These are the IRRs assuming no bank financing. I included the reference prices for Sainsbury and Tesco in the context of a previous post.

Using the Tesco installed price of £5k/kWp for small retrofit, an IRR of 5.5% from your investment might not seem too bad at the moment, given current interest rates. Sure, it might not set the world alight (and certainly won’t attract much in the way of private finance) but it’s not too abysmal.

However even this 5.5% is provisional: the IRR is very sensitive to how much of the electricity generated by the PV is used on site. This is because the “on site” value of the electricity is the same as the price of the grid electricity that you’re offsetting. In other words, if you pay 14p/kWh of grid electricity but instead you generate and use a kWh on site, this has a value of 14p in addition to the FiT payment.

On the other hand if the electricity from your PV panels is surplus to on site requirements at any given moment, the electricity will be exported… and attract a measly 3p/kWh. So it’s clear that consuming electricity on site is worth a heck of a lot more to exporting to the grid. For a small retrofit at £5k/kWp, here’s how the on site proportion affects the IRR:

The 50% on site figure comes from DECC, but lots of people (though obviously, not people in the PV industry) feel it’s overcooked. My own doubts were strongly reinforced recently when I put an energy display unit in my house. I was genuinely surprised by how spiky our electricity load is.

Typically during the day, our load is a steady 80W or so, occasionally punctuated with spikes of between 2 and 5kW for a minute or two while the kettle and microwave do their thing. Not a good match if you’re looking to use all your PV electricity on site. I reckon for our house it would be around 10 – 15% for a 2kW array. Suddenly my 5.5% has become 4.3%. Then again, everyone is different and the loads in another house might be a tighter fit. Just the same 50% feels way too high.

So what’s the headline verdict on the IRR from the PV FiT? Giving DECC the benefit of the doubt on the 50% figure, capital cost for small domestic retrofit needs to drop well below £4k before an ESCO would be able to come along and take the cost away. And even then they wouldn’t be offering much in the way of rent or value share.

For small new build and medium installations, you’d need to be nearer £3k/kWp to attract private finance. For larger installations you need to be well under £3k.

In some cases it’s probably doable… in a very mature market like Germany or Italy. But if part of the point behind the FiT is to hurry the development of our immature PV market (we’re talking about supply chain and installers rather than PV manufacture), we appear to be demanding that our industry run before it can walk. It’s not clear yet what the effect of this will be over the next couple of years. But I’d expect to hear a lot more hype from salespeople while ESCO offers remain thin on the ground (and watch that small print!).

Here are the assumptions behind the graphs above:

Here’s the sell: we’re an agile, extremely capable distributed energy consultancy and ESCO. We’ve not only weathered the downturn, we’ve come out stronger, smarter, and better positioned than before. Our work includes all aspects of DE:

• Feasibility including carbon, regulatory, and commercial strategy
• Consulting to government on energy services, policy, and how to finance low carbon
• Energy markets: enabling third party access, negotiating PPAs, getting best value for energy
• Asset ownership: putting in and owning our own kit
• Selling energy to customers

It’s a fantastic company and this is a good time to join (while we’re still relatively small).

Fontenergy is one of those places where everyone does everything (sound familiar?). That’s great because you get exposure to all the ingredients required to make distributed energy work – engineers have to understand basic finance, business bods have to get energy markets, energy traders have to understand the Code for Sustainable Homes, etc. Admittedly this can be a little daunting at first, but everybody’s pretty nice and happy to help each other out.

In addition to getting exposure to new areas, you also get as much responsibility as you’re willing to accept. This means you have the chance to go much farther much faster than you might in other companies.

The kind of person we’re looking for in this role will:

• have at least a few years’ experience in built environment or energy sector (or equivalent)
• understand the basics of low and zero carbon energy including relevant standards (SAP, CSH, etc)
• be extremely proactive
• have excellent business writing skills
• have a very high degree of competency with spreadsheets, including formulas (and maybe even the odd macro)
• be able to put together effective and attractive presentations and present to clients or other groups
• be handy with a computer generally (given a few bits of information, do you know how to set up your email client?)
• have a strong desire and ability to pick up new skills and knowledge

Some things that would be a bonus:

• project management experience
• mechanical or electrical design experience
• languages – particularly Italian and French
• business background

This description could include a wide range of people so salary will depend on experience. As you have probably gathered, we’re looking for the right person, not the right CV. So if you think you’re right for Fontenergy, give me a call or send me an email (casey dot cole at fontenergy dot com).

Speak soon.

There goes the afternoon!