Energy options soar for farmers as solar installation costs plummet… for now!

Plummeting installation costs for photovoltaic solar panels have opened up a window of opportunity for farmers to strike a good deal, even with Feed-In Tariff (FITs) rates shrinking.

The last year has been a tough one for the renewable energy industry with many companies going out of business as customers have backed off after being spooked by a series of lurching cuts to FITs.

But for those smart enough to invest, the prices have never been so affordable – equipment prices have fallen substantially, growing expertise has cut installation time and labour costs and increased competition between installers has reduced margins.

And although FITs will continue to drop, the new mechanism for reducing the rates means they will fall in small, regular increments and at a predictable rate. This will allow buyers to time installations around scheduled cuts while ensuring that if a deadline is missed the costs are not too severe.

Perhaps even more importantly, now the costs of solar installations have fallen so dramatically, the cost of solar electricity is lower than grid electricity. By investing in solar, buyers can protect themselves against future electricity prices increases because once a solar system is installed, the price of the solar electricity is effectively fixed. That ability to hedge energy bills is something which Photon Energy director Jonathan Bates believes will sway people early in 2013 as rising winter fuel charges are delivered to businesses and households.

Figures from industry expert Photon Energy, which has worked with a series of agriculture operations, tell the story of falling renewable costs: in five years the company has seen wholesale prices for solar modules fall from £2.19 per watt to just 45p now.

And in just the last year the company’s prices for installing large solar PV arrays of around 250kW on big barns or storage units, for example, have fallen from £500,000 to just £250,000.

It means the price for smaller 50kW systems has also plummeted from about £110,000 to under £60,000.

The difference not only saves money on the initial investment, it also opens up opportunities where higher costs might have stopped projects before. Installations that have not gone head because of the need to strengthen a barn to take the weight of the panels, or improving the electricity supply to a farm are now much more attractive.

In fact, Photon Energy has installed more solar panels between April and September this year than it did over the same period in 2011.

While the falling prices have certainly caused problems for many renewable energy businesses, for customers it has proved a boon as the amount shrinks that they have to gather for the initial investment.

Photon Energy is now seeing previous clients returning to order more solar panels to take advantage of the lower costs and the fact that systems are also generating as much as 10% or 15% more electricity than expected.

Photon Energy director Jonathan Bates said: “Profits are as high now as they were when the Feed-In Tariffs were first introduced. Although they’ve been cut, because costs are falling at the same time the returns have stayed stable at between 10 and 15 per cent over 20 years.

“It’s quite wrong to believe that the Feed-In Tariffs have ended – people are mistakenly missing out on some excellent deals, and returns that even the best saving-accounts can’t beat.

“We’re now getting previous customers come back to us ordering more solar PV, and as more people cotton on to the benefits we’ll see growth again. Now may be the window of opportunity to get cheap installation with the best returns.”