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Peter Fane FARM ENERGY 2011 Feed In Tariffs and income from renewable energy Presentation amended to take account of App

Peter Fane FARM ENERGY 2011 Feed In Tariffs and income from renewable energy Presentation amended to take account of Appeal Court finding 25 th January 2012. …. Breaking news (25 th January 2012):

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Peter Fane FARM ENERGY 2011 Feed In Tariffs and income from renewable energy Presentation amended to take account of App

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  1. Peter Fane FARM ENERGY 2011 Feed In Tariffs and income from renewable energy Presentation amended to take account of Appeal Court finding 25th January 2012

  2. … Breaking news (25th January 2012): • Since the Farm Energy event in December, DECC has lost its case in both the High Court and now (25th January 2012) in the Court of Appeal. • Although Chris Huhne, Secretary of State, has said that DECC intend to appeal to the Supreme Court, they have yet to win the right to do so and it is unlikely that the Supreme Court will take a different view on the merits of the case. • The next two slides have been inserted to show the implications of this for farmers considering investing in solar PV.

  3. … The Court of Appeal (25th January) has refused DECC’s appeal against the High Court finding in December that the way it introduced the change in FIT rates was illegal. In preparation for losing the case, DECC had set out a new fallback date of 3rd March for implementing the change of rate. This means that the new reduced rates of Feed-in Tariff for PV will apply from 3rd March 2102, and not as DECC had intended from 12th December 2011

  4. … The Court of Appeal finding means that some farmers will be able to secure both the significant cost reductions which have become available since October and the previous high rates of feed in tariff, giving simple rates of return of nearly 20% in some cases on typical good quality 50 kW PV schemes; We would advise farmers only to proceed on this basis if they were already convinced that PV was a good investment at the new rates – to regard the restoration of the PV rates as a bonus, not a basis for planning; To benefit from this, and to get the system installed in time, farmers will have to be on the point of confirming a contract and to have the funds available, assuming a 50% deposit; and to have started the process of securing planning consent and grid connection approval. FarmREO can expedite arrangements with good quality suppliers with a track record of supplying to farmers, and can help secure the necessary consents in time – but only for those who act quickly (25th Jan ’12). See http://www.farmrenewableenergyoptions.co.uk/farmrenewableenergyoptions/decc-loses-court-of-appeal-hearing-pv-rates-to-be-restored-till-3rd-march.html .

  5. … The background to feed in tariffs

  6. 20% improvement in energy efficiency 20% reduction in greenhouse gas emissions - rising to 30% if multilateral agreement 20% generation of total energy from renewable sources (and 10% from renewable transport fuels) All to be achieved by 2020 Renewable Energy Directive, see http://eur-lex.europa.eu/JOHtml.do?uri=OJ:L:2009:140:SOM:EN:HTML Meeting the EU’s 20:20:20 target:

  7. The UK has a long way to go … (2007) % of overall energy generated from renewable sources

  8. Agriculture emissions of methane and nitrous oxides

  9. Meeting the EU renewable sources target? • EU-27 on target for 20.7% of 2020 energy consumption from renewables? • 34% EU electricity demand to be supplied from renewables by 2020? • Wind energy to generate 14% of Europe’s total electricity demand in 2020 (4.2% in 2009) • 15 Member States to exceed their national targets EWEA analysis of NREAPs, Dec ’10 http://orizzontenergia.it/images/stories/Communicati%20Stampa/Per%20Argomenti/Rinnovabili/EWEA%20-%20EU%20will%20exceed%20renewable%20energy%20goal%20of%2020%20percent%20by%202020.pdf

  10. Renewables obligations (* 1.9 ROCs for biomass and small wind) RTFO for transport fuels Feed in Tariffs 2010 – as amended July ‘11 And again 31st October/ 12th December 2011 and 31st March 2012 Energy cost savings Grants – inc RDPE (large grants scheme and energy efficiency) Tax incentives Market incentives – lower carbon products, house / building values (rental)? New incentives: Renewable Heat Incentive (RHI) Incentives for renewable energy

