In 2010, the Government introduced Feed-In Tariffs (FiTs) to encourage ordinary energy users to generate their own electricity from renewable sources.
FiTs provide three financial benefits to users:
- a payment for all electricity produced, even where this is used by the same person producing it;
- additional bonus payments for electricity exported into the grid;
- a reduction on the user's standard electricity bill from using energy that person has self-produced.
Most forms of renewable electricity generation up to 5MW in size are eligible for FiTs. The rate of FiTs payable will depend on a number of factors including the size of the installation and the energy efficiency of the building on which the panels are installed.
Roof mounted solar power schemes below 50kW can be used to supply electricity to individual buildings. Owners can pay for and install the panels and generate some of their own power, allowing them to claim FiTs and potentially reduce bills. Alternatively, joint venture opportunities with solar installers will allow owners to share risks, as well as FiTs. For those unwilling to part with installation and maintenance costs, the solar installer could be contracted to take these on while retaining the FiT for itself. Following a series of reductions in FiTs rates, the number of installers offering this has fallen significantly.
Key issues
This latter approach will require a roof lease, and the parties will need to take care to protect their interests. They should bear in mind that:
- the installer can claim FiT only if it owns the panels, so any lease to the installer should ensure that rights to the panels remain with the installer and aren't deemed to 'attach' to the building in a way which might otherwise transfer ownership;
- the panels and the installer need to be of a type that is accredited under the Microgeneration Certification Scheme (MCS), an independent scheme that certifies microgeneration products under 50kW and installers in accordance with consistent standards. Note that there are separate requirements where the panels have an installed capacity of over 50kW;
- the installer needs the right to enter the property, install and maintain the equipment and to use any surplus electricity which is generated;
- consideration needs to be given as to whether any lender needs to consent to the arrangement;
- repair of the panels is important to both parties and the obligations around maintenance need to be clear. Consideration must also be given to responsibility for maintenance of the roof itself;
- the building owner will want some control over the installer's ability to assign. The installer's covenant and experience is what the owner relies on for maintaining the panels and providing the electricity.