1. Woodwater House, Exeter
Solar PV for businesses
The money-making overhead

2. Introduction
Ian Holyoak
Head of Energy & Renewables

3. Seminar Programme
• 6.10pm: Financial Considerations
» Andrew Killick, Francis Clark
• 6.30pm: Legal Considerations
» Philip Wolfgang & Mark Howard, Michelmores
• 6.50pm: Forward planning for lasting returns
» Gabriel Wondrausch & Matthew Lauri, SunGift Solar
• 7.10pm: Why we chose solar PV
» James Dart, Darts Farm
• 7.20pm: Questions
• 7.30pm: Networking & Refreshments

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Andrew Killick
Corporate Finance Partner
Financial
considerations for
PV installations

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Contents
• An overview of the economics of solar generation
• The potential effect on the valuation of a business
• Factors to consider for investment appraisal
• Fundraising
• An brief overview of related tax matters

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Electricity price forecast - Wholesale

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Electricity price forecast

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Electricity price forecast

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The inevitability of Solar - price

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Electricity market
• Electricity today – where is it coming from?
Coal - 39% Gas - 28% Nuclear - 19% Renewables - 11% Other –
3%
• Heavily distorted market
• Decarbonisation/reduction in generating capacity/electrification
• Price freeze 2015 - 2017?
• Market uncertainty
• The US experience
Supply/Demand ≠ Price

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The inevitability of Solar
• Increased concerns over security of traditional supply
• Increasing costs (whatever happens in 2015)
• Significant benefits of self-generation
• A reliable and cost-effective alternative technology?
Solar PV

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Impact on business valuation
Valuation = Maintainable earnings X Multiplier
Maintainable earnings:
• Lower cost base
• More profitable
• Diversification
• Index linking
Multiplier:
• Differentiation
• Security over energy supply
• Diversification
• CSR

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Investment appraisal
• Appropriate installation
• Irradiation
• Planning/construction costs
• Grid connection?
• Operation and maintenance/warranties
• Tax
• FIT administration

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Financial summary - example
Installation of 500m2 (approx size of 2 tennis courts):
Installed capacity
Capital spend
Estimated output
Annual income
Annual savings (assuming 50% used)
Total income and savings
Simple pay-back (pre tax)
- 49.9kW
- £45K - £60K (net of VAT)
- 45,000kWh
- £6,700
- £2,250 (£0.10 per kWh)
- £8,950
- 5.0 – 6.7 years

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Fundraising
• High Street Banks will look for existing business security
• Standalone finance emerging
• Some specialised financing companies available
• Present your proposal fully/projections
• Who owns it? Lease/Rental? No funding required?!

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Related tax matters
• Capital allowances – kit AND directly attributable costs
Carry back?
• AIA of £250K until 31 Dec 2014
• Corporation tax - separate trade?
• CGT – considered as F&F
• Inheritance tax – 100% BPR?
• VAT

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Summary
• Uncertainty in the supply and pricing of traditional power
• Enhancement to profits and value
• Short term payback
• Maximise the tax allowance treatment
Timing important – leaving it until later may result in lower returns

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Disclaimer & copyright

20. Solar PV for Businesses
Legal Considerations
Philip Wolfgang

21. Preliminary considerations
• Is an option necessary?
• Is a crane licence necessary?

22. Lease Terms
• Are there pre-existing occupiers?
• What do the “premises” comprise?
• Dilapidations
– Should there be a schedule of condition?
• Warranties for roof structure?
• Lift and shift provisions?
• Who owns the panels?

