30 Aug 2013, 12:47 PM
A housing association is on the verge of agreeing a major solar deal that it claims demonstrates the renewed viability of investing in large-scale solar photovoltaic technology. The organisation, which owns and manages 20,500 homes in the south of England, is about to sign a contract to install panels on 800 tenants’ homes and its offices and depots over the next two years.
Picture shows PV panels installed by South Yorkshire Housing Association on properties in Sheffield.
Housing association First Wessex is leading a charge back to PV by investing £4.3 million in the project to save its residents between £75 and £150 a year in energy bills and save 1,250 tonnes of carbon annually (see box).
After the government slashed the feed-in tariff – a subsidy payment intended to incentivise the take-up of PV – from 43.3p per kilowatt hour to 21p in November 2011, many associations dropped their solar plans on the grounds that schemes were no longer viable.
In April last year the government introduced a reformed FIT regime, meaning the tariff has dropped gradually in line with the cost of PV systems.
However, First Wessex claims the cost of PV systems has fallen dramatically – it has more than halved since the initial cut – and there is a business case to install solar panels again. The association expects to have its investment repaid by year 12, with the borrowing repaid by year eight, leaving another eight years in which it can profit from the FIT.
Before its borrowing costs, the association will make a return of 9.3 per cent on the FIT.
The panels, which should produce an output of 2.5 mega watts, will receive a FIT rate of 14.9p/kWh on the houses, which will drop by 10 per cent to 13.41p/kWh after the first 25 PV stations have been installed.
The association is set to sign a deal in the coming days with Wales-based installer Dulas which will start work in October.
Paul Ciniglio, sustainability and asset strategist at First Wessex, said: ‘I believe the PV market is still open for business. Many housing associations thought it would no longer work, but despite no longer being such a lucrative proposition or easy to do, it still stacks up.’
South west-based Alliance Homes is the only other association to make a major push into solar PV. It has reported renewed interest from neighbouring associations in joining its existing procurement framework and to install 6,000 panels a year for the next three years.
A spokesperson for the Solar Trade Association said: ‘Prices of PV systems have dropped more than 50 per cent up to 70 per cent. Although the return on investment is broadly the same as it was previously [as the FIT falls broadly in line with the cost of PV), the cost reduction makes buying the kit more affordable as it lowers the upfront costs.’