Friday, December 6, 2019

New energy scheme offers little guarantee of financial return

November 6, 2019 by  
Filed under Property

Landowners who are considering installing a renewable energy system should budget correctly because attractive financial returns are no longer guaranteed, says an adviser.

The government’s Smart Export Guarantee (SEG) – which supersedes the Feed-In Tariff (FiT) – does not set any base price for renewable electricity, only ensuring a payment of more than 0p/kWh for power exported to the grid.

No guarantees

As a result, landowners need to take a much more considered approach to their investment, says adviser and senior consultant Richard Palmer, of independent power and energy specialist Roadnight Taylor.

“In the days of the FiT, farms and estates could put solar panels on the roof and get paid a subsidy for all generation as well as a guaranteed floor price for any electricity exported to the grid,” explains Mr Palmer.

“Many had hoped that the new SEG would set a minimum price for export – like the FiT – but it has not done so. Instead, it only guarantees that operators will have access to a market and are paid more than 0p/kWh at all times of export.”

The SEG should be a secondary consideration for landowners considering renewables because it is neither smart or guaranteed, says Mr Palmer.

He adds: “With no guaranteed payments, it is important that landowners now focus on sizing schemes to their site’s energy demand, minimise any surplus exported to the grid and pay close attention to tariff structures.”

Anyone considering renewable technology should analyse historic data from a half hourly meter, suggests Mr Palmer. And they should do so before looking at the most suitable technology, whether solar, wind, anaerobic digestion, battery storage or combined heat and power.

“Many operators with existing installations opted out of the FiT base price and instead achieved higher export prices through Power Purchase Agreements,” he explains. “This will still be a good option for those schemes of a suitable scale.

“But for small-scale operators on the SEG alone, the lack of a guaranteed price or contract length is a risk due to exposure to falling electricity wholesale markets and the potential lack of competition, leading to an under-valued export price.”

Available markets

Any new renewable installation or addition to existing schemes after 31 March 2019 will not be eligible for the FiT, but should ideally be built to comply with the SEG so that operators can access the available markets.

The SEG applies to the main renewable technologies, up to 5MW, subject to eligibility criteria including a requirement to meter half hourly. The scheme comes into effect from 1 January 2020 with the full range of SEG tariffs being available from this date.

“There are still opportunities to significantly reduce electricity bills through small-scale renewable projects,” says Mr Palmer. “But there needs to be a change in mindset across the industry.

“Too many developers are recommending unsuitably large installations, which will never deliver decent returns and may potentially create significant losses. There is no one-size fits all any more – it is vital to undertake a professional strategic review.”

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