There is no doubt that the solar industry has seen a dramatic slow down since the April 1 changes in feed-in tariffs (FiT). Deployment has fallen from over 100MW installed per week at its peak, between February 3 and March 3 2012, compared to 6MW average weekly installations since April 2012 (Source STA statistics). But these much lower deployment figures need further analysis and understanding as they are clearly influenced by customer perception of what Solar PV now offers than the actual investment returns available.
We unquestionably saw a massive increase in demand for all things solar PV pre April which led to ‘gold rushes’ of weekly deployment levels that were never sustainable.
Post April, when the incentive dropped, inevitably deployment also dropped. Yet it really isn’t as simple as equating this reduction of customer demand to a reduction in the FiTs. Firstly, there is the Energy Performance Certificate (EPC) to consider. Properties now need to obtain an EPC Grade D or above to qualify for the feed-in tariffs, adding a new obstacle for those wanting to be energy efficient. Yet still, even with this additional hurdle, I believe the main reason that deployment figures have dropped so dramatically is the simple fact that customers have been confused by all the media coverage and no longer appreciate the financial as well as environmental benefits of solar PV
Whilst consumers may currently be unclear about exactly what the FiTs scheme now offers, the good news is that the reality is much clearer. The revised scheme now gives us transparency and stability for the PV market going forward. Both industry and consumers alike will have at least two months notice of any tariff change. Future tariff reductions will be based on deployment levels within specified bands of system size – 0-10kW; 10kW-50kW and above 50kW, with higher level of deployment bringing a faster reduction in tariff.
As all of us in the industry know, as the FiTs tariff fell, so did the costs associated with solar PV bringing the return on investment (ROI) back to similar levels to six, if not 12, months ago. Those looking to install solar energy today should still be able to generate eight to ten percent returns on their investment.
Let’s put this into context. We have all seen the UK economy crash and burn over the last 24 months, and although there sometimes seems a glint of light for the future, many remain sceptical whether we will recover from this financial crisis for a fair while yet. For those with their eye on Europe, more nervousness remains with everyone from Iceland to Ireland having sunk to financial depths they never thought they would ever experience.
So to the financial savvy, the investment landscape has changed. Where stocks and shares were the 80s nirvana, bricks and mortar a preferred investment in the 90s, today’s financial safe bets are few and far between. Banks have gone bust, high street stalwarts such as Woolworths, Habitat, Borders, MFI all gone so the question is, where does the smart money go now?
I believe that Solar PV is still one of the few viable investments around today. 8-10 percent ROI (tax free for domestic installations) with a guaranteed revenue stream for the next two decades assuming the sun shines – surely even those not interested in the environmental impact of the renewable energy market, can see the financial sense?
So, as an industry our role now is to give back to our customers the confidence to invest in solar, to help them understand the financial and environmental benefits and to grow the market at a steady rate to ensure that we continue to have a long term future for our planet and our businesses.
Alan Aldridge is Managing Director of Riomay Renewable Energies and Chairman of the Solar Trade Association.