final exeter the secrets of solar success 10 nov 2011

The Secrets of Solar Energy

10 November 2011

At the National Financial Directors’ Excellence Awards, Broadcaster Peter Sissons commented:

“...with a score of nearly nine-out-of-ten for quality of service, the highest marks ever for an audit firm in ten years.”

Francis Clark LLP, National Auditor of the Year – Mid Tier 2011

“Give me sunshine”

Lessons learned from 12 months in

the ‘eye of the storm’ and guidance

to preparing for the next solar gold

rush…

Administration

&

www.francisclark.co.uk

Renewable Energy and the Devon Landowner

• Presentations:– Introduction

– Comprehensive FiT Review phase 1 proposals (Sonya Bedford)

– A turbulent year and a bright future (Bob Meier)

– Lessons learnt/ winning strategies (Sonya Bedford)

– The tax tail… (John Endacott)

– Summary

• Q&A session

Economics of Renewables

• History – renewable energy ‘uneconomic’

• Government intervention– ROCs, FiTs and RHI

• FiTs– Cover PV, hydro, AD, CHP and Wind

– Came into operation on 1 April 2010

– “Review April 2012”…

A year in PV in three headlines

• The £1bn solar power gold rush (Business

Cornwall – 27 September 2010)

• Solar ‘Gold Rush’ in U.K. May Die With Incentive

Roll-Back (Bloomburg - 28 February 2011)

• ‘Harsh’ support cuts will force solar rethink

(Farmers Weekly Interactive 1 November 2011)

The future?

But first…

Sonya Bedford

Head of Renewable Energy

Comprehensive FIT review phase 1 proposals

Tel: 01392 210700

Email: renewables@stephens-scown.co.uk

Web: www.stephens-scown.co.uk

Sonya Bedford – Head of Renewable Energy

Sonya Bedford – Head of Renewable Energy 17th February 2011

Band (kW) Current generation tariff (p/kWh) Proposed generation tariff (p/kWh)

≤4kW (new build) 37.8 21

≤4kW (retrofit) 43.3 21

>4-10kW 37.8 16.8

>10-50kW 32.9 15.2

>50-100kW 19 12.9

>100-150kW 19 12.9

>150-250kW 15 12.9

>250kW-5MW 8.5 8.5*

stand alone 8.5 8.5*

Further Fast Track Review of the Feed in Tariff - how does this affect your existing

projects?

The proposed new tariff rates under FiT are:

*These are the current tariffs, which we are not proposing changing and which, like all other current tariffs, will be adjusted in

line with the Retail Price Index from 1 April 2012.

At the National Financial Directors’ Excellence Awards, Broadcaster Peter Sissons commented:

“...with a score of nearly nine-out-of-ten for quality of service, the highest marks ever for an audit firm in ten years.”

Francis Clark LLP, National Auditor of the Year – Mid Tier 2011

Solar PV – perspectives on a

turbulent year and very bright

future

Bob Meier, Senior Manager, Energy

& Sustainability

Solar – a huge, expanding global sector

“Photovoltaic and solar-thermal plants may meet most of the world’s

demand for electricity by 2060 -- and half of all energy needs“ senior

analyst IEA August 2011

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Total Others

Total Europe

Total North America

MW of PV installed capacity globally – BP energy survey

2011

2020:Renewables targets

Technology breakdown for central view of deployment in 2020

TWh Mid %

Onshore wind 24-32 12%

Offshore wind 33-58 19%

Biomass electricity 32-50 18%

Marine 1 0.4%

Biomass heat (non domestic) 35-50 18%

Air-source and Ground-source heat pumps 16-22 8%

(non domestic)

Renewable Transport Up to 48 21%

Others (including hydro, geothermal, solar 14 6%

and domestic heat)

Estimated 15% taget 234

Original

strategy

Original

strategy

May 2011

Roadmap

May 2011

Roadmap

Approximate

Electricity:

c.25TWh to

c.115.5TWh

Heat:

c.14TWh to

c.75.5TWh

Transport:

c.14TWh to

c.48TWh

FITs and anticipated PV installation rates

DECC Forecast of PV deployment at introduction of Feed-in-Tariffs

Installations

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Domestic - 0-4KW 20,309 54,842 113,526 209,731 308,989 407,838 491,907 564,314 622,551 667,005 698,418

Small - 4-10KW 0 0 0 414 3,573 9,309 12,249 12,887 12,887 12,887 12,887

Large - 10-5,000KW 0 0 0 42 440 1,195 1,641 1,810 1,836 1,838 1,839

Cumulative MW installed

Domestic - 0-4KW 51 137 284 524 772 1,020 1,230 1,411 1,556 1,668 1,746

Small - 4-10KW 0 0 0 2 18 47 61 64 64 64 64

Large - 10-5,000KW 0 0 0 7 42 104 143 163 171 173 173

Source: DECC internal working papers disclosed under a FOI request

The government grossly underestimated the level of PV take up at the

tariffs it introduced, leading to three intra-year “fast-track” changes to avoid

breaching “budget” ceilings

Renewables are capital intensive• To understand renewables’ economics – and set appropriate tariffs

– you need to understand the capital costs. (They also need policystability as a result!)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Solar PV Tidal

barrage

Tidal stream Wave

(fixed)

Onshore

wind

Offshore

wind

Nuclear Coal CCS Gas CCS Gas CCGT

Cost excluding capital cost Capital cost

Source: CCC Renewables review May 2011

Why the government got it wrong

0

500

1000

1500

2000

2500

3000

3500

2010 2020 2030 2040

PV

ca

pit

al

cost

s (£

/kW

)

Balance of plant

Installation works

Inverters

Modules

Site prep/ licensing

high capex

low capex

The government calculated the tariffs assuming capital costs of £4,000/kw

or higher. Costs have fallen – but how much?

