Monday, 27 March 2017

The comeback tour

Installed on a house near you, solar panels are back in business. Here, Jess McCabe investigates why PV dropped off the radar in the first place, and how one social landlord in Somerset is bringing it back into the spotlight

The Bournville estate is one of the most deprived in the country. It’s actually in the most deprived 1 per cent, but the casual visitor would never guess. Built to house workers for a chocolate factory that was never built, the estate is tucked a few minutes from the coast in Weston-super-Mare. Clusters of small houses wind around squat tower blocks.

When Inside Housing visits, the pretty houses bask in the sun. Despite some having been built in the 1920s, the homes have a decidedly up-to-date feel. Wherever you look, the roofs are rammed with glinting solar photovoltaic panels, the ultimate symbol of ‘eco-bling’.

In the lead-up to drastic cuts to the feed-in tariff in 2011 - paid to people for generating electricity from solar panels - the Daily Mail’s coverage described the situation as an ‘absurd subsidy bonanza’, illustrating the story with photos of millionaires like Mick Jagger who’d managed to reduce their energy bills with subsidised solar panels.

Wandering around Bournville talking to residents about their PV panels, however, a different picture of the FIT and solar quickly emerges.

Steve Amos, a 48-year-old with a soft Somerset accent, has lived on the estate for a few weeks and his social home, managed by Alliance Homes, is fitted with solar panels paid for by the landlord.

Mr Amos used to be a lorry driver, but is now a full-time carer for his wife. ‘Mainly we try and use a lot of things during the day,’ he explains, in order to make the best of the free electricity in daylight hours. Solar panels generate electricity, so when they are working, there is no need for tenants to pay to draw electricity from the grid.

Steve Drew, director of property at Alliance Homes and the brains behind the solar programme, estimates that tenants with solar panels save around £5 a week off their electricity bills as a result.

Sun drenched on a freezing April morning by the coast, solar panels seem like the ultimate in common sense in the south west, which is the sunniest region in the country, according to the European Solar Radiation Atlas. Given they can save tenants up to £300 a year on energy bills, there is an increasingly compelling argument for a solar comeback, as welfare reforms start biting into tenants’ income.

When the FIT subsidy was cut, many social landlords abandoned plans to install thousands of panels on their tenants’ roofs. Now - partly in a bid to cope with the impact of the bedroom tax and the start of direct payment of housing benefit to tenants - social landlords at least in one part of the UK seem to be starting to dust off those plans and look again at PV.

Taking the lead

Alliance Homes is a good place to track this resurgence, because it is easy to see what’s happening under its procurement framework, which it believes is the biggest in the country.

Alliance did all the detailed work of finding a supplier of PV panels, and any other social landlord can join the framework for free. Some of these include Cornwall Housing, Three Valleys Housing and Plymouth Community Homes.

Since it started in June 2011, around 55,000 panels have been installed under Alliance’s framework by 18 social landlords and several public bodies. Combined, these panels have the capacity to generate more than 10 megawatts of electricity - in other words, the equivalent of a small power station.

After cuts to the FIT, activity under the framework fell off. But now, Mr Drew says that every week more social landlords approach Alliance to join its framework agreement to buy solar panels. On current projections, around 6,000 solar panels will be installed every year for the next three years.

The height of fame

Solar PV might be making its comeback, but it still isn’t reaching the levels during the boom of 2011 to 2012. In 2011, savvy social landlords were rushing to install as many panels on their tenants’ rooftops as possible. Once connected, these panels were guaranteed 43p per kilowatt hour of electricity generated for 20 years under the FIT. Depending who you talk to, that meant a return on investment - the golden number for financiers - of 10, 20 or even 30 per cent.

But in October the same year, the FIT turned from a gravy train into a roller coaster ride. The government announced that rates for residents were to be lopped in half to 21p/kWh for installations connected after 12 December 2011. A lengthy court battle ensued, concluding that the government had rushed in the cuts. The installation deadline was extended by a few extra months.

But eventually, in April 2012, the rate was cut and a ‘digression’ system - of managed future cuts - was put in place by the Department of Energy and Climate Change, with lower rates for schemes that aggregate lots of small, rooftop solar panels.

During this maelstrom, many solar businesses shut down, the rate of installation plummeted, and nervous social landlords ditched their programmes.

Susannah Wood, a director at PV firm Solarcentury, one of the survivors of this tumultuous time, explains she was working with a number of social landlords at this point, ‘and it all collapsed when the feed-in tariff changed’. The ‘rent a roof’ schemes that relied on a third-party to finance the cost of the panels were particularly hard hit, she explains.

