Model allows landlords to turn a profit despite reduced feed-in tariff
Alliance Homes sets up free solar scheme
A housing association is helping cash-poor social landlords defy cuts to government subsidies by installing solar panels with no upfront cost.
South west-based Alliance Homes and a renewable technology supplier are in talks with private financiers to develop a green deal-styled finance model and will allow landlords to turn a profit from the reduced feed-in tariff subsidy.
The 6,500-home association in Devon and Low Carbon Exchange will offer the model to cash-strapped landlords, ensuring that they can install photovoltaic panels using debt finance and access FITs.
In March the government confirmed a cut from 43.3p/kilowatt hour to 21p/kWh. It will fall to 15.7p/kWh in July and will continue to be cut every six months thereafter.
Solar experts have warned that the reduced FIT rate would be too low for landlords that cannot afford to invest directly to benefit from PV.
The Alliance model will mirror the pay-as-you-save mechanism used in the government’s flagship energy efficiency scheme, the green deal.
Under the green deal households can receive retrofit works at no upfront cost, with the tab being picked up by private companies that recoup the
cost through savings in energy bills.
Alliance is proposing a similar idea for PV, in which landlords take out a low-cost loan arranged by renewable technology company Low Carbon Exchange at around 7 per cent from banks or investors. This would be repaid by the similar returns offered by the FIT.
The cost of the PV would be paid off in 12 to 15 years, so landlords can benefit from the FIT for the last 10 years of the tariff’s 25-year lifespan.
The landlord and its partner are in talks with two private finance groups to source the loans - one of which has up to £60 million to invest. Six landlords are now looking to take on the model, which could provide PV for 50,000 social homes.
Steve Drew, director of assets at Alliance, which last year spent £250,000 setting up a PV procurement framework landlords can join for free, said: ‘PV panels are reducing in price and it is a stable investment to make. We now have a good idea of how much energy PV generates which gives funders confidence, and some decent financial offers are being made to the sector.’
For landlords that install PV after July, the payment period will be extended to match the reduced tariff.