Making the most of Feed-in Tariffs
Renewable energy has experienced a boom in British agriculture over the past year, with farmers playing a strong role in developing this new industry.
The advent of guaranteed Feed-in Tariffs (FiTs) a year ago sparked a massive number of projects, with small-scale solar photovoltaic panels accounting for 92% of the 27,000 registered installations.
But, in February the government announced a review of the FiTs, and now medium to large-scale solar projects face potentially devastating cuts in their tariff rates.
So is solar power still viable? Or has the review introduced new possibilities in other areas?
The answer, according to Juliet Davenport from Good Energy, is yes in both cases.
“I still think solar is a good opportunity for farmers, particularly for smaller installations below 50kW,” she says.
But the review also unveiled plans to introduce a higher FiT for anaerobic digestion, which had previously been relatively unviable.
If the government’s plans go ahead, FiTs for anaerobic digesters below 250kW will increase from 11.5p/kWh to 14p, while solar projects might see their tariffs drop to as little as 8.5p for arrays above 250kW. The consultation remains open until 6 May, and any changes could take effect from 1 August this year, although existing installations will not be affected.
With energy prices only likely to increase in the future, generating your own green power is an excellent way to both cut costs and develop a new income stream, says Ms Davenport.
“The type of renewable energy you choose depends on your natural resources. There are a significant number of farm-led commercial wind farms in Scotland, while in the south of England many farmers have got involved in solar.”
Solar photovoltaic
According to Farming Futures, photovoltaic production has doubled every two years since 2002, making it the world’s fastest-growing energy technology. When installing on buildings, roof space, structure and orientation are important.
A 23-27kW peak system, capable of producing 20,000kWhs a year, will need about 160-200sq m. The building must be capable of lasting as long as the solar cells – up to 50 years; strong enough to support their weight, and roughly south facing.
The electricity produced cannot be easily stored, so farmers should rearrange energy use to optimise output during the day – and retain National Grid backup.
If considering exporting to the National Grid, farmers should check whether their system needs upgrading, says Sarah Wells at 7Y Energy. Single-phase electricity will only support a 10kW peak array – typically costing £30,000 to install. Three-phase will cope with about 50kW, usually costing about £125,000.
The grid itself may also need upgrading, which can be extremely expensive. Most projects should return about 10% on investment, and pay back over 8-11 years, depending on finance costs.
Once connected, surplus electricity can be sold to the National Grid at about 3.1p/unit, compared with buying it in at about 10p/unit. Maintenance costs are low, but the inverter is likely to need replacing after about 12 years, at a cost of 10-15% of the total project.
“Choose an installer with experience of farm buildings, and consider tax implications – the panels are eligible for capital allowances, but the FIT is subject to income tax for businesses.”
Anaerobic digestion
With the proposed new FiTs, anaerobic digestion (AD) may become more financially attractive. “But it really comes down to the technology – the feedstock is absolutely key,” says Ms Davenport. Typically, mixtures include slurry or farmyard manure, green waste, energy crops and crop waste. “Consider collaborating with neighbouring farms to cut cost and ensure correct feedstock supply.”
Most AD plants are imported from Germany, so the exchange rate will have a bearing on cost – and maintenance warranties will also be an important consideration.
Most plants in the planning system are between 500kW and 1MW capacity, as these are the most economically viable.
A 250kW farm-scale digester would cost £750,000-£1m, possibly earning energy revenues of £200,000-£300,000, plus the FiT. A 1MW plant would cost £3-4m, but could earn more than £1m a year.
Wind power
There are still considerable opportunities for wind power, particularly smaller scale, Ms Davenport says. “The biggest problem is obtaining planning permission.”
Small turbines are usually more locally acceptable, but larger installations tend to be more cost-effective.
Prospective investors should accurately measure the average wind speed and consistency on the site using an anemometer, and ensure the technology is comprehensively guaranteed.
A 6-15kW turbine will cost £20,000-50,000, with a payback of 5-10 years depending on site wind speed. Systems from 50-500kW cost £150,000-£600,000, with larger wind farms costing considerably more.
Hydro-electric power
Farmers with a suitable river on site may consider a micro-hydro project. Power is more consistent than wind or solar, although it fluctuates according to season and rainfall. Developers must obtain a licence from the Environment Agency, and will probably need a bespoke system for their site, says Ms Davenport. “But we’re seeing a lot more take-up of hydro power since the FiT.”
Low head systems will cost about £4,000 per kW, up to about 10kW. For medium heads, expect a fixed cost of about £10,000 and then about £2,500 per kW up to 10kW, says Farming Futures. Unit costs drop for larger schemes.
Biomass
Farmers often have considerable under-utilised resources of by-products such as straw and tree thinnings, which could be used as biomass fuels. They may also grow crops such as miscanthus or short-rotation coppice, which could either power a small boiler for the home, or larger systems to provide combined heat and power for farm buildings and neighbouring houses.
The Renewable Heat Incentive, announced in March this year, aims to bridge the financial gap between conventional and renewable heat systems. Tariffs will be paid on top of FiTs for a range of technologies, including biomass, solar thermal, ground and water source heat-pumps, biogas, and energy from waste. They will be guaranteed over 20 years, at up to 7.6p/kWh for biomass projects below 200kWh.
Agreement types
There are a plethora of different financing agreements – from farmers’ funding the project themselves to developers paying rent for the site and covering all upfront and maintenance costs. Landowners should research their development partner, to ensure they have experience in the field and strong financial backing.
Farmers must consider the renewable venture in the context of the existing farming business, says Ruth Kendal, rural economy consultant at ADAS. “Land that is used to generate renewable energy may be classed as non-agricultural. Professional advice should be sought on the legal, tax, planning, single payment and agri-environment scheme issues. It is also important to explore the business rates that may be applicable.”
Planning permission
Most projects require planning permission, although smaller schemes may fall under permitted development rights, she adds. “It may be necessary to submit specialist reports such as landscape assessments or wildlife surveys in support of the application. Early discussions should be held with the planning department, and the actions required should be costed and incorporated into the project design.”
More information
• Farming Futures – www.farmingfutures.org.uk
• Department of Energy and Climate Change – www.decc.gov.uk
• Good Energy – www.goodenergy.co.uk
• 7Y Energy – www.7y.co.uk/energy
Case study
Tim Breitmeyer, Cambridgeshire
Tim Breitmeyer installed a 100kWp system on his grain store roof at Bartlow Estate, Cambridgeshire, in October last year, and is so far enjoying above-target performance.
With the highest output coming in the summer months, when electricity consumption in the 7500t store is at its highest, the technology is well-matched, he says.
The project cost £340,000, so Mr Breitmeyer entered into a joint venture with Esco NRG to part-fund and manage it. Fortunately it fell within permitted development rights, so did not require planning permission. With a FiT of 31.4p/kWh, and forecast annual production of 85,000kWh (about 35,000 of which will be exported to the National Grid), it should pay for itself in 10 years, and reduce the farm’s carbon footprint by 46t a year.
“The industry has been really forging ahead, but the government’s proposals to slash the tariffs is a complete disaster. If they reduce the FiT to 10p/kWh, it cuts the return on capital to 16 years – it kicks the whole thing into the long grass.”