Starting again

But the industry wasn’t totally crushed. Helped by the fact that the price of solar PV panels has dropped by more than half, private investors - and to a lesser extent social landlords - are starting again. Housing associations that are self-financing - like Alliance and most of the other landlords that are currently joining its framework - were in a better position than those relying on third-party finance.

The cost of solar PV has dropped internationally due to a number of reasons, including an over-supply of panels; manufacturers finding cheaper ways to produce the panels; a reduction in the cost of raw materials; and competitors in the marketplace. Technological improvements also have an effect on prices. The industry estimates that the cost of PV cells drops 20 per cent every time global manufacturing capacity doubles.

Admittedly, overall rates have not returned to boom levels. Solar PV installations have fallen every quarter since the beginning of 2012, when more than 100,000 solar PV systems were fitted as installers rushed to get the highest FIT rate, according to energy regulator Ofgem. In the past three months of 2012, this had fallen to less than 30,000 systems.

But, back in Weston-super-Mare, Alliance’s experience is one of a sharp drop, followed gradually by a recovery. Before the FIT cut, around 40 systems were installed per week through Alliance’s framework. After dropping as low as 10 a week after the cut, installations have now gone up to about 20 a week. Mr Sheldon says he expects weekly rates to recover to the level before the cuts in the next few years.

The town also houses the distribution centre of panel supplier Low Carbon Exchange, where, on the day of Inside Housing’s visit, two young men are packing up solar PV systems to be sent out to Plymouth for a social landlord. Mark Parrett, one of the workers, is scanning the bar codes on the panels - this means that the firm and landlord will know exactly where each panel is located, down to the order the panels are put on the roof, making it easier to track any faults that may arise. He says when he started the job around 18 months ago, ‘it was quite manic back then’. He pauses, before adding: ‘We’re getting quite busy.’

Steve Sheldon, the consultant who helped design Alliance’s framework, is clear that this renaissance has been partly driven by ‘the fundamental challenge of the welfare reform’. With benefits due to be paid directly to tenants under universal credit, rather than going straight to landlords, housing associations are keener than ever to boost their tenants’ income. According to landlords, returns from PV can still be as high as 10 per cent.

The government not only made cuts to the FIT, it also added other restrictions. Homes are now only eligible to receive the subsidy if they have achieved an energy performance certificate rating of D or above. The aim is to ensure that priority is given to insulating homes properly before adding green kit like solar panels.

But Mr Drew is critical of this ‘fabric first’ approach. ‘It does tend to be some of the areas of worst deprivation [that] have the lowest energy rating,’ he says. Even though they might benefit most from lower bills, they are most likely to be excluded, in other words. Still, Mr Drew is convinced that social landlords can and should look again at solar.

The financial story makes sense, he says, as landlords with the capital to spare may not make sky-high returns, but they will make their money back. And meanwhile tenants, struggling with the impact of welfare reform, can save about £300 a year. This would help neutralise part of the cost of the bedroom tax for affected tenants - the government predicts this charge for spare rooms will cost social housing tenants £16 a week on average.

On the other side of the coin, members of Alliance’s framework have collectively generated almost £4 million of income from solar panels since 2011.

Mr Drew, a quietly spoken man, doesn’t tub thump. But he is evangelical, and argues that more social landlords should restart their solar programmes. ‘It is a three-year framework. We are looking to extend the life of that framework,’ he says.

Mixed reviews

Not every landlord is convinced, even in the solar-rich south west. Doug Stein, group director of asset management at Devon and Cornwall Homes, which has installed 320 PV systems, explains: ‘Our focus is on high-quality building fabric using passive technologies, such as double-glazed units; loft, cavity and other insulation which supports low maintenance for DCH; and reduced cost… for our residents.’

Merlin Hyman, chief executive of Regen SW, an organisation promoting renewable energy and energy efficiency in the region, also takes a cautious approach. ‘The right approach is to start with an assessment of the property. What’s its energy use and energy problems? And then look at all the different solutions.’

Walking around Weston-super-Mare, the glint of solar panels catches the eye everywhere you turn: the glittery black squares are ubiquitous. ‘What do you think of them?’ I ask Mr Amos. ‘I don’t,’ he replies, suggesting they are becoming the norm. Mr Amos has actually just moved house from another Alliance home down the road, which also has solar panels.

For Kim Mayers, a young mum who we chatted to over the garden fence, the same is true; she looks bemused when I ask what she thinks of them.

But they’re still not a fact of life for many tenants - solar has only been installed on about a quarter of Alliance’s 6,500 homes, compared with about 30 per cent that would be technically feasible. Across the country, hundreds of thousands of tenants are living hand-to-mouth in homes that could be generating free electricity.

‘It’s not costing you anything,’ Mr Drew says, if you are a landlord with the capital to invest. There’s nothing to lose, but tenants, in tough times, definitely have something to gain.

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