The UK Government has set a target that, by 2020, 15% of all energy generated in the UK should be from renewable sources. One consequence of this has been a significant increase in demand for Solar Photovoltaic technology, more commonly known as solar panels. Why is this?
Well, in order to encourage growth in renewable generation, the 2008 Energy Act introduced ’feed-in-tariffs’ (FITs) – a per kilowatt hour payment for electricity produced from renewable sources and exported to the National Grid.
Through the FITs, both individuals and companies can be paid for simply using solar panels and these payments are guaranteed in the long term, 25 years, thereby creating a financial incentive which is very attractive to landowners and investors.
In addition to receiving income from FITs small scale generators can also benefit from reduced energy bills because the renewable electricity that the solar panels produce, and that is used on-site, can be offset against the electricity that would otherwise have been purchased. Having read this far you might now be thinking of making a call to have solar panels installed without further delay! However, every silver lining has a cloud!
As a land or property owner you need to think about the practicalities of installing solar panels.
Health and Safety is now at the forefront of peoples minds and must be a consideration for both owners, landlords and tenants. Whether the land is owned or rented consideration must be given to such matters as the direct current generated by the solar panels as this may present a fire risk. Do fire risk assessments need to be reviewed?
Insurers will usually need to be notified of installations as there could be an impact on both cover and premiums. Consideration should also be given to any covenants on the land or premises preventing such an installation. The most common of these would be a restriction on external alterations or additions. Mortgage providers will also need to be notified of any such changes.
Once you have considered all of these matters, and you might think that this is already a lot to think about….what next?
Well, now consider the potential financial benefits. To purchase and install a 50kw facility for a commercial property you should expect to pay around £120,000. You might consider this to be a lot but, based on current tariff levels, returns of 8-10% can be expected thereby enabling a capital repayment within 9-10 years. As the FITs are guaranteed for 25 years this will provide an additional 15 years of income from your investment once the initial outlay has been repaid.
The current FITs are set until 31 March 2011 when they will be reviewed. Delay could, therefore, be costly.
If you need any further information on the legal technicalities of FITs or guidance as to where and how to start please do not hesitate to contact us.
