Seminar on the Current Position in the Solar Industry in the South West.

1. The Secrets of Solar Energy
10 November 2011

2. “Give me sunshine”
Lessons learned from 12 months in
the ‘eye of the storm’ and guidance
to preparing for the next solar gold
rush…
At the National Financial Directors’ Excellence Awards, Broadcaster Peter Sissons commented:
“...with a score of nearly nine-out-of-ten for quality of service, the highest marks ever for an audit firm in ten years.”
Francis Clark LLP, National Auditor of the Year – Mid Tier 2011

3. Administration
&
www.francisclark.co.uk

4. Renewable Energy and the Devon Landowner
• Presentations:
– Introduction
– Comprehensive FiT Review phase 1 proposals (Sonya
Bedford)
– A turbulent year and a bright future (Bob Meier)
– Lessons learnt/ winning strategies (Sonya Bedford)
– The tax tail… (John Endacott)
– Summary
• Q&A session

5. Economics of Renewables
• History – renewable energy ‘uneconomic’
• Government intervention
– ROCs, FiTs and RHI
• FiTs
– Cover PV, hydro, AD, CHP and Wind
– Came into operation on 1 April 2010
– “Review April 2012”…

6. A year in PV in three headlines
• The £1bn solar power gold rush (Business
Cornwall – 27 September 2010)
• Solar ‘Gold Rush’ in U.K. May Die With Incentive
Roll-Back (Bloomburg - 28 February 2011)
• ‘Harsh’ support cuts will force solar rethink
(Farmers Weekly Interactive 1 November 2011)

7. The future?
But first…

8. Sonya Bedford – Head of Renewable Energy
Sonya Bedford
Head of Renewable Energy
Comprehensive FIT review phase 1 proposals
Tel: 01392 210700
Email: renewables@stephens-scown.co.uk
Web: www.stephens-scown.co.uk

9. Sonya Bedford – Head of Renewable Energy 17th February 2011
Further Fast Track Review of the Feed in Tariff - how does this affect your existing
projects?
The proposed new tariff rates under FiT are:
Band (kW) Current generation tariff (p/kWh) Proposed generation tariff (p/kWh)
≤4kW (new build) 37.8 21
≤4kW (retrofit) 43.3 21
>4-10kW 37.8 16.8
>10-50kW 32.9 15.2
>50-100kW 19 12.9
>100-150kW 19 12.9
>150-250kW 15 12.9
>250kW-5MW 8.5 8.5*
stand alone 8.5 8.5*
*These are the current tariffs, which we are not proposing changing and which, like all other current tariffs, will be adjusted in
line with the Retail Price Index from 1 April 2012.

10. Solar PV – perspectives on a
turbulent year and very bright
future
Bob Meier, Senior Manager, Energy
& Sustainability
At the National Financial Directors’ Excellence Awards, Broadcaster Peter Sissons commented:
“...with a score of nearly nine-out-of-ten for quality of service, the highest marks ever for an audit firm in ten years.”
Francis Clark LLP, National Auditor of the Year – Mid Tier 2011

11. Solar – a huge, expanding global sector
“Photovoltaic and solar-thermal plants may meet most of the world’s
demand for electricity by 2060 -- and half of all energy needs“ senior
analyst IEA August 2011
45,000
MW of PV installed capacity globally – BP energy survey
40,000
2011
35,000
30,000
25,000
Total Others
20,000 Total Europe
Total North America
15,000
10,000
5,000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

12. 2020:Renewables targets
Approximate
Electricity:
Original c.25TWh to
strategy c.115.5TWh
Heat:
Technology breakdown for central view of deployment in 2020
TWh Mid % c.14TWh to
Onshore wind 24-32 12%
Offshore wind 33-58 19%
Biomass electricity 32-50 18%
c.75.5TWh
Marine 1 0.4%
May 2011 Biomass heat (non domestic)
Air-source and Ground-source heat pumps
35-50
16-22
18%
8%
Transport:
Roadmap (non domestic)
Renewable Transport
Others (including hydro, geothermal, solar
Up to 48
14
21%
6%
c.14TWh to
and domestic heat)
Estimated 15% taget 234 c.48TWh

13. FITs and anticipated PV installation rates
The government grossly underestimated the level of PV take up at the
tariffs it introduced, leading to three intra-year “fast-track” changes to avoid
breaching “budget” ceilings
DECC Forecast of PV deployment at introduction of Feed-in-Tariffs
Installations
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Domestic - 0-4KW 20,309 54,842 113,526 209,731 308,989 407,838 491,907 564,314 622,551 667,005 698,418
Small - 4-10KW 0 0 0 414 3,573 9,309 12,249 12,887 12,887 12,887 12,887
Large - 10-5,000KW 0 0 0 42 440 1,195 1,641 1,810 1,836 1,838 1,839
Cumulative MW installed
Domestic - 0-4KW 51 137 284 524 772 1,020 1,230 1,411 1,556 1,668 1,746
Small - 4-10KW 0 0 0 2 18 47 61 64 64 64 64
Large - 10-5,000KW 0 0 0 7 42 104 143 163 171 173 173
Source: DECC internal working papers disclosed under a FOI request