Estimated current and projected PV

capital costs prepared for DECC and

Climate Change Committee

Catching a falling knife – with bureaucracy

Source: Bernstein September2011

“We are aware of reports that the global costs of PV modules have fallen by as much as 70%

since 2008”, DECC ministerial statement November 2011

Has DECC killed the solar industry?

Stand alone: “Goldrush tariffs” : 30.7p – pre August 1st 2011

Now : 8.5p, a c.72% cut

Retrofit domestic: Current : 43.3p

Proposed : 21p, a c.52% cut

Stand alone: “Original goldrush tariffs” : 29.3p + 3p = 32.3p

Now : 8.5p + [6.5p] = 15p, a c.54% cut

Retrofit domestic: Current : 43.3p + 50% * 3.1p = 44.8p

Proposed : 21p + 50% * 3.1p = 22.5p, a c.50% cut

Before allowing for increased value from on site use:

Has DECC killed the solar industry?

Source: Quantitative evidence base for ROC banding review, DECC

0

5

10

15

20

25

30

35

40

0

500

1000

1500

2000

2500

3000

3500

4000

2010 2015 2020 2025 2030

p/K

Wh

£/K

W

Costs - Low

Costs - Medium

Costs - High

LC - Low

LC- Medium

LC - High

"Goldrush"

Proposed Resi

Standalone

Conclusions

• Government has been pushed into three intra-year tariff changes on solar

as policy has struggled to reflect economics of a very dynamic global

industry

•The headline cuts in tariffs are dramatic, but so too are the offsetting

capital cost falls

•Large field – based systems are likely to be able to hold their own

economically against the current marginal renewable technology, offshore

wind, very soon

•That raises the prospect of PV becoming mainstream and being freed of

current budgetary constraints

•Sites will also not be constrained by FIT rules, particularly 5MW cap

• The economics will not be so generous, however, as to allow all

development – careful site selection from a grid and irrradiation

perspective will be important

Sonya Bedford

Head of Renewable Energy

War stories and best practice from the new

legal frontier

Tel: 01392 210700

Email: renewables@stephens-scown.co.uk

Web: www.stephens-scown.co.uk

Sonya Bedford – Head of Renewable Energy

17th February 2011Sonya Bedford – Head of Renewable Energy

Stephens Scown renewables client Wheal Jane

Sonya Bedford – Head of Renewable Energy

Stephens Scown renewables clients Hendra Holiday Park

Sonya Bedford – Head of Renewable Energy

Stephens Scown

renewables clients

Dillington Estate

Sonya Bedford – Head of Renewable Energy

• 50 kw Ground Mount Systems

• Suitable sites

• Planning permission

• Legal documentation

• Large Solar Parks

“The reports of my death are greatly

exaggerated,” Mark Twain.

• Suitable sites

• Exclusivity agreements with developers

• Option

• Lease

Sonya Bedford – Head of Renewable Energy

Sonya Bedford – Head of Renewable Energy

Sonya Bedford – Head of Renewable Energy

• Roof Top Solar

• Still worth pursuing?

• Rent a roof or purchase?

• New build barn schemes

• Options and Exclusivity Agreements entered into - can

you get out of them?

Sonya Bedford – Head of Renewable Energy

• Other Renewables

• Wind

• Anaerobic Digestion

• Hydro

• Marine

Sonya Bedford – Head of Renewable Energy

Thank you for listening

For further queries, please contact

Email: renewables@stephens-scown.co.uk

Tel: 01392 210700

At the National Financial Directors’ Excellence Awards, Broadcaster Peter Sissons commented:

“...with a score of nearly nine-out-of-ten for quality of service, the highest marks ever for an audit firm in ten years.”

Francis Clark LLP, National Auditor of the Year – Mid Tier 2011

The Tax Tail

John Endacott

John.endacott@francisclark.co.uk

Tax Partner

Possible Approaches

• Own Use

• Letting of Land

• Energy Generation

Own Use

• Domestic Use

• Benefiting a Trading Business

• Capital Allowances Consultation

• VAT

Letting of Land

• Rental Income

• Agricultural Property Relief (APR)

• Business Property Relief (BPR)

• Balfour/Farmer Cases

• VAT – exempt income

Energy Generation

• Capital Allowances Consultation

• Business Structuring

– Company

– Trust

• Financing Arrangements

• VAT

At the National Financial Directors’ Excellence Awards, Broadcaster Peter Sissons commented:

“...with a score of nearly nine-out-of-ten for quality of service, the highest marks ever for an audit firm in ten years.”

Francis Clark LLP, National Auditor of the Year – Mid Tier 2011

Q & A

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