Power to the people as feed-in tariffs arrive

Mar 31 2010 by Chris Knox, The Journal

THE introduction of feed-in tariffs (FITs) tomorrow is expected to transform the way householders and businesses receive their electricity. Christopher Knox looks at the implications for the region’s burgeoning renewables energy sector.

AS part of the Government’s Renewables Obligation, feed-in tariffs (FITs) will allow small businesses and individuals to install technology such as solar panels or wind turbines and receive an income for all the electricity they generate.

They will also receive an additional payment for any excess electricity they export into the National Grid at a price three times that of a standard unit of electricity bought from a power supplier.

The Government believes that FITs will help to increase the level of renewable energy in the UK towards its target of 15% of total energy from renewables by 2020 (up from under 2% in 2009) and cut carbon emissions from homes by 29%.

As well as the environmental considerations, the measure is also expected to kick-start the development of micro-electricity generation in the UK and provide increased trade and jobs for those companies involved in the manufacture and installation of the technology.

This agreement is expected to negate what many consider to be a significant investment, with many analysts believing that the technology could pay for itself after just five years under the feed-in tariff model.

There are a number of companies that have been developing this type of technology in the North East and have been eagerly waiting for the introduction of FITs in order to start reaping the rewards of their investment.

One such company is Newcastle-based wind turbine maker Vertical Wind Energy (VWE), which expects to grow from a standing start to a £44m by 2014 on the strength of the FITs, as well as boost the size of its workforce from eight to 40.

The firm started in Northern Ireland before moving to Prestwick Park, near Newcastle Airport, last year with the help of a £1.2m of funding led by Newcastle- based venture capital firm NorthStar Equity Investors (NSEI) and a North East venture capital syndicate represented by Tiger Corporate Finance.

Although the company sources the parts for its turbines from around the world, the final products are assembled on site and are expected to create jobs as orders grow.

The firm’s smaller 3kw turbines cost £12,500 plus installation costs each and are estimated to pay for themselves within seven to nine years under the FITs scheme, with a lifespan of over 20 years.

VWE chief executive Tony Gordon said: “FITs are to be welcomed as they are exactly the sort of stimulus the small wind industry needs, if we are to ensure the UK economy is a centre of excellence for small wind systems and micro-generation as a whole.

“With FITs to come on stream, I expect demand for all sorts of wind turbine technology to increase.”

Companies involved in other types of renewable energy generation such as photovoltaics, where the sun’s rays are used to create electricity, are also expected to benefit.

County Durham-based firm Romag is hoping to use the FITs to recover from a difficult trading period, which saw its revenues plummet from £33.6m in 2008 to £19.7m in the 12 months to the end of September 2009.

The firm, which was founded in 2003 as one of only a few firms in the UK manufacturing solar-panel glass, was hit badly by the financial crisis and subsequent recession, which saw many green construction projects grind to a halt.