Falling costs plus generous feed-in tariffs mean return is higher than ever – but payback will fall in April
Miles Brignall
guardian.co.uk, Friday 22 July 2011 23.02 BST
Are you a homeowner with some spare cash? A 20%-25% collapse in the price of rooftop solar power units in recent months has turned the government's feed-in tariff scheme into one of the most lucrative financial propositions for households with the right sort of property.
The scheme was introduced in April 2010, when the Labour government introduced generous feed-in tariffs to encourage households to install solar photovoltaic systems. Back then, anyone spending, say, £13,000 up front to fit a 2.5kWp system to their home was paid 41.3p per kilowatt hour (kWh) generated – enough to earn them a typical annual income of £900 a year in payments, on top of a £140-a-year saving in reduced electricity bills.
It was described as a good investment because payments for each unit of electricity generated were guaranteed for 25 years, paid tax-free, and set to rise each year in line with inflation.
If you were planning to stay in your home and had a suitable roof (unshaded, at a pitch of about 40 degrees, and facing between south-east and south-west), the main question was how big a system to install – assuming you could raise the installation costs. The bigger the system, the greater the financial return.
However, you shouldn't worry if you put off doing anything because it has emerged this week that waiting has worked in your favour.
Solar experts say that as a result of the installation costs coming down, the investment value of the scheme has become even better. These lower installation costs, an inflation-linked increase to the feed-in tariff payments and the prospect of rising electricity prices all mean the guaranteed returns are now above 10% a year, depending on how you calculate it. And if you install before next April – when new payment tariffs look set to come into force – you are guaranteed the tariffs for the next 25 years at the old rate.
Gabriel Wondrausch, who set up Exeter-based PV installer Sun Gift Solar, says the cost of systems has come down dramatically in 18 months. "We've been supplying PV systems for almost five years now and the prices have been on an almost continuous downward path," he says. "A year ago we were selling a large 4kWp system for around £16,000. Today that same one is costing less than £13,000." (Two years ago the cost would have been closer to £20,000.)
Wondrausch says the volume of sales has been a major factor in UK prices coming down, as has the reduction of feed-in tariffs in Germany, Europe's biggest PV market. The panel manufacturers, it seems, price their panels according to the returns consumers can expect, and have been lowering prices as a result.
Solarcentury, one of the UK's biggest solar companies, confirms the view that prices are falling. And even British Gas has reduced the price of its PV systems. A spokesman says business efficiencies and efficiencies in the supply chain mean costs have fallen by about 20% since June last year. "A typical 2.5kWp system cost around £13,383 last year," he says. "Today it would cost around £10,450. We also need to consider that panel efficiency has increased – panels are 10% more efficient than they were."
Wondrausch points out that the generous tariffs won't be around for ever. In September the government is expected to unveil a new – significantly less generous – scheme for those installing PV systems after April 2012, suggesting that if you want to do it, now is the time to act.
Originally, it was thought the payments for new installations would be cut by 9% from their current level of 43.3p per kWh generated.
Solarcentury says the industry is currently awaiting publication of the government's proposals for tariff cuts. "There is no doubt that the proposed cut for new installations from April 2012 will be higher than the planned 9%," it predicts.
Meanwhile, if you are thinking of installing a system be prepared to spend some time researching the company you are using to carry out the work.
Cathy Debenham, who runs website YouGen.co.uk, says there is growing evidence of dubious sales tactics in the solar PV market. She recently came across one company that claimed you could make money by installing a panel on a north-facing roof, which is nonsense. The consumer group Which? warned that some claims made by firms selling solar PV could not be substantiated. Its advice is that consumers should be wary of any company that offers a quote without visiting the home to carry out a proper survey, or one that makes grandiose claims about the income you will receive.
Debenham's site is a good starting point if you're looking for information, or for a good installer who comes with recommendations from other users. The Energy Saving Trust site has lots of information too.
One thing to ask your chosen installer is which panels they plan to use. Wondrausch, who was one of the first to install PV panels in the UK five years ago, says the panels vary significantly in the electricity they produce – by as much as 12.5%.
