There’s more to Renewables than just the Feed in Tariff!
Date of Article
Jan 19 2015

Keep informed

Sign up to our newsletter to receive further information and news tailored to you.

Sign up now

19 February 2015, Developers of renewable energy projects are urged to make sure they get the best rates when selling the surplus electricity they generate.

Energy specialist Clare Davey, who is part of the national property consultant Carter Jonas’s Energy Team in Harrogate, says there is potential to increase returns by as much as up to £15,000 a year.

Feed in Tariffs (FiTs) grab all the headlines when it comes to renewable energy but as rates continue to decline by as much as 20% per annum, developers are urged to remember that they are not the only tariff they need to consider when it comes to maximising returns on an investment.

While FiTs focus on total generation, the balance of income that developers can expect to receive 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:

One option offered to operators generating electricity is a fixed export tariff under the FiT scheme which is tied to at an index-linked rate of 4.77p/kWh.

The second option is 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 sleeving arrangement with the District Network Operator.

The third and often most common option is 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 LECs and REGOs which are traded on the open market) that are 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 oversupplied system 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 rates offered by suppliers can often vary by as much as 30% which makes 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, according to Carter Jonas, 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 the consultancy offers to and trades within the market, Carter Jonas is often able to achieve enhanced rates over those afforded to individual landowners.  Its brokerage service is geared towards maximising the returns available to landowners on their renewable energy schemes.

“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.