  11. Feed in Tariff on farm / commercial buildings is taxed as other income (only domestic exempt IT) Enhanced capital allowances (ECAs) on purchase of new capital equipment Biogas / biomass CHP (CHPQA certified) exempt from business rates Renewable Energy Bonus - local authorities can keep business rates from renewable energy projects Revenue from electricity and FiTs (domestic projects exempt from income tax) http://www.hmrc.gov.uk/budget2007/bn64.htm Taxation and investment in renewable energy

  12. Consider joint ventures - with communities, farmers/landowners, manufacturers/suppliers Collaboration - with energy companies, retailers, others Rate of return is crucial – FiTs now based on 5% real terms Venture capital ? Will the third party investors return? Funding renewable energy projects

  13. FEED-IN TARIFFS (FITs) • Introduced in April 2010 • Scheme is guaranteed by the government • but Tariff is paid by the electricity supplier. • payments are inflation protected - linked to the Retail Prices Index. • Rate, once set, guaranteed for 20 years (25 years PV) • The Government set EU target of achieving 15% electricity production from renewable sources by 2020 – current figure is only 7%. Predictable returns? Subject to emergency tariff changes…

  14. Help to kick-start mass deployment of renewables to meet 2020 targets; to bring technology costs down to “grid parity” so public support no longer needed costs typically fall by 20% every time the number of installations doubles. increase energy security (i.e. reduce dependence on imports) and reduce carbon emissions. FITs used in more than 40 countries around the world, many now have strong renewable manufacturing industries, creating employment and export revenue. FITs attract outside investment: “international experience shows FITs are extremely effective at attracting investment from homeowners, farmers, community-schemes and the public sector, as well as the commercial sector.” (REA FiT briefing - http://www.r-e-a.net/document-library/press-releases/100201FITPressBriefing.pdf) Why FITs? what will they achieve?

  15. FEED-IN TARIFFS(FITS)Post 31st October ‘11 phase 1 review

  16. FiTs – “Comprehensive review phase I” 31 October 2011 ‘Comprehensive Review Phase 1: Consultation on Feed-in Tariffs for Solar PV’ ‘Consultation’ closes 23rd December, rate changes wef 12th December 2011 (or 3rd March 2012):• Reduced tariffs for all PV with a Total Installed Capacity (TIC) of 250kW or less• new ‘multi-installation’ tariffs for aggregated solar PV schemes(further 20% cut) • new energy efficiency requirements

  17. Feed-in Tariffs – why the review? Gregory Barker MP, Energy & Climate Change Minister: “overgenerous subsidies failing to keep pace with plummeting costs… boom has been built on unsustainable foundations the costs of the technology have plunged – by at least 30% – since the scheme started in April 2010 solar is burning through its budget at an unsustainable rate. The £867m pot … will be completely devoured if we don't act now. … avoid the boom and bust already experienced in Italy, Spain and France, fuelled by over-generous subsidy. I still believe passionately that feed-in tariffs are essential”.

  18. Opposition day debate in House of Commons Motion: “… that solar power gives families, community organisations and businesses greater control over their energy will help the UK meet its renewable energy targets and reduce carbon emissions; since the creation of the feed-in tariffs nearly 90,000 solar installations have been completed in the UK and the number of people employed in the solar industry has increased from 3,000 to 25,000; the Government’s cuts to feed-in tariffs … undermine confidence and deter investment; regrets that the cuts to feed-in tariffs were announced with just six weeks’ notice and come into force before the consultation has even finished; calls on the Government to withdraw the 12 December 2011 deadline and bring forward more measured proposals, put feed-in tariffs on a sustainable footing”

  19. The Labour case Caroline Flint MP: cost of FiTs < £1 per household per year (Ofgem, June) average household energy bill £1,345 pa standard tariffs up by £175 per household since June. the (solar) industry is calling for … planned, sensible reductions in tariffs. “When we introduced the scheme in 2010, we made it clear that there would be a review in 2013, or earlier if needed”.

