Big Solar Co-op: solar as a hedge against energy price rises
We’ve blogged before about the great work the Big Solar Co-op is doing, bringing solar into communities. Here Jon Halle explores the potential for solar to provide some protection against energy price rises for small businesses and community-based organisations.
The changes in energy price over the last year have been unprecedented. We are all feeling the impact in our home energy bills, but in many cases the impact on businesses has been even more severe. There is no price cap for commercial energy users and we have seen electricity prices doubling for many – even for large industrial sites.
If we were looking for a good way to explain the financial benefit of our solar offer we could not have wished for a better opportunity. Energy users with our solar on their roof have a contract with us at a fixed price which only ever goes up with inflation. Not only does our power purchase agreement (PPA) offer them lower cost from day one, it protects them from exactly this type of price spike.
We’ve been re-approaching a number of potential host sites and re-calculating existing models. In each case we have been able to retain all the carbon benefits while improving the financial deal to the client significantly.
There are a few things that are worth bearing in mind when looking at solar in the current energy crisis.
Firstly, although nobody knows exactly what is going to happen, there is good reason to suppose that market electricity prices will drop again to just above the pre-existing level. In our latest financial models we are conservatively treating electricity prices as a spike of around 60% which we expect to fall over the next three years, to meet the long term trend line.
Second, there has been a significant increase in the cost of building solar over the last year – solar panel prices are up 20% and the rise in other costs means the overall installation cost to us has risen by around 15%. That situation is predicted to ease over time but perhaps not really until 2023.
Despite these mitigating factors, our PPA prices are still predicted to save businesses more than we were able to offer last year. Even before the spike, our PPA was a good price hedge. Over the last 10 years, commercial electricity prices as reported by the Department of Business, Energy and Industrial Strategy (BEIS) have risen on average between 4 and 5% per year and we expect this to eventually resume. The projected saving we can give on imported electricity will continue to rise over time:
If you have a site with a roof at least as big as a tennis court and use a significant amount of power onsite, please give us more details via our site submission form and we can prepare you an outline proposal.
The views expressed in our blog are those of the author and not necessarily lowimpact.org's