A boost for the renewables market

There’s no doubt that in recent years sustainability and renewables have become buzzwords in the industry, with energy efficiency and green issues at the top of the political and news agenda.

The main reason for this is obviously linked to the Government’s commitment to play its part in combating climate change. This includes reducing carbon emissions by more than a third from 1990 levels by 2020, and by 60% by 2050. Part of this commitment also means making the energy mix greener, with the UK targeted to deliver 20% of its energy from renewable sources by 2020.

Meeting targets

To ensure these targets are met, there have already been a host of new legislations introduced in the UK that we, as an industry, have had to get to grips with. 

It was only four years ago that the building services sector successfully handled the major revisions to the Building Regulations. Whilst the transition into this new high efficiency era was a challenge as the industry had to get up-to-speed quickly, the impact of Part L was significant. Ultimately, it has changed the face of the market, increasing demand for both domestic and commercial condensing technology dramatically, along with placing greater emphasis on the importance of adopting renewable technologies.

Later this year, further Building Regulation changes will come into force that build on 2006 and make further improvements to the energy performance of buildings, and this will be pushed again onto the next level in 2013 as the Government continues to step up its energy efficiency drive.

Add to this initiatives like the Code for Sustainable Homes, Decent Homes, the Energy Performance of Buildings Directive (EPBD) and the Eco-Design of Energy Using Products (EuP) Directive for example, and it gives a good indication of the regulatory pressures the industry is under now and in the near future.

From a manufacturing point of view, the heating industry has responded well and has been developing high efficiency products and solutions that meet and exceed legislation requirements for many years. Along with condensing boilers, this now includes a whole host of renewable technologies like solar, ground source heat pumps (GSHP), biomass, biofuel and combined heat and power (mCHP) solutions.

However, despite all the talk of renewables and the legislative measures in place that are trying to drive demand for these types of solutions, is anything really happening?   

Unfortunately, despite the solutions available, the answer at the moment is very little. According to industry statistics, heat from renewable technologies currently only make up 0.6% of the total heating demand. It is clear then that if we are going to meet the EU target of 20% of energy coming from renewable sources by 2020, much more needs to be done.

Feed-in tariff

The good news is that from April this year, a new scheme is being introduced by the Government that is specifically designed to stimulate the small-scale use of renewable energy. Whilst the final details of the scheme are still being finalised as this goes to print, assuming everything goes to plan, this could be a major milestone in the UK’s attempts to deliver a low carbon economy, re-shaping the energy sector in this country for good. However, for this to happen, it is the responsibility of the Government and those within the renewables sector to ensure this is well publicised so it can really make a difference.

Already successfully adopted in a number of other countries such as Germany, Spain and the US, the feed-in tariff or Clean Energy Cash Back scheme is designed as an incentive for energy producers to move away from conventional fossil fuels to renewable energy sources by guaranteeing a fixed, premium rate for renewable electricity fed into the national grid. 

In essence, this means that payments will be made to any homeowner, school or business for every kilowatt-hour of renewable electricity they generate from a number of systems including solar photovoltaic (PV), biomass power, hydro power and wind power. Non-renewable Micro-combined heat and power less than 50kWel (mCHP) and CHP >50kW are still to be addressed and details weren’t available at the time of writing this. This will apply to any system up to 5 megawatts, which will suit all households and the majority of businesses, apart from possibly large industrial buildings. Renewable heat generators, like ground source heat pumps, will be covered by a separate renewable heat-tariff scheme that will be launched in 2011.

The level of payment is set by the Government, but will be up to 36.5p/kWh (for retrofit PV system) depending on the type and size of the system. In addition, it will help end-users save on their electricity bills when they use their own energy, along with enabling them to earn an additional 5p/kWh when they export any surplus electricity back to the grid.

The tariffs will be paid for a period of 20 years (with an annual digression of 7% on PV) from the date the system is first registered, except for solar PV, where it is 25 years, and this should cover the capital cost of installing the system, along with earning a return of up to 8% p.a.

In practice

Whilst there is a greater awareness and acceptance of renewable technologies on the whole, the fact that they make up such a small percentage of the market means there is still a low acceptance and a lack of understanding about the benefits they can bring. This can mainly be attributed to the cost implications and long payback periods.

However, the fact that electricity prices have risen for over a decade and this is likely to increase further in the next 10, 20 or 30 years, coupled with the feed-in tariff in place, it now makes installing these technologies a viable option, helping the market grow and consequently bringing the price for renewable products down. 

There’s no catch either, the result of the tariff being implemented will mean both homeowners and businesses that generate their own power will be able to earn hundreds if not thousands of pounds a year tax free. For example, a typical PV system can generate approximately 850kWh/year per kW installed. Based on an installation cost of approximately £10,000 (for an approx. 1.65kWel installation which equals to about 10 modules or 15sq m area), not only will it be able to provide about 40% of a property’s electricity consumption over the course of a year, but it will also provide an annual profit in the region of £800.

In addition, the economy will benefit too and it is estimated that FIT will generate thousands of additional jobs. Also SMEs or even farmers with lots of empty roof space could generate additional income by generating electricity from the sun and selling it back to the grid.

Based on these figures, it would take a light commercial property around 10-15 years to recoup its investment. With the feed-in tariff paid over a 25-year period, this will yield a tidy profit for those looking to future proof their business. Add to this the fact that it will increase the value of a property, is zero carbon, very little maintenance is needed and installation is relatively straight forward and it looks like a very attractive proposition.

To take advantage, Viessmann is introducing a range of solar PV and CHP solutions to the market in 2010, starting with the launch of Vitovolt 200, a polycrystalline silicone cell and Vitobloc 200 CHP range from 18 to 400kWel. To complement this, we also have our biomass range from 50 to 500kW.

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