Introduction
In February 2010, the UK government finalised the details of its ‘Feed in Tariff’ (FIT) for domestic producers of electricity from solar panels. I first heard about this from a BBC radio programme at lunchtime on the Monday of the announcement and immediately started looking into it.
The FIT arrangements replaced a previous grant scheme, whereby you would receive up to £2,500 towards the cost of an installation, with a guaranteed price for electricity generation. (In fact there was a ver brief period during which you could get both the grant and qualify for the FIT, but that’s now irrelevant ).
Some basic calculations ( see below ) seemed to indicate that this was financially a good idea as well as being a responsible green sort of thing to do.
The current status of the project comes next, followed by a more detailed discussion including some of the history.
Current Status after 3 years.
In our first year, we generated 1400 units of electricity and this turned out to be a very good average over the first three years. That was disappointing compared to my initial hopes of getting nearer 2000 units per year, but even so, this would work out as a return of approx 2.5% over the 25 year lifetime of the programme, assuming inflation at 0%. Since inflation in the first year was already 4%, and whatever happens is likely to remain positive, that will boost the return significantly. The arithmetic works out like this. FIT per unit 41.3p
Allowance for electricity sold to E.ON 1.5p
Saving on current electricity bill assuming we actually use 90% of what we generate 10p
Total value per unit 52.8p
First year generation 1400 units ( Apr 20-Apr 20 )
Total income £739.20
Break-even AER = 2.8%
If inflation averages 2% per year return is 4.6%
Decisions
After some googling, and digging around, I found a number of organisations able to quote for an installation. These ranged from the electricity suppliers themselves ( if you can find the right department! ), through a number of smaller firms, through to outfits whose business model reminds me of the classic double-glazing sales approach – the hallmark being a list price twice as high as anyone else, but an automatic ‘discount’ which brings the final price down to something a bit pricy but not ridiculous, and an high-pressure sales approach.
Since the key requirement is to have sufficient roof area facing in a sensible direction, many of the suppliers handle an initial sanity check by using google earth to find your house and measuring your roof before they even come and visit. That approach seems to work quite well – the initial proposal produced that way turned out to be pretty well spot on.
In the end, I went for one of the smaller suppliers, and after some discussion, we ended up with a configuration which had 10 panels on the south-east facing roof, and a further 4 on the south-west facing roof, for a total nominal generation capacity of 2.59kW.
This arrangement should mean that during the middle part of the day, all 14 panels will get direct sunlight, with the first 10 getting quite a lot in the early/mid morning, and the final 4 in the mid/late afternoon.
The choice of 14 panels as the total number was based on a combination of factors:
- The standard installation proposal was for 10 panels, but not surprisingly, adding a few more panels was relatively good value, so 14 would cost rather less than 1.4 times the price of 10.
- There was room on the roof for up to 16 panels, but along with the panels, you need an inverter, which is a box which converts the DC output from the cells into AC and pumps it into the supply in the house. These come in various models and sizes, and 14 panels is the maximum capacity of the most cost-effective model available at the time (the Fronius IG30).
Having chosen the configuration, the final stage was some due dilligence, which consisted of:
- Talking to a local existing customer of the supplier, to get his view.
- Negotiating agreement to pay the up-front deposit by credit card, to give me some legal recourse should the supplier go under before the job is done.
- Contacting the electricity suppliers to confirm that we would qualify for the FIT, and getting the necessary application forms.
I was ready to go by late February, and paid the deposit. Installation was set for late March.
Installation
Things went pretty smoothly to begin with. The scaffolding was put up on the planned date ( our neighbour was very accomodating about allowing access to the side passage between our houses ), and work was done on schedule.
However, when the system was first turned on, it only appeared to be generating about 250W, even at midday with the sun out. I called the installers, who agreed to come and check everything. So they came back, and individually tested every module to confirm it was working. It was quite cloudy that day, and they assured me that when the sun was out, I should see better performance.
I asked them if there was any possibility that the two separate banks on each roof were wired wrongly and they said no, that couldn’t happen or the system wouldn’t work at all.
We were off on holiday for Easter a day or so later, so I left things till we got back to see how things went. When I returned to London, we had two problems. The first was that the scaffolding still hadn’t been collected, despite promises to do so, the second was that the system had only been generating about 1kWH per day, even though the weather had been good. There had to be something very wrong, or there was no way we were going to generate enough electricity.