Monday, 25 July 2011
City presses Centrica to cancel plans for building nuclear power plants
• Delays at prototype in Normandy raise concern in City
• MPs aim to curb doorstep sales by energy companies
Terry Macalister
The Guardian, Monday 25 July 2011
Centrica is being urged by the City to withdraw from a £4bn commitment to build new nuclear power stations in partnership with Electricité de France (EDF) amid soaring costs and delays at a prototype reactor at Flamanville in France.
The call comes days before the company will reignite the row over high domestic energy prices by reporting six-monthly operating profits at its British Gas Residential Energy division of £300m even before its latest price rises.
Meanwhile, a House of Commons report out on Monday demands that energy companies found guilty of mis-selling their products on the doorstep and elsewhere should pay compensation.
Centrica should "not touch with a barge pole" the new nuclear build (NNB) joint venture with EDF to build four new plants in Britain, argues Lakis Athanasiou, utilities analyst with Evolution Securities.
"Centrica is a minority holder in a technology in which it has no institutional understanding, and where, as emphasised by Flamanville, construction risk is notorious. Centrica should not progress new nuclear further, particularly if [the] government is unwilling to take construction risk," he says.
The Evolution view reinforces concerns expressed by other investment specialists such as Citigroup, which has previously questioned the economics of building new nuclear plants. It is a blow to EDF and the government, which are both keen to see ageing power stations replaced from a source that used to provide almost a quarter of Britain's electricity.
EDF, mainly owned by the French state and the operator of dozens of atomic plants in its home territory, revealed last week that the cost of constructing the new power station in Normandy had almost doubled since its original budget. The building work has been hit by problems including accidents and the need for changes in the plant's construction after the explosion at the Fukushima plant in Japan, which was hit by the tsunami in March. It is now running four years behind schedule.
Vincent de Rivaz, the chief executive of EDF in Britain, has admitted the schedule for opening new plants in the UK by 2018 is slipping but denies this is a delay. He says the company is just a "taking stock".
The nuclear industry has a poor record of cost-overruns, once tracked in a study by Paul Brown, a visiting fellow at Cambridge university, and published under the title Voodoo Economics.
Evolution Securities expects Centrica to show a slight dip in overall group operating profits to about £1.3bn, with its residential business showing profits down by almost half from £585m. Athanasiou says that without the 18% and 16% rises in gas and electricity prices announced recently, the company would have seen British Gas Residential Energy fall into a small loss.
But that will do little to assuage consumer groups, who have been calling for widespread competition investigations into the actions of the big six power suppliers, which include British Gas, Scottish and Southern Energy and EDF.
The energy and climate change select committee will unveil a report on Monday calling for widespread action by the regulator, Ofgem, to ensure abuses are curbed. The committee is concerned that customers may be pressured into switching supplier on the doorstep when confronted with an array of complex tariffs and a hard sell. Figures from Ofgem suggest that up to 40% of consumers who switch do not end up with a better deal.
Tim Yeo, the Conservative MP who chairs the committee, said on Sunday: "There is mounting concern in parliament about the doorstep selling techniques of large energy companies. If it turns out that consumers are being persuaded to switch contracts when it's not in their best interests, by salespeople keen to earn commission, then it would only be right for the energy companies to cough up compensation."
Richard Lloyd, executive director at the consumer group Which?, said: "People should be guaranteed the rate they sign up to and the right to get out of mis-sold tariffs. Where things do go wrong, they should get compensation or the difference back."
Corporate results this week will reveal that the motorist's loss is the oil industry's gain as energy groups BP and Royal Dutch Shell prepare to report significant profits. Shell is expected to record a 43% surge in second-quarter profits to $6.7bn (£4bn) on Thursday, while on Tuesday BP is forecast to record a profit of $5.7bn for the three months to June. BP's figures for the same period last year were blighted by the Deepwater Horizon disaster which forced the group into a $17bn loss. Both groups have benefited from an oil price that has averaged more than $100 a barrel over the quarter, lifting petrol prices about 16% higher than last year. Last week a litre of unleaded petrol cost an average 135.8p. A spokesman for the AA said: "Drivers will find it difficult to reconcile their predicament, with pump prices becoming unaffordable, with the big profits that oil companies are making."
