Higher energy prices are delivering faster investment payback on solar while future-proofing your sustainable energy needs. Centrica Business Solutions’ Phil Bryant discusses the economic and environmental case for on-site solar.
In recent months, we’ve seen the return on investment for solar photovoltaic (PV) projects increase by a third, which is largely due to higher wholesale energy costs. For one client we were predicting annual energy savings of £43,000 six months ago, but this has risen to £78,000 today.
Energy market pain
Since August 2021, wholesale energy prices have soared – reaching a peak in September. Since then, prices have fallen back, but remain significantly higher than 2020. That’s causing financial pain and concern for many public sector organisations, who are already managing exceptionally tight budgets.
Although some public bodies have used various hedging strategies to find temporary relief from inflationary energy pressures, higher costs and extreme market volatility will catch up with all buyers sooner or later. While it’s difficult to predict the future direction of wholesale energy prices, most forecasters predict that energy market turbulence is here to stay amid the phase-out of nuclear, gas and coal power plants.
Another pressure is a potential doubling of power demand by 2050 due to the electrification of transport and heat sectors. Indeed, recent analysis from the International Energy Agency (IEA) suggests that global energy market turbulence will be a continuing problem during the transition away from fossil fuels.
Take control of costs with solar PV
Installing solar PV is one of the most effective ways that public sector organisations can take control of long term energy costs and shield themselves from market volatility. Solar arrays are relatively quick and easy to install and have a 25+ year lifespan. A solar PV system has very few moving parts and therefore requires minimal maintenance, which is reflected in long term product and power output warranties .
Solar technology costs have dropped sharply in recent years – negating the need for subsidies, like the former feed-in-tariff. When you factor in higher prices of purchasing network electricity and opportunities to sell surplus electricity to the grid, the economic case is now even stronger.
Organisations can make use of rooftops, car parks and spare land to site solar panels. This can also provide renewable energy to meet additional future power needs, such as installing electric vehicle charging infrastructure and electric heat pumps in place of gas heating systems.
Win-win on cost and carbon reduction
The environmental benefits of displacing expensive grid supplied electricity with 100% renewable solar power are obvious. It is little surprise that solar deployment is expanding across the world as one of the most flexible and affordable ways to deliver on climate change targets.
The UK government has set one of the world’s most ambitious climate change targets to reduce emissions by 78% by 2035 and the public sector is leading from the front on decarbonisation. Now is the time for public bodies to accelerate their net zero progress and manage costs by installing on-site solar as part of their sustainable energy strategies.
The UK has a total of 14GW of solar generation capacity and installations doubled last year, with rapid market growth continuing. Analysis from the Committee on Climate Change and other independent bodies shows that the UK will need to deploy at least 40GW of solar by 2030 if it is to achieve a net zero economy by 2050.
British Army marches to net zero
Centrica Business Solutions is supporting the British Army’s net zero commitment by installing 4,248 solar panels at the Defence School of Transport, which is the first of four pilot projects. Across all four sites, it’s estimated that annual savings will amount to £1 million and 2,000 tCO2e (tonnes of carbon dioxide equivalent), with cost savings reinvested into essential Army infrastructure.
Spanning approximately four hectares (the size of almost eight football pitches), and with a peak capacity of 2.3MW, the Defence School of Transport solar farm is projected to save 700 tonnes of carbon emissions and cut electricity bills by one third annually.
Solar PV savings for hospital
As part of a £4.7 million energy upgrade at Hereford County Hospital, we’re installing more than 300 rooftop solar panels. Together with a new ground source heat pump network and other efficiency improvements, we’re helping Wye Valley NHS Trust take a further big step towards net zero.
The project has been funded by The Department for Business, Energy and Industrial Strategy Public Sector Decarbonisation Scheme via Salix Finance.
Southwark shines on solar
The London Borough of Southwark has invested in solar PV at a cost-effective price that will reduce carbon dioxide emissions by 337 tonnes annually. Centrica Business Solutions worked with the Local Authority, PFI contractor Veolia and other partners to design and construct a cost-effective large scale solar PV system at a recycling and waste management facility – demonstrating that on-site solar is feasible even in dense urban areas.
Solar battery storage
Linking solar with battery storage systems can deliver even greater cost and carbon reduction by maximising solar utilisation and optimising energy use. Organisations can draw energy from the solar array when the sun shines and store excess energy in the battery – ready to deploy when the sun isn’t shining and when grid energy prices are highest. Combining batteries with solar for peak power avoidance in this way can deliver significant cost and carbon savings and mitigate the risk of exposure to volatile prices.
Even bigger financial returns are available by optimising battery storage using Demand Side Response (DSR) strategies. Solar power stored in batteries can be used to unlock flexibility revenues across ancillary services, wholesale and balancing markets. Public bodies can thus generate income while helping keep grid supply and demand finely balanced. In turn, this supports the utilisation of greater volumes of renewable power onto the grid –contributing to decarbonisation of the UK electricity supply.
Solar battery storage also provides an uninterrupted power supply that can create carbon free back-up power to ensure resilience in the event of grid supply disruption. This can be used to support or replace carbon intensive diesel and gas emergency power generators.
Financing solar battery storage
For public bodies with capital to invest or access to low-cost borrowing, on-site solar generation, with or without combined battery storage, can deliver rapid payback on investment. Considering that a solar PV system has a lifespan of 25+ years, once the capital investment is paid off, your renewable energy supply continues to be free and the only ongoing cost is for operation and preventative maintenance.
If access to capital is lacking, funding support may be available via public sector grants, or private funding. Technologies such as solar and battery energy storage provide such strong and predictable returns on investment that projects can be funded off balance sheet via a performance-based operating cost model, such as Centrica’s Discount Energy Purchase or Energy as a Service funding options. Once a project is operational, you repay the investment via regular service payments from your realised energy savings. Power Purchase agreements can also be used to fund solar installations.
Organisations that invest in distributed energy solutions, such as solar PV and battery storage, can deliver immediate cost and carbon advantage, while achieving greater security over supply and energy prices. They can also get ahead of tighter environmental regulations and higher carbon taxes, while future-proofing their organisations to capitalise on the benefits of the electrification of transport and heating.
Further information: https://www.centricabusinesssolutions.com