final exeter the secrets of solar success 10 nov 2011
TRANSCRIPT
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: [email protected]
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: [email protected]
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: [email protected]
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
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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