BP, mainstay of the FTSE 100 index, can at least argue that pension funds gain from its higher share price. BP stock has risen more than 50% since the Deepwater nadir. Airline passengers have had more shelter from the effect of high oil prices thanks to cut-throat competition between airlines. Nonetheless, fares have risen by about 5% in Europe this year, with business class passengers, deemed less sensitive to price hikes, on the receiving end of double-digit increases.
• MPs aim to curb doorstep sales by energy companies
Terry Macalister
The Guardian, Monday 25 July 2011
Centrica is being urged by the City to withdraw from a £4bn commitment to build new nuclear power stations in partnership with Electricité de France (EDF) amid soaring costs and delays at a prototype reactor at Flamanville in France.
The call comes days before the company will reignite the row over high domestic energy prices by reporting six-monthly operating profits at its British Gas Residential Energy division of £300m even before its latest price rises.
Meanwhile, a House of Commons report out on Monday demands that energy companies found guilty of mis-selling their products on the doorstep and elsewhere should pay compensation.
Centrica should "not touch with a barge pole" the new nuclear build (NNB) joint venture with EDF to build four new plants in Britain, argues Lakis Athanasiou, utilities analyst with Evolution Securities.
"Centrica is a minority holder in a technology in which it has no institutional understanding, and where, as emphasised by Flamanville, construction risk is notorious. Centrica should not progress new nuclear further, particularly if [the] government is unwilling to take construction risk," he says.
The Evolution view reinforces concerns expressed by other investment specialists such as Citigroup, which has previously questioned the economics of building new nuclear plants. It is a blow to EDF and the government, which are both keen to see ageing power stations replaced from a source that used to provide almost a quarter of Britain's electricity.
EDF, mainly owned by the French state and the operator of dozens of atomic plants in its home territory, revealed last week that the cost of constructing the new power station in Normandy had almost doubled since its original budget. The building work has been hit by problems including accidents and the need for changes in the plant's construction after the explosion at the Fukushima plant in Japan, which was hit by the tsunami in March. It is now running four years behind schedule.
Vincent de Rivaz, the chief executive of EDF in Britain, has admitted the schedule for opening new plants in the UK by 2018 is slipping but denies this is a delay. He says the company is just a "taking stock".
The nuclear industry has a poor record of cost-overruns, once tracked in a study by Paul Brown, a visiting fellow at Cambridge university, and published under the title Voodoo Economics.
Evolution Securities expects Centrica to show a slight dip in overall group operating profits to about £1.3bn, with its residential business showing profits down by almost half from £585m. Athanasiou says that without the 18% and 16% rises in gas and electricity prices announced recently, the company would have seen British Gas Residential Energy fall into a small loss.
But that will do little to assuage consumer groups, who have been calling for widespread competition investigations into the actions of the big six power suppliers, which include British Gas, Scottish and Southern Energy and EDF.
The energy and climate change select committee will unveil a report on Monday calling for widespread action by the regulator, Ofgem, to ensure abuses are curbed. The committee is concerned that customers may be pressured into switching supplier on the doorstep when confronted with an array of complex tariffs and a hard sell. Figures from Ofgem suggest that up to 40% of consumers who switch do not end up with a better deal.
Tim Yeo, the Conservative MP who chairs the committee, said on Sunday: "There is mounting concern in parliament about the doorstep selling techniques of large energy companies. If it turns out that consumers are being persuaded to switch contracts when it's not in their best interests, by salespeople keen to earn commission, then it would only be right for the energy companies to cough up compensation."
Richard Lloyd, executive director at the consumer group Which?, said: "People should be guaranteed the rate they sign up to and the right to get out of mis-sold tariffs. Where things do go wrong, they should get compensation or the difference back."
Corporate results this week will reveal that the motorist's loss is the oil industry's gain as energy groups BP and Royal Dutch Shell prepare to report significant profits. Shell is expected to record a 43% surge in second-quarter profits to $6.7bn (£4bn) on Thursday, while on Tuesday BP is forecast to record a profit of $5.7bn for the three months to June. BP's figures for the same period last year were blighted by the Deepwater Horizon disaster which forced the group into a $17bn loss. Both groups have benefited from an oil price that has averaged more than $100 a barrel over the quarter, lifting petrol prices about 16% higher than last year. Last week a litre of unleaded petrol cost an average 135.8p. A spokesman for the AA said: "Drivers will find it difficult to reconcile their predicament, with pump prices becoming unaffordable, with the big profits that oil companies are making."