  20. “the Government is putting feed-in tariffs on a long-term, fair and sustainable footing” (23rd November debate) Chris Huhne: If we were to leave the scheme unchanged (it) would add at least £26 to an average consumer bill… by 2014-15 feed-in tariffs for solar PV would cost consumers about £1 billion a year If we do not act now, the entire feed-in tariffs budget for the current spending review period will be fully committed by next spring the returns that the new scheme will provide—if, indeed, we proceed with it following what is a genuine consultation will be very similar to those originally intended. The revised tariffs will provide inflation-proofed returns for 25 years of around 5%. We have to strike a delicate balance between acting quickly, and allowing people to finish work that is well under way. Those who have already installed solar PV and who are registered for feed-in tariffs will not be affected… this approach is consistent with our long-standing principle in the House of not making retrospective changes.

  21. Government response to the FITs debate (23rd Nov) Gregory Barker (Energy & Climate Change Minister, Con): “I believe in the huge potential of solar, and I am determined to see it at the heart of the coalition’s ambitious plans (for) decentralised energy. I recognise that there is concern about the implementation date of 12 December. We are protecting the scheme for the long term ... This is a genuine consultation”. Labour motion defeated 297 to 226. http://www.publications.parliament.uk/pa/cm201011/cmhansrd/cm111123/debtext/111123-0004.htm

  22. The battle inside the coalition? George Osborne to Conservative conference October: “We’re not going to save the planet by putting our country out of business… we’re going to cut our carbon emissions no slower but also no faster than our fellow countries in Europe” Chris Huhne at Renewable UK conference (26th October): “We subsidise renewables to bring on deployment and reduce costs; We are not going to save our economy by turning our back on renewable energy... I know the Prime Minister agrees…” George Osborne’s Autumn statement (29th Nov): “If we burden them with endless social and environmental goals, however worthy in their own right, businesses will fail, jobs will be lost…”

  23. CBI: “third own goal” on energy policy. John Cridland: government has undermined investor confidence and lost trust of the industry; “Moving the goal posts doesn’t just destroy projects and jobs, it creates a mood of uncertainty that puts off investors” government is jeopardising investment in future initiatives http://www.egovmonitor.com/node/44609

  24. ‘Cut don’t kill’ campaign 25,000 jobs in 3 - 4,000 businesses under threat from the Government's proposals? 87,769 solar installations installed with FiTs since introduced 2010. 312 mW solar generated in UK (cf 225mW Oldbury nuclear power station). ‘As solar industry grows and costs go down,… there should be a gradual reduction in the tariffs’. ‘within 6 – 8 years solar will not need to be subsidised” – provided current support is maintained (Solar Revolution Strategy for UK) http://www.oursolarfuture.org.uk/

  25. “Raise the Roof” (Alan Simpson) The whole purpose of FiTs is to develop a momentum for renewable energy technologies that will quickly turn them from innovations to mature market technologies. Instead of having energy bills that pay for the import of non-renewable fossil fuels, Germany is now paying its own citizens to produce, install and maintain their own renewable energy systems. calling on the government to delay the proposed cuts and introduce a framework for tariff rate adjustments, which would prevent future rates being cut by surprise.

  26. The report from the Select Committees: Tim Yeo MP, Chairman of the Energy and Climate Change Committee: "solar subsidies needed to be urgently reduced, but the Government has handled this clumsily.Joan Walley MP, Chair of the Environmental Audit Committee: "It doesn’t make economic sense to let the sun go down on the solar industry in the UK. As well as helping to cut carbon emissions, every panel that is installed brings in VAT for the Government and every company that benefits from the support is keeping people in work. The Government is right to encourage people to focus on saving energy before fitting solar panels, but these proposals will require most households to spend thousands of pounds on extra insulation before they purchase the panels. This will stop nine out of ten installations from going ahead” See http://www.parliament.uk/business/committees/committees-a-z/commons-select/energy-and-climate-change-committee/news/solar-fits-findings/(22nd December).

