A short spell of sunshine for Photovoltaics

    There is currently much confusion over the viability of Solar Photovoltaic (PV) installations, following significant cuts to feed-in tariffs (FITs).

    Installations registered between 12 December 2011 and 2 March 2012 still have not had their FIT level confirmed. However, the FITs that will apply between 1 April and 30 June 2012 have been confirmed, creating some short-term stability and presenting an opportunity to install PV before 1 July, when proposed, much-reduced FITs would come into force.

    Additionally, it is proposed that PV systems installed from 1 April must achieve an Energy Performance Certifcate rating of D or above to qualify for the full FIT payment; generators who cannot meet this requirement would receive a lower tariff.

    So what does this mean for returns on PV investments? The proposed FITs after 1 July would provide a 5–10% target return; this could be higher for potential projects if most of their electricity is used by the producer, thus replacing purchased electricity (which currently costs 9–14p/kWh from a commercial supplier), rather being sold at an export tariff of 3–4p/kWh. This return could rise further if energy prices continue to rise.

    The price of PV panels has fallen by more than half over the past year, enhancing the returns achievable. Although this trend may continue, the benefit of forming a buying group to lower costs through economies of scale will help to achieve the best returns available. Savills has valuable experience of this collaborative approach: we were early entrants into this sector, project-managing our first sites in Hertfordshire in July last year after having brought together a group of ten investors. We are currently commissioning 35 new sites, saving money and maximising returns by managing groups of investors.

    If you would like to discuss opportunities in this sector, please contact me on 01223 347276, or at ghanglin@savills.com