I decided to check things myself, and by pushing a probe into the wiring which was in our upstairs loft, I measured the voltages across each of the banks, and discovered that the bank of 10 was generating about 250V, the bank of 4 was generating about 100V, but the total voltage across the inverter was only 150V. Sure enough, and despite earlier assurances, the bank of 4 was wired backwards.
An angry phonecall to the supplier later, and we’d agreed that as an interim measure I would cut the wires where they came into the loft from the bank of 4, and use some connector blocks to wire them in the other way round. Took me about 10 minutes.
And the result was spectacular. The reading immediately went up from 100W instantaneous generation to over 400W. The next day was bright and sunny, and the system generated 9 kWH that day alone, very much the kind of figure I had been hoping/expecting this time of year.
The suppliers duly returned and replaced my hacked-up wiring with a proper repair job and everything has been working smoothly since. However, I’m deeply unimpressed with the suppliers’ ability to make such an elementary mistake, and to fail to spot it despite spending several hours checking the system.
In the meantime, I received what’s called the MCS Installer Certificate from the supplier, and sent it off with an application form to E.On for the FIT payments. A few days later I received confirmation that I was registered, and a final form to confirm I accepted the terms and conditions. In theory, all I now have to do is send E.On a reading from the new ‘total generation’ meter every quarter, and they will pay me direct to my bank account.
Early generation readings.
During the first month of full operation we had weather ranging from glorious sunshine all day to pouring rain all day, and readings ranging from over 9 units to only 2. Some indicative days were:
| Date | Output | Weather |
|---|---|---|
| 2010-04-23 | 9.0 | Bright Sunshine all day |
| 2010-04-24 | 9.0 | Hazy Bright |
| 2010-04-25 | 5 | Overcast but bright at times |
| 2010-05-02 | 2 | Rain |
| 2010-05-22 | 9.4 | Glorious, not a cloud to be seen |
The total generation output for the 4 week period 2010-04-23 to 2010-05-21 was 154.3 or an average of 38.5 per week. By the beginning of July, total output had reached 500 units, the average had gone up to about 50 per week, and the best day had seen total generation of 10.1 units.
Interestingly enough, although total generation around the solstice was the highest attained, the instantaneous maximum was actually higher in April, since the combination of the position of the panels and their angle with the vertical means that the sun shines more directly on the entire array when it’s a bit lower in the sky than in June a bit before solar noon.
Calculations
The starting point is that the FIT guarantees a price of 41.3p index linked and tax free for every unit of electricity generated under the scheme. In addition, every unit either gets consumed locally, saving about 11p in electricity costs at current prices, or gets exported to the grid, earning a further 3p. (The 11p and 3p will change as the price of electricity changes over the coming years ). Currently, most of the electricity companies simply assume that you will use 50% of the electricity you generate rather than asking you to fit a second ‘export’ meter to measure this. Assuming they are right ( actually I suspect this is a fairly generous estimate for people like us with a lot of permanently on computer equipment ), that means that every unit of electricity generated earns 42.8p directly, and a further 5.5p in savings, for a total of more or less 50p per unit (41.3 + 50% of 3p earned + 50% of 11p saved).
So, in round figures, if we get 1,400 units generated annually, at 50p that works out at £700 per year. And in fact the annual generation in the first year was almost exaction 1400 units.
Now, the key point is that this £700 is tax free, and the 41.3p is index linked and guaranteed for 25 years, while the rest is linked to energy costs which we can assume will rise at least as fast as prices in general.
So we’ve bought a £700 index linked tax free 25 year cashflow. The total up-front cost was approximately £13,200.
Even if we assume that inflation is 0% and that the array is worth 0 at the end, that’s still an index-linked return of around 2.5% after tax. Not spectacular, but an OK investment, comparing favourably with National Savings Index Linked when they still existed. It’s well short of the kind of optimistic estimates people quote when they’re talking up the technology ( £1000+ per year). I suspect one could get that if one had: – A roof facing due south at exactly the right angle – no obstructions – a decent year’s weather
What’s also worth noting is how the return changes as the assumptions about income change. The zero-return point comes with income of £528 – which is just enough to pay off the capital cost over 25 years assuming no return at all.
I’ve also found the following tool [http://midsummerenergy.co.uk/grid-connect-solar/solar-feed-in-tariff-calculator.html] quite useful.