Sunday 12 August 2012

How a Feed in Tariff Loophole is Leaking Carbon Dioxide

The current design of the Feed in Tariff  has created a "perverse incentive" to increase financial benefits at the expense of the environment.

The current Feed in Tariff pays 4.5p for each unit of solar electricity you generate but don't use, exporting it to the electricity grid.  If you use the electricity yourself, you avoid charges from your electricity supplier nearer to 12p per unit. So, to make the greatest saving from a solar PV system you should try to use as much of your generated electricity as possible, for example by vacuuming the stairs rather than sitting outside and sunning yourself.

Unfortunately, for domestic-scale systems, this exported electricity is not measured on a meter, it is instead assumed to be 50% of whatever electricity is generated.  This means that you get your money for export even if you actually export nothing. 

Enter a number of companies with "Excess Energy Switching Units" - electronic gizmos to help you use up your electricity generation rather than giving it away for someone else to use.  These systems turn on the immersion heater on your hot water cylinder when the PV electricity generation is higher than the electricity use.  It's worth your while to use up the electricity to heat water in the hot water cylinder, even if you're saving only 3 or 4p per unit on gas heating - because you're paid as if you were exporting electricity anyway.

So what?

Well, the issue is that the electricity we use is mostly made by burning gas and coal at a relatively low efficiency in a power station.  A unit of electricity is not only worth more in pence, it also cost more in carbon dioxide emissions than a unit of gas heating.

If a unit of electricity is exported from your home, it displaces a unit of electricity used somewhere else on the grid, and prevents the emission of 522 grams of carbon dioxide.

If instead, a gas-heated home installs one of these switching unit and heats water instead of exporting that unit of electricity, it is preventing the use of a gas boiler to provide a unit of heat, and saves only 212 grams of carbon dioxide.

The solarblogger calculates that taken over a 25-year lifetime, a typical solar pv installation without a switching unit would save 33% more carbon dioxide and result in the emission of 5.5 tonnes fewer of carbon dioxide gas than a system with a switching unit (see below).

What's your opinion?  Post a response below.


The Maths Bit

Let's take a 2kWp system and assume 850kWh/kWp.yr and 50% export.

If the 50% is exported, it prevents the emission of 850x0.522kg of carbon dioxide, 444kgCO2/year.

If that 50% is instead diverted to an immersion heater, and assuming a boiler efficiency of 80%, then the saving is 850x0.212/0.8 = 225kgCO2/year

(Carbon intensity in kgCO2/kWh are taken from draft SAP 2012)

The PV system with a switching unit has resulted in 220kg of extra carbon dioxide emissions each year compared to a PV system without.

Total emissions saved wihtout switching unit: 444kg x 2 = 888kg
Total emissions saved with switching unit: 444kg + 225kg = 669kg
Increase in emissions benefit from system without switching unit: (888-669)/669 = 33%
Lifetime emissions resulting: 220kg x 25 years = 5.5 tonnes.

Monday 6 August 2012

Gonna Have to Face it we’re Addicted to Cuts

It may not like them, but the solar photovoltaic industry needs the tariff drops

Prices are falling, and falling fast.  If you are a home-owner with only one roof to fill with photovoltaic solar panels, what’s the rational thing to do?
Wait, of course.  Wait until prices stop falling, and then purchase.

Rapidly falling prices depress demand, which in turn results in industry over-capacity, and greater price competition leading to further decrease in prices.  This vicious circle is called a deflationary spiral by economists, and it is considered a disaster for a national economy.

Perhaps by accident, the Feed in Tariff has also prevented a damaging deflationary spiral in the solar PV installation industry.

Of course, the purpose of government incentive schemes such as the Feed in Tariff is to distort rational decision-making and correct market failures where the pricing mechanism does not take externalities into account.  (Externalities are where some of the costs of the product, in this case the costs from global climate change caused by carbon dioxide emissions from conventional electricity generation, are paid for by neither the buyer nor the seller.)

Under the Feed in Tariff, the owner of a solar PV installation is paid over and above the savings they make on their electricity bills for every unit of electricity they generate.  However, the UK government has been scrambling to keep up with the price deflation in photo-voltaic solar panels.  Successive drops in payment levels have had the aim of preventing the financial returns to householders with solar panels from becoming excessive.
A side effect of the series of cuts to the Feed in Tariff has been to create a reason for the customer to “get in before the tariff reduction” and therefore not wait for installation prices to fall further.

Many in the PV industry have been calling for the government to delay or halt cuts to the Feed in Tariff to better stimulate the market.  Should they be thinking more carefully about the alternative they are proposing..?