In the first in a two part series, BusinessGreen Plus explores what companies need to know when considering onsite solar installations
Businesses and public sector bodies are increasingly turning to solar power as a means of lowering their electricity bills, enhancing their environmental credentials, and providing an additional revenue stream. But there is still some considerable confusion about how best to go about installing solar technologies.
Meeting the upfront cost is an issue for many organisations, while others may find themselves bewildered by the sheer number of technology options available.
With the help of a few industry experts, BusinessGreen Plus this week attempts to demystify the process and establish what companies need to take into account when considering installing a solar system. And in part two, published tomorrow, we explore what to expect before, during, and after the installation process and afterwards.
Making the case for solar
According to industry figures, the UK has over 4,000 square kilometres of industrial roof-space that could be used for solar panels. Not only would maximising the use of solar power help the country meets its carbon emission targets, it also provides a secure energy source that can protect companies from future energy price rises and boost their green reputation with employees and customers alike.
For most companies, the primary financial benefits from solar panels are a reduction in energy costs through the production of their own onsite electricity and payments from the government's feed-in tariff (FiT) subsidy scheme.
FiTs provide set payments based on the amount of electricity generated for 20 years. The level of inflation-linked payments is dependent on the size of the system, while additional payments are also available based on the amount of electricity exported to the grid by the solar installation.
The scheme was reformed last year to protect the FiT scheme's budget and provide certainty over future tariffs. Following the changes the tariffs for new installations can be reduced each quarter based on the level of installations in previous quarters. The government maintains the new approach stops the scheme's budget being broken, allows businesses to better predict the level of payments they will get for a new installation, and ensures incentives are reduced in line with the falling cost of solar technologies.
The FiT is structured to offer businesses and households average returns of between five and eight per cent on renewable energy investments, making it a more attractive use of capital than many other savings or investment options. However, the five to eight per cent range is an average and there are stories of higher returns for particularly well located solar arrays.
"The economics [for companies] are very good as they are going to be consuming a large proportion of electricity they generate, so the cost of what they are displacing will be high," says Leonie Greene, head of external affairs at the Solar Trade Association (STA). "And the economics of onsite solar are getting better and better as electricity prices rise and the cost of panels falls."
But before approaching a solar installer, businesses need to consider a number of inter-linked factors: what is your energy consumption profile, how do you intend to finance the system, and - for those in leased premises - will your relationship with the landlord allow for the installation of a solar array.
Getting a handle on how much electricity your company uses, as well as when it needs supply, can not only dictate what type of system would best meet the company's needs but also if solar is a viable option. For example, if operations run mainly at night, solar is clearly not going to be worthwhile without significant improvements in battery technologies.
Once you have secured information on your energy use profile, it is possible to calculate how much a solar system would yield using software, such as offerings PV Sol or PVGIS, which incorporates the differences in sunlight across different areas. With this information to hand it is relatively easy to assess whether solar generation matches closely to yourt demand profile.
What funding companies opt for depends on what they intend the system to achieve - an investment return, cheaper energy bills, or both. Given the financial modelling requirements, it is preferable that the finance department undertakes the research and makes the final decision on whether or not to install solar.
Companies that own their own premises and have a sufficient credit line can do a relatively simple return on investment calculation using their predicted consumption, FiT rate, and projected energy bills. It is important to remember most projections show energy prices are likely to continue to rise in the UK over the coming years - the government uses a standard of six per cent inflation per year for energy bills, but recent trends have been far higher. Any increase in energy prices will invariably make the long term returns from a solar installation more attractive.
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