Gifford

Feed-in Tariff (FITs) - Gifford commentary

Thu, 08 Apr 2010 08:31:00 +0100

Feed-in Tariff (FITs) - Gifford commentary

Some would say that the launch of the government’s feed-in tariffs (FITs) initiative on April Fools Day is prophetic, with a number of detractors labelling the initiative the “great green rip-off”. Gifford have monitored the numerous on-line debates in recent months on the pro’s and con’s of the initiative, most notably the exchange of views between George Monbiot (the popular Guardian blogger) and Jeremy Leggett (founder of Solar Century, one of the largest suppliers of photo-voltaic (PV) panels in the UK). So we would like to offer our own opinion on the initiative.

We wholly support the need to reduce carbon emissions in the UK. We are committed to a sustainable future energy strategy and have invested in the skills and tools needed to offer our clients simple and effective advice on carbon reduction. This includes sustainability accounting tools, preparation of energy performance certificates and virtual carbon emission assessments of our building projects.

The government’s FITs initiative obliges electricity companies to pay consumers for the power they are able to develop using renewable energy technologies. As an example, a consumer installs a number of PV panels on their south facing roof. For every kWhr of electricity generated by the PV panels, the electricity company will pay the consumer 41p (44p if the electricity is “sold” back to the national grid). This compares with the 7p per kWhr charge levied on the consumer by using conventional electricity from the national grid. Consumers are able to sign up to contracts with the electricity companies which stipulate a 25 year concession period for this feed-in tariff to operate so their “return” on each kWhr generated is guaranteed.

Detractors of the FITs initiative complain that this “invest now - reward later” arrangement favours the more affluent consumer due to the high initial cost; with the electricity companies passing on the costs for the feed-in electricity via increased bills for those consumers who cannot afford to invest and who use conventional grid based electricity.

Promoters of the FITs initiative suggest that as well as reducing carbon emissions in the UK (albeit marginal), its launch will increase the level of PV production and R&D investment, bringing the costs of manufacture down (economies of scale) and creating new low carbon based jobs in the UK both in manufacture, advice and installation.

Gifford would offer the following advice to those considering investing in the feed-in tariff arrangements:-

Understand that you may need to wait a long time (perhaps 15 years) before you see a financial return on your investment.

Applying now will allow you to receive higher feed-in tariffs than a later application, but you are likely to pay more for the initial investment than later due to the increased demands on supply chains. There may be negligible benefit in terms of timings.

Be aware of the variation in electricity that can be generated by alternative manufacturer’s PV’s - do your homework before committing to a particular installer - we may see a raft of poorly experienced installers springing up to cash in on demand.