BP, mainstay of the FTSE 100 index, can at least argue that pension funds gain from its higher share price. BP stock has risen more than 50% since the Deepwater nadir. Airline passengers have had more shelter from the effect of high oil prices thanks to cut-throat competition between airlines. Nonetheless, fares have risen by about 5% in Europe this year, with business class passengers, deemed less sensitive to price hikes, on the receiving end of double-digit increases.
Michael Bloomberg got New Yorkers to quit smoking. Can he shut down coal?
The New York mayor is using a $50m gift to the Sierra Club to make the case against coal on public health grounds
He got New Yorkers to stop smoking and give up trans fats. Now maybe he can convince Americans to see coal as a danger to public health – at least Michael Bloomberg says that is the idea behind his $50m (£31m) gift to the Sierra Club's Beyond Coal campaign.
What it's not about is making an argument based on climate change.
"If you don't survive today, you are not going to be around for tomorrow," he told me on Thursday, soon after announcing the gift from his philanthropic foundation.
"I don't think there is any question that we are doing damage to the global environment but that gets you into an argument that is not necessary, and that the public has trouble thinking about," he said.
Bloomberg has proven his commitment to environmental causes. As mayor, he has championed bike lanes and green retrofits of office towers. As a philanthropist, he pledged $20m (£12.5m) earlier this year to help the C40 global mayors group which is working to reduce greenhouse gas emissions in 40 cities around the world.
But like other leaders on the environment since the rise of the Tea Party he is strategically avoiding mention of climate change. In Bloomberg's case, he argues distant threats are not great motivators.
The effects of air pollution from coal burning plants are evident now, and they are simpler to explain. Soot particles trigger asthma attacks and cause breathing problems; mercury can cause neurological defects, the mayor said.
"This is not science saying what is going to happen years from now as the oceans rise and the planet warms," he said. "This is: this year we are going to kill another 13,000 Americans."
So what are the chances of actually meeting the Bloomberg and Sierra Club goal of shutting down about 30% of America's coal plants?
Pretty good, actually.
It's worth remembering, nine years on, that Bloomberg's push to ban smoking in bars was controversial at the time.
"When we passed the smoking ban in New York City I was told that nobody from England or Ireland was ever going to come to be a tourist in New York again, and that everybody would leave New York to eat and drink, and that it would be a disaster for the food and drink industry," Bloomberg said. "But the truth of the matter is, every country in Western Europe followed our lead."
His anti-smoking effort also proved effective, bringing down smoking rates in New York even as they stayed stubbornly steady in the rest of the country.
About one in five (21.6%) of New Yorkers were smokers when the ban went into effect in 2002. The figure fell to 15.8% in 2009 and the city is hoping its combination of smoking laws, high cigarette taxes, nicotine patch giveaways will bring that number down to 12% or about one in eight New Yorkers by 2012.
Now here is the base line for coal.
Coal still supplies nearly half of America's electricity. The latest forecast from the Energy Information Administration suggest it will continue to supply 43% of electricity even in 2035.
But - new construction of coal plants is at a standstill. More than 150 planned coal power plants have been abandoned or blocked in the last decade, according to the Sierra Club.
About 10% of the 600 or so existing coal plants are scheduled to be retired, and the Environmental Protection Agency is finally rolling out new regulations that will force coal plants to install new, cleaner burning technologies, or shut down.
Which is where Bloomberg and the Sierra Club come in. Bloomberg hopes the scale of his gift, and the high-visibility launch of the campaign on a boat in the Potomac, will set the same example as New York did in changing minds on coal.
He is not trying to get the White House or Congress to act. In choosing the Sierra Club, the largest membership-based environmental group in the US, Bloomberg put his money on grassroots organising.
The campaign will use the courts to enforce existing environmental regulations, and hopefully shut down the oldest and dirtiest plants.
They will also push state governments to adopt renewable energy standards that require power companies to generate a portion of their electricity from wind or solar.
And they will try to further mobilise public opinion against the destructive practice of mountaintop mining removal. Opposition to coal is growing.
