Carter Jonas
Carter Jonas

There’s more to Renewables than just the Feed in Tariff!

Developers of renewable energy projects must ensure they get the best rates when selling the surplus electricity they generate.

There is potential to increase returns by as much as up to £15,000 a year for a typical 500kw turbine installation. While Feed in Tariffs (FiTs) grab all the headlines when it comes to renewable energy, as rates continue to decline by as much as 20 per cent per annum developers should remember that they are not the only tariff to consider to maximise returns on an investment.

While FiTs focus on total generation, the balance of income from a renewable development is also made up from the value of the exported electricity. As it stands, a developer can choose to source this value from one of three options:

1. A fixed export tariff under the FiT scheme which is tied to at an index-linked rate of 4.77p/kWh.
2. To negotiate a Power Purchase Agreement (PPA) with a third party consumer to enhance returns. This can be achieved via a dedicated private wire or third party arrangement with the District Network Operator.
3. To negotiate a Power Purchase Agreement (PPA) with an energy supplier directly.

The level of PPA is based on a number of factors such as the current market for wholesale electricity, the type of technology, project scale, annual output, location, term of contract and the percentage of benefits, such as Levy Exemption Certificates (issued by OFGEM to show that electricity delivered to consumers is Climate Change Levy exempt) and Renewable Energy Guarantees of Origin (a certificate issued by OFGEM to prove that electricity was generated from renewable sources) which are traded on the open market and a percentage of which is passed back to the client.

Throughout 2014, the market saw energy demand fall owing to the warmer weather and the increased renewable energy generation. The oversupply meant that power prices fell over Christmas and the New Year. However, as margins are ever reducing on the generation side, it is important to squeeze more value out of PPAs for the developer, regardless of the current market position, and this is where embedded benefits offered alongside the electricity price prove their worth.

In the present market, the purchase rates offered by electricity supply companies can often vary by as much as 30 per cent, making the marketing of the PPA through an independent broker a necessity for any developer looking to maximise their returns form a project. A 1p/kWh improvement on a PPA for a 500kW turbine, can equate to £15,000 per annum and so it’s vital that landowners and developers seek third party advice on setting up the initial PPA or negotiating its renewal.

Through the variety of technologies and combined generating capacity of the sites Carter Jonas offers to and trades within the market, we often achieve enhanced rates over those afforded to individual landowners. This brokerage service is geared towards maximising the returns available to landowners on their renewable energy schemes.

For the majority of renewable energy generators, the FiT is the primary focus. However, by using an agent or broker with a detailed knowledge of the market and who may be marketing a portfolio of mixed technology sites, there is an opportunity to negotiate an enhanced revenue stream for clients through a route which many will be unaware exists.

Timing is key as most contracts are renewable on an annual basis and suppliers often try to secure renewals directly with developers. There is also the opportunity to review the import supply to a property at the same time and ensure a competitive supply rate is being offered.

Clare Davey

Clare Davey

Energy Specialist

Clare is based in Harrogate and manages renewable (including medium wind, solar, hydro and biomass) and peak power generation development projects across the country, from initial feasibility through ...

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