Fair warning, this is going to be very maths/stats heavy, so if that's not your jam, maybe skip this one.
I signed up originally for a wind farm project as we have roof top solar. I did read the docs eagerly though, and I've got some observations I wanted to share.
First, kudos to the team for the amazing work that went into the planning of this. There is extensive research behind the project and I'm really keen to see more projects like this. It can only be a good thing for our energy security.
The doc quotes an estimated 0.96 kwh/y/£ as realistic (2900kWh/£3010). For comparison just the solar part of our home install would be 0.6kwh/y/£, and with the battery it’s only 0.3kwh/y/£, so on paper at least it initially seems a better deal in terms of generation per pound spent than rooftop.
Where things start to get a lot less rosy though is when you look at the estimated wholesale energy cost. They run the solar park, sell the energy at wholesale prices, take their opex, and give you the rest. I think their estimates are probably broadly accurate, and that’s what worries me. If we see more projects like this or other larger scale solar projects, we can expect to see a greater difference between the highs and lows. At midday during the summer the energy value (when you’d generate the most) would plummet because of all the grid connected solar, and you’d still have the high energy prices during the dark winters. I would anticipate less of an impact on a similar scoped wind project on energy as wind across the country is generally less evenly distributed and can obviously happen at night and during the winter.
Tax: the trading benefit portion of savings on your electricity bills will be taxable should your interest income allowance for that tax year be exceeded. Not a concern for us personally right now, but the government has already cut this recently, and they may cut it again, at which point it becomes another thing to think about and yet further impact to any return. And another thing to forget if you do self assessment.
The scheme is not FSCS protected. Not a huge deal after the project is completed as there’s insurance, but it doesn’t mention how the money is handled until the date of completion. I'd hope the money is held in escrow until construction begins etc.
Shares in the co-op scheme are the unsecured/lowest ranked among creditors. So if the business running the solar park goes bust, you may lose much of your money.
All of this is stated in the doc, (except the extrapolation about trends on grid connected solar capacity on energy prices, that bit is my own speculation).
Where I think they missed a trick, and what I think puts me off going ahead with it is that YES, the cost per kwh of capacity is good, but the actual cost of the energy is detached from what you’re paying at home for usage.
They quote an estimate of ~6p/kwh saving on your energy bill, but if you spent the same amount on roof top solar you'd be cutting your usage during that time at the price you're importing at. There is a huge gulf between import and export prices due to VAT, fees, network costs, operator profit, grid losses etc.
Let's instead explore a scheme where the project is a collaboration with energy suppliers to apply an energy credit to your account during that time window, not a cash amount. That way if you used 3kwh between 2pm and 3pm, but your solar farm share generated 1kwh, your actual usage to the grid would be 2.1kwh (minus some grid loss). Comparing the calculations, lets say 20p/kwh import and 6p/kwh export. Treating it as a separate entity, you spent 3x 20p, and saved 1x 6p. Total spent: 54p. Treating the panels in the solar park as part of your own energy account: 3x 20p - 0.8x 20p. Total spent: 44p. In the scenarios where there was excess, you would be credited to your account as an export at 6p/kwh.
Looking at this graph from here:
https://energy-stats.uk/wholesale-energy-pricing/
The majority of the time Octopus will pay you close to the wholesale cost for your export, yet their import fee is almost double (1.7-1.9x). Of all the suppliers, I think Octopus is one of the least likely to price gouge, so that cost (to them) is real.
The question is, where does it go?
https://www.businessjuice.co.uk/energy-guides/what-makes-up-your-electricity-price/
This data is OLD (2015 old), but it should be somewhat indicative, although the wholesale energy costs should be a larger percentage of the pie now. If we break these costs down, the largest costs come from social obligations, network costs and VAT.
So let's break this down:
Network costs - broadly speaking if the power goes over the grid it should pay the cost, so this 25% is here to stay.
Supplier operating costs - the suppliers need to take a profit, and these margins have been squeezed razor thin recently. Trying to recoup this would have even the most socially responsible energy company questioning their involvement though.
VAT - Do I think you should pay VAT on energy you generated through this scheme? No, but a change here would require a change in legislation
Social levvies - Should you pay a renewable energy levvy on a renewable project, probably not, but again a legislation change would be required, and a new type of project would be required.
So is it actually feasible to implement this scheme? I don't think so unfortunately. If it touches the grid you immediately pay a whole host of fees. Treating it differently would require government backing, and I don't think the encumbents have any interest at all in supporting something like this.
So what are my thoughts on Derril Water and what's on offer? I think the team has done an excellent job in putting forward the best possible project, and the documentation to support it. Honestly, A+. Where I think it falls down is when you consider return on investment. Their own estimates suggest an ROI between 0.5 and 2.3% over 30y (excluding the extended high scenario). Factoring in the risks of the scheme, current interest rates etc, and I honestly think you'd be better putting your money in an ISA right now. If you've backed it or planning to back it, 🤜🤛 respect, thank you - I don't think it's for me though, especially with existing rooftop solar and a battery. I'll be back to do this all again when the next wind project comes along though.
In terms of carbon offsetting etc, a quick calculation puts the cost of a longhaul flight for a family of 4 at about 4x what my 16 solar panels have generated in a year. So if you want to save the planet, perhaps skip the holiday abroad.
What I'd like to see, perhaps if Labour gets a turn, is a government backed scheme, ideally with Ripple and their prior experience to operate it. Have them build and support green projects but at grid scale, using a co-operative to help fund it. Use the scheme to make the funds directly pay back at a more reasonable rate while making the grid more carbon neutral. Likewise if the project factored in storage as well as generation, energy could be buffered back to the grid when it is most needed (and more valuable)..
Hey Ripple, how about something like this for your next project?