What do the proposed changes to the Feed In tariff mean to the industry?
The recent proposals to change the Feed In Tariff have been well documented, and elements of which were not a huge shock??
However, what does it mean for the consumer? And what does it mean for the installers (and others in the industry)?? Let’s discuss??
Let’s, firstly, look at what it means for Mr and Mrs “Average”, looking at installing a 4kwp solar PVsystem on their nice South facing roof, somewhere in the South of England -
1). Installation price – Whilst some companies are offering installations of £10,000 (there may be caveats here?), but in the main you’d be looking at spending around £13,000??
2). Annual generation/financial returns – Based upon “average” generation (3500kwh/a), “average” price paid for electricity (13p/kwh?), the current FIT price (43.3p/kwh), and the current export payment (3.1p/kwh). This will give Mr and Mrs Average, return of around £1,700 in the first year.
A ROI of around 13% in the first year. Index linked, tax free, and guaranteed for 25 years.
Over the 25 years (and assuming modest levels of inflation), this would give a total return of around £60,000. Or a profit of around £47,000. All tax free! Not bad?
3). Under the new, proposed, plans, this same system would give Mr and Mrs Average a first year return of -
£1,016, or a ROI of 7.8%.. Still not bad?? And, incidentally, not too far from the original target the Government had in mind when the scheme was launched back in April 2010, when there were many people interested?
As mentioned, some companies are offering this size system for £10,000? In this instance the ROI would be a shade over 10%. Which is very attractive??
Therefore, perhaps, installers should have this as a target price??
But, how do they achieve it??
Many people people believe the price of panels will come down? We can say (with some certainty) that it will? TV’s, computers etc. all have, so it stands to reason? But, will it come down quickly enough??
Maybe not? The price of panels is largely controlled by the manufacturer. The UK solar market is such a small piece of the Worldwide market, that it’s unlikely that the UK situation and demand will force manufacturers to reduce the prices just for us??
However, there is a huge price difference in panels already, and the ability to bulk buy, further reduces cost. For example, even on modest amounts an installer could pay anything from £1/watt (and lower) and £1.90/watt for panels?? In reality, the more expensive panels do not give twice (almost) the output of the cheaper ones?
True, there are differences in quality? But, all MCS accredited panels must achieve a minimum standard, so one must assume that there aren’t huge differences?
Therefore, in order for installers to achieve an installation price that is attractive for the consumer, they need to look at their costs, and the way they work?
For example:
Many (smaller) installers will buy “ready made kits” – Whilst this is a convenient way of doing it, it is more expensive. Therefore, they will need to look at procuring equipment separately (and in some sort of bulk), and putting the “kits” together themselves?
Many (larger) installers, who are already buying in “bulk” and put the “kits” together themselves, often offer more than one type of panel (a Gold, Silver and Bronze package?). Maybe, they will need to reduce the choice, and secure greater discounts on buying one panel type in greater bulk?
So, is the UK Solar Industry dead? I think not?
Most installers will have earned more in the next few weeks than they would have done in a few months? This will give them a bit of breathing space to formulate their “battle plans”? In honesty, the Christmas period is usually a quiet one for installers? So in some respects the timing of the proposal has been favourable?
Don’t get me wrong? I think the tariff reduction is too high, and the 12th December cut off point ridiculous! But, I don’t think it’s the end of the World for the Solar market in the UK?
Watch out for the New Year offers!!
If you want advice on your Solar installation, then please don’t hesitate to contact us on 0845 437 4484, or email info@viridisec.co.uk