The Feed-in Tariff has made solar photovoltaics an attractive option for farmers in the UK. Oliver Sylvester-Bradley, consultant at The Solar Energy Co-op, examines the pros and cons.

Solar photovoltaics (PV), which generates electricity from daylight, can deliver a valuable income, reduce electricity bills and cut carbon dioxide emissions.

How does solar PV work?

Solar photovoltaics are installed as "arrays", which are made up from a number of solar panels. Each panel is made up from either monocrystalline or polycrystalline solar "cells" made from silicon, which is manufactured from sand. The solar cells generate DC current when exposed to sunlight. The current flows from the cells through a junction box on the back of the panel and out through electrical cables. The cables connect the panels in series to form a solar array. The DC energy is then passed through an inverter, converting it into AC, which is either consumed on the farm, or exported to the national grid. There are no batteries in a "grid connected" PV system.

What is the Feed-in tariff?

The main financial benefit for farmers comes from the FiT. This government-backed scheme requires the utility companies to reward owners of renewable energy generators for each unit of electricity they generate, regardless of whether they consume the electricity or not.

You get rewarded for any units of electricity you feed-in to the grid, but this payment is small (currently 3.1p/kWh) compared to the payments for generating (currently 8.5-43p/kWh depending on the system size), and the price of "normal" grid-based electricity (currently about 10p/kWh).

The fact the export, or "feed-in" rate, is so low (3.1p/kWh) means it is more lucrative for a farmer to use as much of the generated electricity as possible. Clearly it is better to avoid spending 10p/kWh than to gain 3.1p/kWh.

Income from the FiT is paid from the utility companies and comes from a small levy on all electricity consumers' bills.

Installation

There are several areas you need to consider when deciding to install solar PV:

1. Location

The most obvious location for solar panels is on the south-facing roof of a barn, which is otherwise redundant space. Solar PV generates the most energy when the surface of the panels is perpendicular to the sun's rays.

Most farm PV systems are either mounted on the roof of an existing or new building, or on a purpose-built structure on the ground. South-facing roof areas with a pitch of 30-40° have the best generation potential, although shallower pitches and even east and west-facing roofs will still deliver at least 80% of the energy available from a south-facing installation.

It is possible to install a "tracking system" that follows the sun throughout the day. Gains of up to 20% can be achieved in this way; however, a tracking system involves the incorporation of several moving parts into a system. Since the panels need to operate non-stop for 25 years, the introduction of a moving infrastructure is probably not the best route for those wishing for a simple life.

2. Grid connection

Solar installations should be situated within 100m of an existing three-phase grid supply and will require permission from the District Network Operator to feed energy back into the grid. Your installer can help obtain this permission.

3. Planning

Planning permission is required for any solar installation over 4kWp. Domestic installations of up to 4kWp fall within permitted development rights, although this rule can be extended to include some larger systems that fall within the curtilage of a farmhouse. However, most larger farm PV systems will require planning permission and you should contact your local authority for specific guidance. The usual restrictions apply for Areas of Outstanding Natural Beauty, Sites of Special Scientific Interest and listed buildings.

4. Size

Ground-mounted systems of 50kWp require about one-third of an acre of land. These systems offer the advantage of being easily orientated to ensure the panels face south at the appropriate angle. The main issue with ground-mounted systems is finding a suitable location, ideally a "brownfield" site that is free from shade and also located within 100m of a three-phase grid connection. Ground-mounted panels will be installed in rows mounted on a framework about a metre from the ground, meaning it is also possible to combine electricity generation with grazing for sheep. The animals can benefit from the additional shade and wind protection and also help keep the grass down.

Choosing the right size solar installation is mainly a matter of available roof space, or land, versus the financial capital available. At present, the FiT rates are most attractive for installations of up to 50kWp, which will generate roughly 42,000kWh a year, depending on location, orientation and pitch. The financial benefits are greatest where there is a similar electricity demand on the farm with a load profile that matches the production from the solar panels.

For example, a farm with electrically powered grain dryers that can be operated at the same time the system is generating (ie from 8am to 8pm) will benefit more than a dairy farm that requires energy for milking and chillers early in the morning and later in the evening when the panels are not generating energy.

Finance

If the consumption and generation profiles can be matched up to maximise energy usage, financial returns of more than 15% are possible, making solar PV a viable investment. Although businesses are required to pay tax on the income from the FiT, the payments are linked to RPI (Retail Price Index) and increase over time. It is also possible to use Capital Allowances to offset an investment in solar PV, especially where the panels form an integral part of a barn's roof and can be classified as "upgrading" or "required maintenance" of an existing building.

With possible returns of 15%, borrowing money to finance a solar PV installation is a feasible option. Although some banks have been hesitant to invest, there are many that have specific funds available for renewable energy installations. There is also now at least one installer who is offering finance backed by the FiT itself, meaning no other assets are required to secure the loan.

The other option is a "fully financed" system, where the installer partners with a finance company and provides a fully serviced solar PV system at zero cost to the farm. The farm benefits from free or cheap electricity and the finance company claims the FiT. This may seem like an attractive option, but the financial advantages of owning your own system outright are significant. By allowing an investor to claim the FiT, you are effectively waving goodbye to hundreds of thousands of pounds of potential income over the next 25 years.

The PV tariff rates are scheduled to reduce in March 2012 and any installation completed after that date will receive a lower rate for the 25 years. As such, any farmer that is considering installing solar panels should act now to allow enough time to obtain full planning permission and have their system up and running before the 31 March 2012 deadline.