  27. SCHEDULE – TABLE OF GENERATION FEED-IN TARIFFS (FIT) PV – 25 Years Wind – 20 Years

  28. Solar PV in Germany PV currently generates 3% of gross electricity consumption 10% by 2020? 5.2 GW (gigawatts) new capacity installed Oct 2010 to Sept 2011, triggering a 15% FIT reduction. Rate for small rooftop installations goes down to 24.43 eurocents / kWh (currently 28.74) “the German government has clearly defined the future growth path... the risks of an abrupt change in subsidies are minimal and the market will remain attractive during 2012" German Government invested €6.5 billion in solar 2010 (UK: £860 million over four years).

  29. LOCATION National solar performance

  30. Estimate of solar electricity generationBased on PVGIS data for Peterborough(fixed system, 10kWp chrystalline, due South at 35 degrees)

  31. PV PRODUCTS ROOF MOUNTED :- suitable on a range of agricultural buildings and houses GROUND MOUNTED :- good option if you don’t have sufficient / suitable roof space available TRACKER SYSTEM:- alternative ground-mounted installation allowing optimization of grid connection, space and yield

  32. PV RETURNS – before and after 31st October review

  33. WIND TURBINE RETURNS

  34. RETURNS WILL INCREASE WITH ELECTRICITY PRICES, FEED-IN TARIFFS ARE LINKED TO THE RPI Ofgem, has forecast that electricity prices will increase by 60% in the next 6 years. From 1999-2009, domestic users’ bills increased by 37% and non domestic medium users’ bills increased by 66%. Feed-in Tariffs – once set for any installation - guaranteed to increase in line with RPI. RPI 5.6% Sept (cf CPI 5.2%) RPI averaged 5% per year from 1987 to 2010

  35. INCREASES IN ELECTRICITY COSTS OVER THE PAST 25 YEARS

  36. Feed-in Tariffs: other technologies

  37. Feed-in Tariffs – anaerobic digestion

  38. Support for small hydro schemes

  39. What will tariffs be after 31/03/2012? Government commitments: to 2020 targets in RED (and increase if possible); to ‘full feed in tariff system’ in Coalition agreement; to maintain rates, once set, for 20 / 25 years To protect from inflation No commitment to schedule of rates originally set out System should secure ‘grid parity’ as costs come down, ie. no further subsidy needed after a period But cuts in rate for April 2012 may be greater: 50% cut Oct for PV cf 30% cost reduction So …?

  40. 100 Conservative backbench MPs object to wind farms (31st January): Conservative MPs wrote to the Prime Minister asking him to amend draft National Planning Policy Framework to ensure that local people have the power to object to proposals for unwanted on-shore wind farms. to cut the subsidy for on-shore wind and spread the savings made between other types of renewable energy production and energy efficiency measures. Simon Reevell MP: “The new National Planning Policy Framework must protect … the right of local people to defeat unwanted on-shore wind farm proposals.” “Recent planning appeals have approved wind farm developments with the inspectors citing renewable energy targets” … the importance of local heritage and that the local countryside must be given proper consideration.”

  41. Get the basics right first Consider energy costs and efficiency first, assess GHG emissions and potential to reduce CO2e per kg Review and decide right option(s) for business situation and overall objectives Assess optimum site and planning situation listed buildings? radar / telecoms? community engagement / part ownership? Accurate assessment of wind energy (or solar gain) for site grid connection costs – and delays Scope for additional energy savings? Alternative investment options? Ownership structure and finance options

  42. Farm Renewable Energy Options Contacts: David Meredith MBIAC, Bridgnorth (West) - Chairman 07702 204439 Peter Fane MRICS MBIAC, Cambridge (East) 07802 256861 Philip Uglow MBIAC, Launceston (South West) 07901 516684 Chris Harvey MBIAC, Altrincham, Cheshire (North West) 07736 081424 Ruth Farrell MRICS (Head Office) 01746 785121 Email: Ruth@FarmREO.co.uk

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