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Sunny outlook for solar
If something sounds too good to be true . . . well, you know the rest. The aphorism springs to mind when you hear about those kind people offering to provide and install solar panels — providing us with free electricity — for no money at all.
Isis Solar, a member of the Oxford Sustainable Group, was the first solar panel provider in the south of England to come up with the free panel scheme. Now the founder of Oxford Sustainable Group, Hadley Barrett, tells me the 18 staff working for Isis Solar, which only came into being at the beginning of August, have found the response “quite extraordinary” — thanks to the publicity the scheme has received.
So is it all too good to be true? Well, no: it could be worth up to £350 a year in electricity to householders with suitable south-facing roofs who sign up for the deal. But they will need to commit their homes to 25 years of having photovoltaic panels on the roof — and even if they sell and move on, the panels will have to stay, their position firmly secured by a covenant in the transfer document preventing the new owner from removing them.
In return, Isis Solar (or any other similar installer) will receive the proceeds of the Feed- in Tariff, which is a Government-backed scheme that pays out for all electricity generated in this way. It will typically amount to about £1,000 a year.
Mr Barrett explained: “The householder could opt to buy the panels from us. That would typically cost them about £18,000. Then they would receive about £1,000 a year on top of the free electricity.
“If we install the panels free, of course, we get the Feed-in Tariff.”
The Feed-in Tariff is paid for all electricity generated, regardless of whether consumers use it themselves or feed it into the National Grid.
The electricity you buy from your utility company at the moment costs you about 10p per kWh, but put a photovoltaic panel on your roof and either you (or the company that installed your panel free) will get 41.3p per kWh from the Feed-in Tariff.
If you also manage to export any to the grid, you will receive an extra 3p per kWh.
And ultimately, after the 25 years have elapsed, the panels will belong to the householder.
The roots of the Oxford Sustainable Group, the parent company of Isis Solar, date back to 1999 when Mr Barrett, 38, was studying for an MBA at the Said Business School in Oxford — and decided to carve out a career in sustainable energy.
He founded the group, which now has business interests in biogas and wind, as well as solar, in 2004 — but the Isis subsidiary only came into existence at the beginning of August.
Now the company’s London office has Oxfordshire firmly in its sights as a target area for installing its panels.
Mr Barrett said: “We have 18,000 panels to install and have so far received hundreds of inquiries from Oxfordshire.”
Certainly the sun seems to be shining brightly on the solar business at the moment. He added: “Demand has been extraordinary. Now anyone applying for a panel must wait about three weeks for us to send someone round to assess whether or not their roof is suitable.”
The Government’s objective is clear: the UK has committed itself to generating 15 per cent of its electricity from renewable sources by 2020. And at present it seems determined to achieve the apparently arbitrary target at high cost — despite its pledge to cut public spending.
But why are companies such as Isis willing to trust the Government to stick to this policy of rewarding people producing their own power?
After all, many of us, I suggested to Mr Barrett, would not trust a Government further than we could throw it — even though each successive administration should in theory keep to long-term promises made by its predecessor.
He said: “The point here is that the money being paid out comes out of an additional payment we are all making to the utility companies on our ordinary bills. The Government is not paying out the money itself but it is still gaining the kudos.”
So, in effect, we are all paying for the subsidy, whether we like it or not.
Mr Barrett added that in spite of credit being notoriously hard to come by at present, he had encountered relatively little difficulty in raising money for this scheme. He said: “Compared to most risks, this is quite low.”
He said the yearly return on the capital might seem low but that over the entire period the returns look bright — even on the comparatively expensive panels Isis installs. (There are companies out there offering to install panels for £12,500 with a return of £900 in Feed-in Tariff, plus £140 off electricity bills).
Mr Barrett said: “There are many returns and prices spoken about in the market. The key point is that these all depend on the assumption of light efficiency of panels and so on. Our model has quite pessimistic assumptions.
“As a group, we have been criticised for under-selling ourselves since we almost always over-perform on our expectations.
“However, I believe this is a positive aspect of Oxford/Isis, since it is better to promise something small and deliver something big.”
So should we never look at this particular gift horse in the mouth?
According to figures from Ofgem, more than 2,200 people were added to the register to claim Feed-in Tariff in August, up from 1,700 in July and 1,400 in June.
The consumer organisation Which? has issued a warning about a similar scheme from British Gas called ‘rent a roof’. Which? solar expert James Tallack said: “If British Gas owned the panels, then an average household in the Midlands would save just £140 a year on their electricity bills. They'd also need to be completely clear about responsibilities for maintenance and insurance of the panels, as well as the fact that anyone interested in buying their home in the future may be put off by the presence of panels that they won't get the full financial benefit from.”
Of course, anyone signing up for free panels should read the small print — if they want to benefit from global warming and at the same time contribute to cutting carbon emissions.