In line with our ‘quantitative over conjecture’ approach to advising clients on the energy use in their home and housing stock, we have estimated the FIT tariff cost to average households under a variety of different installation number scenarios over the next 5/6 months should the FIT tariff rate not be decreased until April 2012.
We have produced these scenarios because we noted that:
· many people in the solar industry are suggesting that the deadline for any FiT cut should be delayed until April 2012.
· the proposed FiT rate cut deadline in December is surprisingly soon.
We thought it likely that, given the rate of return possible given the pre-cut FiT (others have noted already that it it economic, even profitable, to borrow money in order to fund PV installations with the pre-cut FIT), the industry would probably ramp up very fast at the prospect of an April FiT cut. We were interested in the effect on the body of ~26M UK household energy consumers of various scales of market ramp upgiven that the FiT fees are spread across all users of energy in the UK.
The information and its associated spreadsheet (which you can get by emailing us) are free to use although we request that we are quoted as the original author. Please contact us with any questions or comments at info@parityprojects.com.
Parity Projects has no financial interest in promoting or not promoting photovoltaic technologies or installations.
We have produced these scenarios because we noted that:
· many people in the solar industry are suggesting that the deadline for any FiT cut should be delayed until April 2012.
· the proposed FiT rate cut deadline in December is surprisingly soon.
We thought it likely that, given the rate of return possible given the pre-cut FiT (others have noted already that it it economic, even profitable, to borrow money in order to fund PV installations with the pre-cut FIT), the industry would probably ramp up very fast at the prospect of an April FiT cut. We were interested in the effect on the body of ~26M UK household energy consumers of various scales of market ramp upgiven that the FiT fees are spread across all users of energy in the UK.
The information and its associated spreadsheet (which you can get by emailing us) are free to use although we request that we are quoted as the original author. Please contact us with any questions or comments at info@parityprojects.com.
Parity Projects has no financial interest in promoting or not promoting photovoltaic technologies or installations.
Modelling scenarios
These scenarios are not based on detailed industry modelling or analysis, but are instead designed purely to illustrate the potential effect on UK consumers’ fuel bills given various possible FiT supported PV installation scenarios. We believe that Scenarios 2, 3 and 4 are the most likely in the event of an April cut, and that Scenarios 2, 3, 4 and 5 are probably unlikely in the event of a December cut.
Scenario 1 – steady state September i.e. the same rate of installation as happened in September month on month. We believe that this is well below what might have been the actual reality given a reasonably long notice period of April 2012.
Scenario 2 – continued installation with month on month increase rate equal to 90% of the August to September 2011 increase, levelling off somewhat about February
Scenario 3 – continued installation assuming steady month on month increase rate experienced between August to September 2011
Scenario 4 – steady increase installation to achieve installed capacity ten times the September levels by April 2012 (i.e. a 20% increase each month in the monthly installed capacity)
Scenario 5 – steady increase installation to achieve installed capacity thirty times the September levels by April 2012 (i.e. a 60% increase each month in the monthly installed capacity)
These scenarios are not based on detailed industry modelling or analysis, but are instead designed purely to illustrate the potential effect on UK consumers’ fuel bills given various possible FiT supported PV installation scenarios. We believe that Scenarios 2, 3 and 4 are the most likely in the event of an April cut, and that Scenarios 2, 3, 4 and 5 are probably unlikely in the event of a December cut.
Scenario 1 – steady state September i.e. the same rate of installation as happened in September month on month. We believe that this is well below what might have been the actual reality given a reasonably long notice period of April 2012.
Scenario 2 – continued installation with month on month increase rate equal to 90% of the August to September 2011 increase, levelling off somewhat about February
Scenario 3 – continued installation assuming steady month on month increase rate experienced between August to September 2011
Scenario 4 – steady increase installation to achieve installed capacity ten times the September levels by April 2012 (i.e. a 20% increase each month in the monthly installed capacity)
Scenario 5 – steady increase installation to achieve installed capacity thirty times the September levels by April 2012 (i.e. a 60% increase each month in the monthly installed capacity)
Cumulative installed capacity
Headline Results
Annual additional cost to all UK energy consumers by April 2012
Key notes:
1) These are only the figures to April 2012. There will be continued increases in costs to households for any installations after April 2012 at whatever level future tariffs are set.
