Housing association agrees viable free PV scheme despite FIT cuts
Banks give consent for PV scheme
A Liverpool-based housing association has agreed a ‘rent-a-roof’ deal to install solar photovoltaic panels on 2,500 of its properties nearly a year after it first entered negotiations with its lenders.
In what is thought to be one of the first such deals to have been given the green light by banks, Riverside managed to create a ‘free PV’ model that was viable, despite government cuts to the feed-in tariff, by tapping into other green subsidies.
The 51,500-home landlord has signed an agreement with investment company Thurlestone Capital and renewables installer Warmer Heating using a £12 million special purpose vehicle which will retain the FIT.
To make the model work under the new FIT regime, whereby the tariff reduces every three months in line with the falling cost of the technology installation, Riverside has injected around £2 million of community energy saving programme cash into the SPV, of which it will get to retain half.
Riverside’s lenders, Santander and Lloyds, only gave consent to the deal, first tabled in August 2011, after overcoming contractual concerns that it could damage the value of their security in the wake of the FIT cuts.
Lenders have been reluctant to sign rent-a-roof contracts with third-party PV companies because of fears that, in the event of a default on a loan, selling properties held as security against loans could be made harder as a result of the contracts.
As a result, few rent-a-roof deals were signed before the government slashed the FIT from 43.3p/kWh to 21p/kWh. The model was not thought to be viable after the new subsidy regime was introduced in April. Riverside said law firms Cobetts, Addleshaw Goddard and Clifford Chance had developed a contract that overcame these concerns.
The use of CESP, which is a subsidy taken from energy bills and administered by energy companies, to make PV schemes viable will only be replicable until December, after which the CESP scheme ends.
Howard Garde, Riverside’s project manager, said: ‘Now that we’ve resolved the legal complexity of third party investment in renewable technology, we may be able to apply this to other technologies and funding streams, such as the Renewable Heat Incentive.’