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Renewable energy…subsidies are no longer essential!

Ever since we started this business in 2009,  we have enjoyed debating the merits and need for renewable energy with anyone who doesn’t share our vision.  One of the standard fall-back lines in any anti-renewable argument is   “..well,  it only works with massive subsidy.”

Whilst this conveniently ignores the fact that our current central generation capacity was all built with public money,  and more huge public subsidy will be required to replace it.  That line of argument also assumes that both Gulf wars really were fought to bring democracy and human rights to the people of Iraq rather than to secure the supply of hydrocarbons as the more cynical amongst us believe.

But the doubters have had a point;  large scale uptake of solar and wind energies would never have been possible without the various incentives paid out to encourage production of renewable energy.  But the cost of these incentives has fallen sharply;  those early adopters of PV were receiving around 40p for every unit of electricity they produced from their panels.  Now the Feed in Tariff, really a generation tariff – the sum the paid to producers of renewable energy - is just 12 pence ,  which is pretty much what the utilities charge per unit for conventional energy.

For businesses with large electricity demand,  the case for installing PV is starting to become compelling without any subsidy.  We’ve recently been carrying out some investigation work for a major food manufacturer in the West Country .  This is a well run and forward thinking business which understands the risks of rising energy costs and unreliable supply.  The investment calculations for their system revealed that over the 25 year warranty life of the panels (using the high quality and high yielding REC module)  the investment would allow them to forward buy 5.5 million kWhs of electricity at only 5.5 pence per unit.  That includes the cost of the capital required to finance the project and excludes the benefits of the Feed In Tariff subsidy, proving for this business, the subsidy is no longer essential.   This will give them a major cost advantage over their competitors who will have to factor in annual increases in the cost of energy.

This is clearly a business with a large energy need that will consume almost 100% of the electricity produced but it serves to prove that we are getting nearer the time when PV in particular will require no subsidy;  that a business will be able to own and consume  it’s own electricity and weaken dependency on the central utilities will be incentive enough.

For now, in the absence of cost effective on site commercial energy storage solutions and given that the vast majority of businesses will only be able to utilise around 50% of production, the Feed in Tariff still plays a vital part in the rollout of PV systems in the UK for SME’s.

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