2) These are crude calculations with many assumptions. The basic assumptions are stated in the accompanying spreadsheet. All comments are gratefully received by Parity Projects by email to info@parityprojects.com or on our blog http://www.parityprojects.com/parity-news-blog.html.
3) The PV generation figures are based on a SAP2009 calculation for a south facing roof in London. If average electrical generation is above or below these figures then FIT payments will be higher or lower by a corresponding amount.
4) We have only looked at the FIT payments due to ‘PV retrofit’. PV retrofit comprised 64% of installed capacity in September. This means that the total cost to consumers will be above the figures calculated although most of the non PV retrofit capacity will be at a lower tariff.
5) ‘Standalone PV’ is has experienced significant growth in the last few months but any figures relating to standalone are not included in our analysis.
6) There are 4.48 million social housing households. It is not expected that anything other than a very small percentage of these are in the pipeline for PV installations before April 2012 and that an even smaller percentage would be benefiting from anything other than some free electricity when the installations on their roof were generating due to the FIT being owned by the social landlord.
7) The analysis relates to the ramp up figures if there was to be an April 2012 deadline. Any figures following the announcement of the December 2011 change are not relevant.
Assumptions/references:
Number of UK households - 26,000,000 (Great Britain's housing energy factfile (DECC), October 2011)
Installed PV retrofit capacity to end September 2011-11-06 - 202,585kWp (DECC)
Other historic installed capacity (DECC)
Average FIT rate used for PV retrofit capacity - 43p per kWh
Wholesale price of electricity used - 8p per kWh
Estimated % PV generated exported - 50%
Effective FIT rate passed onto consumer- 39p per kWh
Annual per kWp installed - 826kWh (SAP)
Annual kWh based on September capacity - 167,335,210 kWh
Annual cost per household by end of September 2011 - £2.51
1) These are only the figures to April 2012. There will be continued increases in costs to households for any installations after April 2012 at whatever level future tariffs are set.
2) These are crude calculations with many assumptions. The basic assumptions are stated in the accompanying spreadsheet. All comments are gratefully received by Parity Projects by email to info@parityprojects.com or on our blog http://www.parityprojects.com/parity-news-blog.html.
3) The PV generation figures are based on a SAP2009 calculation for a south facing roof in London. If average electrical generation is above or below these figures then FIT payments will be higher or lower by a corresponding amount.
4) We have only looked at the FIT payments due to ‘PV retrofit’. PV retrofit comprised 64% of installed capacity in September. This means that the total cost to consumers will be above the figures calculated although most of the non PV retrofit capacity will be at a lower tariff.
5) ‘Standalone PV’ is has experienced significant growth in the last few months but any figures relating to standalone are not included in our analysis.
6) There are 4.48 million social housing households. It is not expected that anything other than a very small percentage of these are in the pipeline for PV installations before April 2012 and that an even smaller percentage would be benefiting from anything other than some free electricity when the installations on their roof were generating due to the FIT being owned by the social landlord.
7) The analysis relates to the ramp up figures if there was to be an April 2012 deadline. Any figures following the announcement of the December 2011 change are not relevant.
Assumptions/references:
Number of UK households - 26,000,000 (Great Britain's housing energy factfile (DECC), October 2011)
Installed PV retrofit capacity to end September 2011-11-06 - 202,585kWp (DECC)
Other historic installed capacity (DECC)
Average FIT rate used for PV retrofit capacity - 43p per kWh
Wholesale price of electricity used - 8p per kWh
Estimated % PV generated exported - 50%
Effective FIT rate passed onto consumer- 39p per kWh
Annual per kWp installed - 826kWh (SAP)
Annual kWh based on September capacity - 167,335,210 kWh
Annual cost per household by end of September 2011 - £2.51
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