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It's an ill wind.............

August 25, 2012

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The photovoltaic solar situation had already been settled and the new arrangements for other technologies, in our case farm scale wind, come as no surprise.

That does not mean we at Gaia-Wind and our customers are happy with the process and we are making that clear to DECC. However, we understand that government support schemes are finite; and that reductions were coming has been clear for some time. One positive we can take from the situation is that we have clarity about the future.

  • The changes will affect tariffs for all FiT technologies from December 1, 2012 onwards;
  • The FiT payment is index linked so will retain its value over 20 years;
  • While the tariff for all farm scale wind turbines is reduced we now know that the degressions – reductions for newly commissioned technologies – will be at fixed annual time points from April 2014;
  • The actual amount of degression will be adjusted according to deployment in the previous year, with a minimum reduction of 2.5%.

So what does this mean for the immediate future? At Gaia-Wind we are experiencing a strong current of interest in getting our 11kW turbine into the ground as soon as possible to beat the December deadline. Taking the slightly longer view, for farmers and other potential users of wind turbines, the question is – will it still be worth my while?

I believe that the answer is "very much so". One of the few certainties we have is that energy prices will continue to rise. In the UK, the price comparison company Uswitch says: "In the last six years, household energy bills have rocketed by 91%".

Deutsche Bank forecasts that the average dual-fuel bill could rise by 30% to 50% in the next four years.

This plays to the advantage of small wind turbine owners, who are able to use their own generated energy and sell any surplus back to the grid. So in addition to tariff payments, your turbine provides energy security and a hedge against ever increasing energy bills. This means that by investing in a small wind turbine, even at a lower FiT rate than 2012, the 50% rise in export prices, coupled with savings from increased energy costs brings the potential to achieve returns on investment as high – and perhaps – higher, than current turbine owners receive now.

So farmers will be asking themselves: What turbine works best under the new "one size fits all" FiT rates? A certain amount of thinking will move toward the larger end of the production scale. The issues here will continue to be around comparing the relative simplicity of finance, flexibility, and possibly easier planning of say, the old, "less than" 15kW small wind turbines group, with the higher production potential of the larger turbines.

Should I go for a "Big Bang" investment in say, a 50kW plus machine or perhaps keep to the <15kW arena and maximise my use of the energy produced? Acute consideration will be given to the risk or accessibility of finance, and issues highlighted by planners: "Cumulative Visual mpact" is currently the main planning obstruction. Here smaller turbines with a smaller zone of visual influence have an advantage.

An intermediate route might be a number of the smaller turbines, or to gradually increase turbines on a site. Given the initial investment costs in particular, the viability or at least the potential ROI, of the larger turbines in a developing energy market will come under careful scrutiny. Naturally at Gaia-Wind we believe that the smaller outlay and greater proportion of returns linked to energy cost savings will continue to make the smaller turbine option attractive.

The comprehensive range of questions to help prospective wind turbine purchasers, compiled by John Maslen and published in The Scottish Farmer (April 13, 2012) – The Maslen Test! – remains valid. Some of his key questions are even more relevant now:

  • How much risk am I prepared to take?;
  • Can I switch my heating systems to run on electricity and thereby avoid using alternatives like oil for heating?;
  • Do I have a fixed budget? Am I prepared to borrow money from the bank?;
  • How much do I want to risk?

Just at Gaia-Wind alone, we have installed more than 500 turbines in farms and rural businesses. Our experience says that renewable energy from the wind suits farmers. It is inevitable that subsidy regimes will become less central to the decision to invest in a technology which brings energy security and price stability to individual users. As ever, early adopters will be at an advantage.

This story appeared here.

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