Lester Brown of the Earth Policy Institute has been arguing for a number of years now that opposition to coal has reached critical mass.
"What began as a few local ripples of resistance quickly evolved into a national tidal wave of grassroots opposition from environmental, health, farm, and community organizations," Brown writes. "Closing coal plants in the United States may be much easier than it appears."
Maybe, it just needs a mayor on a mission to push coal over the edge.
He got New Yorkers to stop smoking and give up trans fats. Now maybe he can convince Americans to see coal as a danger to public health – at least Michael Bloomberg says that is the idea behind his $50m (£31m) gift to the Sierra Club's Beyond Coal campaign.
What it's not about is making an argument based on climate change.
"If you don't survive today, you are not going to be around for tomorrow," he told me on Thursday, soon after announcing the gift from his philanthropic foundation.
"I don't think there is any question that we are doing damage to the global environment but that gets you into an argument that is not necessary, and that the public has trouble thinking about," he said.
Bloomberg has proven his commitment to environmental causes. As mayor, he has championed bike lanes and green retrofits of office towers. As a philanthropist, he pledged $20m (£12.5m) earlier this year to help the C40 global mayors group which is working to reduce greenhouse gas emissions in 40 cities around the world.
But like other leaders on the environment since the rise of the Tea Party he is strategically avoiding mention of climate change. In Bloomberg's case, he argues distant threats are not great motivators.
The effects of air pollution from coal burning plants are evident now, and they are simpler to explain. Soot particles trigger asthma attacks and cause breathing problems; mercury can cause neurological defects, the mayor said.
"This is not science saying what is going to happen years from now as the oceans rise and the planet warms," he said. "This is: this year we are going to kill another 13,000 Americans."
So what are the chances of actually meeting the Bloomberg and Sierra Club goal of shutting down about 30% of America's coal plants?
Pretty good, actually.
It's worth remembering, nine years on, that Bloomberg's push to ban smoking in bars was controversial at the time.
"When we passed the smoking ban in New York City I was told that nobody from England or Ireland was ever going to come to be a tourist in New York again, and that everybody would leave New York to eat and drink, and that it would be a disaster for the food and drink industry," Bloomberg said. "But the truth of the matter is, every country in Western Europe followed our lead."
His anti-smoking effort also proved effective, bringing down smoking rates in New York even as they stayed stubbornly steady in the rest of the country.
About one in five (21.6%) of New Yorkers were smokers when the ban went into effect in 2002. The figure fell to 15.8% in 2009 and the city is hoping its combination of smoking laws, high cigarette taxes, nicotine patch giveaways will bring that number down to 12% or about one in eight New Yorkers by 2012.
Now here is the base line for coal.
Coal still supplies nearly half of America's electricity. The latest forecast from the Energy Information Administration suggest it will continue to supply 43% of electricity even in 2035.
But - new construction of coal plants is at a standstill. More than 150 planned coal power plants have been abandoned or blocked in the last decade, according to the Sierra Club.
About 10% of the 600 or so existing coal plants are scheduled to be retired, and the Environmental Protection Agency is finally rolling out new regulations that will force coal plants to install new, cleaner burning technologies, or shut down.
Which is where Bloomberg and the Sierra Club come in. Bloomberg hopes the scale of his gift, and the high-visibility launch of the campaign on a boat in the Potomac, will set the same example as New York did in changing minds on coal.
He is not trying to get the White House or Congress to act. In choosing the Sierra Club, the largest membership-based environmental group in the US, Bloomberg put his money on grassroots organising.
The campaign will use the courts to enforce existing environmental regulations, and hopefully shut down the oldest and dirtiest plants.
They will also push state governments to adopt renewable energy standards that require power companies to generate a portion of their electricity from wind or solar.
And they will try to further mobilise public opinion against the destructive practice of mountaintop mining removal. Opposition to coal is growing.
Lester Brown of the Earth Policy Institute has been arguing for a number of years now that opposition to coal has reached critical mass.
"What began as a few local ripples of resistance quickly evolved into a national tidal wave of grassroots opposition from environmental, health, farm, and community organizations," Brown writes. "Closing coal plants in the United States may be much easier than it appears."
Maybe, it just needs a mayor on a mission to push coal over the edge.
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