14. Renewables are capital intensive
• To understand renewables’ economics – and set appropriate tariffs
– you need to understand the capital costs. (They also need policy
stability as a result!)
100%
90%
80%
70%
60%
50%
Cost excluding capital cost Capital cost
40%
30%
20%
10%
0%
Solar PV Tidal Tidal stream Wave Onshore Offshore Nuclear Coal CCS Gas CCS Gas CCGT
barrage (fixed) wind wind
Source: CCC Renewables review May 2011

15. Why the government got it wrong
The government calculated the tariffs assuming capital costs of £4,000/kw
or higher. Costs have fallen – but how much?
3500
3000
Estimated current and projected PV
2500
capital costs prepared for DECC and Balance of plant
Climate Change Committee Installation works
PV capital costs (£/kW)
2000
Inverters
Modules
1500 Site prep/ licensing
high capex
1000 low capex
500
0
2010 2020 2030 2040

16. Catching a falling knife – with bureaucracy
“We are aware of reports that the global costs of PV modules have fallen by as much as 70%
since 2008”, DECC ministerial statement November 2011
Source: Bernstein September2011

17. Has DECC killed the solar industry?
Stand alone: “Goldrush tariffs” : 30.7p – pre August 1st 2011
Now : 8.5p, a c.72% cut
Retrofit domestic: Current : 43.3p
Proposed : 21p, a c.52% cut
Before allowing for increased value from on site use:
Stand alone: “Original goldrush tariffs” : 29.3p + 3p = 32.3p
Now : 8.5p + [6.5p] = 15p, a c.54% cut
Retrofit domestic: Current : 43.3p + 50% * 3.1p = 44.8p
Proposed : 21p + 50% * 3.1p = 22.5p, a c.50% cut

18. Has DECC killed the solar industry?
4000 40
3500 35
3000 30 Costs - Low
Costs - Medium
2500 25 Costs - High
p/KWh
LC - Low
£/KW
2000 20
LC- Medium
LC - High
1500 15
"Goldrush"
1000 10 Proposed Resi
Standalone
500 5
0 0
2010 2015 2020 2025 2030
Source: Quantitative evidence base for ROC banding review, DECC

19. Conclusions
• Government has been pushed into three intra-year tariff changes on solar
as policy has struggled to reflect economics of a very dynamic global
industry
•The headline cuts in tariffs are dramatic, but so too are the offsetting
capital cost falls
•Large field – based systems are likely to be able to hold their own
economically against the current marginal renewable technology, offshore
wind, very soon
•That raises the prospect of PV becoming mainstream and being freed of
current budgetary constraints
•Sites will also not be constrained by FIT rules, particularly 5MW cap
• The economics will not be so generous, however, as to allow all
development – careful site selection from a grid and irrradiation
perspective will be important

20. Sonya Bedford – Head of Renewable Energy
Sonya Bedford
Head of Renewable Energy
War stories and best practice from the new
legal frontier
Tel: 01392 210700
Email: renewables@stephens-scown.co.uk
Web: www.stephens-scown.co.uk

21. Sonya Bedford – Head of Renewable Energy 17th February 2011
Stephens Scown renewables client Wheal Jane

22. Sonya Bedford – Head of Renewable Energy
Stephens Scown renewables clients Hendra Holiday Park

23. Sonya Bedford – Head of Renewable Energy
Stephens Scown
renewables clients
Dillington Estate

24. Sonya Bedford – Head of Renewable Energy
• 50 kw Ground Mount Systems
• Suitable sites
• Planning permission
• Legal documentation
• Large Solar Parks
“The reports of my death are greatly
exaggerated,” Mark Twain.
• Suitable sites
• Exclusivity agreements with developers
• Option
• Lease

25. Sonya Bedford – Head of Renewable Energy

26. Sonya Bedford – Head of Renewable Energy

27. Sonya Bedford – Head of Renewable Energy
• Roof Top Solar
• Still worth pursuing?
• Rent a roof or purchase?
• New build barn schemes
• Options and Exclusivity Agreements entered into - can
you get out of them?

28. Sonya Bedford – Head of Renewable Energy
• Other Renewables
• Wind
• Anaerobic Digestion
• Hydro
• Marine

29. Sonya Bedford – Head of Renewable Energy
Thank you for listening
For further queries, please contact
Email: renewables@stephens-scown.co.uk
Tel: 01392 210700

30. The Tax Tail
John Endacott
John.endacott@francisclark.co.uk
Tax Partner
At the National Financial Directors’ Excellence Awards, Broadcaster Peter Sissons commented:
“...with a score of nearly nine-out-of-ten for quality of service, the highest marks ever for an audit firm in ten years.”
Francis Clark LLP, National Auditor of the Year – Mid Tier 2011

31. Possible Approaches
• Own Use
• Letting of Land
• Energy Generation

32. Own Use
• Domestic Use
• Benefiting a Trading Business
• Capital Allowances Consultation
• VAT

33. Letting of Land
• Rental Income
• Agricultural Property Relief (APR)
• Business Property Relief (BPR)
• Balfour/Farmer Cases
• VAT – exempt income

34. Energy Generation
• Capital Allowances Consultation
• Business Structuring
– Company
– Trust
• Financing Arrangements
• VAT

35. Q&A
At the National Financial Directors’ Excellence Awards, Broadcaster Peter Sissons commented:
“...with a score of nearly nine-out-of-ten for quality of service, the highest marks ever for an audit firm in ten years.”
Francis Clark LLP, National Auditor of the Year – Mid Tier 2011

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