether anti-dumping and countervailing duties will be established to prevent Chinese anti-competitive practices and level the playing field for U.S. solar manufacturers.

The Coalition for American Solar Manufacturing (CASM), led by SolarWorld Industries America Inc., filed the cases with the ITC and DOC in October.

“The ITC’s unanimous ruling underscores what American solar manufacturers have argued for months: Without any production cost advantage, dumping by Chinese solar manufacturers and massive subsidies by the Chinese government are enabling Chinese producers to drive out U.S. competition,” said Gordon Brinser, president of CASM, in a statement.

The DOC is expected to make a ruling, perhaps as soon as mid-January, regarding preliminary remedies. These remedies could include, for instance, a requirement that Chinese importers deposit estimated duties on imports they made as far back as Oct. 14.

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