How to choose the right renewables technology

How can farmers be sure they are choosing the right renewables technology and that it will perform as expected? Robert Harris reports.

Glossy brochures may promise excellent returns on capital from renewables schemes, but too few take into account the potential pitfalls and costs that come with installing and running the technology.

Careful assessment is essential before embarking on any project to ensure its viability is based on realistic expectations, says Robert Meadley, head of renewable energy services at property and business consultant Brown & Co.

The aim is to decide whether renewables suit a farm and, if so, which technology is most beneficial, explains Mr Meadley.

“A renewable energy audit will cover all the key points before taking the plunge. The farmer gets a couple of hours’ discussion around the table, a walk around the farm to assess its suitability and a summary report of the options.”

Areas for discussion include:

• On-farm energy usage, including electricity and heat and current charges
• Renewable energy policy
• Available subsidies including the Feed-in Tariff (FiTs) and Renewable Heat Incentive (RHI)
• Resource efficiency and reducing energy use
• Types of renewable energy technologies available, for example solar or wind
• Maximising on-site usage.

Business objectives are key in this process and investment return is likely to be at the top of many lists. On current economics both solar and wind readily return more than 5% on investment – attractive given current interest rates, says Mr Meadley.

Reducing energy costs is also increasingly important, while farmers also face increasing pressure from supermarkets and other customers to adopt renewables.

“It’s an increasing trend to help reduce the carbon footprint of supply chains,” says Mr Meadley. In addition, many clients also often want to be more self-sufficient and to do their bit for the environment, he adds.

Feasibility studies

Once the auditing process is done and a project or projects have been identified, feasibility studies, including output predictions, can begin.

Solar radiation is reasonably predictable as Microgeneration Certification Scheme (MSC) installers have to quote government Standard Assessment Procedure (SAP) figures, explains Mr Meadley. These are general estimates for production for the whole UK.

Other options include:

• SolarGIS figures – these account for local variances such as elevation, slope, landscape type and solar radiation
• Other radiation databases from solar PV equipment providers
• Actual output from nearby installations.

However, site-specific factors such as shading, angle of pitch and cooling all affect solar PV performance and must be assessed, he adds.

Solar PV is generally a lower risk investment than wind, costing about £60,000-75,000 for a fully installed 50kW project. Wind energy, on the other hand, is much more technical during planning permission.

“A reduction in FiTs from December 2012 means smaller turbines will be less economically attractive, but anything over 50kW should still deliver a very competitive return on investment,” says Mr Meadley.

However, a 50kW turbine alone will cost anything from £240,000 upwards, so project due diligence is required.

Turbines require a minimum 5m/sec windspeed to be viable. “The usual starting point when assessing feasibility and likely performance is the UK Wind Speed Database (formally NOABL),” says Mr Meadley.

“This is no longer updated and is based on a 1km square average, so does not account for local factors. However, for most farm options it should be sufficient when used with local knowledge.”

For larger projects or complex sites, other options include:

• Met Office virtual met mast – a site specific, hub-height wind prediction tool based on more complex wind speed models. It is commonly recognised by many funding bodies
• On-site anemometer/met mast – accurate but expensive, being placed on site for 12-24 months to produce production profile and average value.

However, at £10,000-15,000, an anemometer is not feasible for most on-farm installations. Individual sites will therefore need to be assessed for turbulence factors such as buildings and woodland, says Mr Meadley. The distance to grid connection and cable specification may also affect losses.

Biomass projects will require annual heating profiles to assess energy usage peaks and troughs as well as overall averages – feedstock budgeting is crucial, says Mr Meadley.

“You need to ensure you can obtain adequate supplies of woodchip and that storage and handling facilities will be able to cope,” he adds.

Getting the best payback

Whatever technology is chosen, for most farm-scale installations the more power that is used on site the better the payback, as savings in electricity costs far outweigh returns from export FiTs.

“It is becoming more important to check the existing energy usage profile so we can select a project that best meets onsite demand,” says Mr Meadley.

For schemes where on-site use is minimal, budgeting should be done on an export-only basis as a worst-case scenario. “If it stacks up, the project should go ahead – any extra energy used on site will be a bonus,” he adds.

If funding is required for the project, the figures will need to be accurately analysed to satisfy lenders that the project is robust. Any business plan should allow for all costs, depreciation and finance charge.

“Returns on investment of 15-25% are often quoted on solar PV installations. But adding in all these charges can soon bring that down to a more realistic level of 6-10%,” adds Mr Meadley.

A sensitivity analysis can indicate the effect of production changes on the return on investment. “You may have budgeted on 850kW output per kW installed. If the return on capital still stacks up at 800kW then that will give the lender a lot more confidence. Anything above will be a welcome bonus, rather than becoming a necessity,” he says.

Solar PV: Similar installations, different results