23. • Landlord & Tenant Act 1954
• Direct agreement with funder
• Multiple sites and formalities

24. Solar PV for Businesses
Planning Law
Mark Howard

25. Topics for the day
• Planning - core concepts
• Planning - Permitted Development
• Government policy

26. Planning – core concepts
• planning permission required for the
development of land
• ‘development’ is either:
– operations affecting land; or
– changes of use of land

27. Planning – core concepts
• The main exceptions are:
– use for agriculture or forestry
– change of use within the same class e.g. from a
butcher’s shop to a baker’s shop
– interior of the building only
– external appearance is unaltered

28. Planning – core concepts
Types of consent
•outline planning consent
•reserved matters
•full planning consent
•listed building consent
•S106 Agreements

29. Planning – Permitted Development
• Certain ‘development’ does not require
planning permission
• Permitted Development

30. Permitted Development
• General Permitted Development Order 1995 –
permission is deemed granted
• Permission granted by SoS subject to
conditions
• Stray beyond the description of permitted
development then the whole development
needs consent, or it is unlawful

31. Permitted Development
Take care:
•Article 4 (GPDO 1995) – permitted
development rights can be removed
•Permitted development rights attaching to a
particular use of land are only available if that
use is lawful
•Permitted development rights attaching to
buildings are only available if that building has
been constructed lawfully

32. Permitted Development
Take care:
•You cannot stray beyond the description in the GPDO
•Over 40 different classes of PD rights in the Order
•Most PD rights are subject to restrictions:
– Size
– Location
– Noise levels
– Visual impact

33. Permitted Development
The key Order for non-domestic renewables:
•Town and Country Planning (General Permitted
Development) (Amendment) (England) Order
2012 – non-domestic micro-generation

34. Roof mounted solar
Conditions:
•Minimise effect on external appearance
•Remove as soon as not needed
Limits:
•Panels protrude no more than 200mm
•No more than 1 metre above highest part of a
flat roof

35. Roof mounted solar- limits
• Not within 1 metre of the edge of the roof
• Not visible from a highway in a conservation
area
• Not on a listed building
• Building Regs- check your roof loading

36. Free standing solar
Conditions:
•Minimise effect on amenity of the area (glare,
landscape)
•Remove as soon as not needed
Limits:
•No more than four metres high
•At least five metres from the boundary

37. Free standing solar- limits
• No more than 9 square metres
• No nearer to the highway than the building (in
a conservation area)
• Not within the boundary of a listed building

38. Summary of Planning
Consider permitted development
•Have the rights been removed?
•Can you meet the requirements of the GPDO?
Planning permission
•consult
•address issues
•address current policy

39. Government Policy
Key themes of localism and reducing red tape
•planning policy – National Planning Policy Framework
•sustainable development – a golden thread running through
both plan-making and decision-taking
•five principles
– live within planet’s limits
– strong, healthy and just society
– sustainable economy
– good governance
– use sound science responsibly

40. Government Policy – Localism
• May 2010 – the ideological basis for localism and the big society
• The NPPF – process begins December 2010, finalised March 2012
• Community involvement
• Planning Minister – Bob Neill MP
• September 2012 – the economy bites back and realisation dawns
• George Osborne – relax the rules on greenbelt development
• David Cameron – build more houses
• Reshuffle. Planning Minister – Nick Boles MP
• And so it continues…

41. Government Policy - Localism
Localism
•version 1 – people power
•version 2 – consultation
•version 3 – a move back to people power?

42. PD Policy
• Re-use of redundant agricultural buildings
• Change of use: redundant offices to
residential
• Note – change of use is PD, works are not
• Time limited policy – 3 years and then review

43. Renewables Policy
Planning Practice Guidance for Renewables and
Low Carbon Energy (not PPS 22)
•Onshore wind farms
•Large solar PV schemes

44. Renewables Policy
• More weight to local concerns
• Cumulative impact requires attention
• The need for renewable energy no longer a
trump card

45. SunGift Solar
Forward Planning for Lasting
Returns
Matthew Lauri
Commercial Project Development

46. Contents
 Gathering the correct information at site survey
 The design and installation process
 System commissioning, handover, aftercare
support and application for Feed-In Tariffs.

47. How It Works

48. How It Works
DC
ACMeter
Appliances/
Machinery
Grid

49. Are two solar installations the same?

50. Are all 2ltr cars the same?

51. 2ltr Comparison

52. Solar PV variables
 Efficiency
 Appearance
 Performance
 Warranty
 Life expectancy
 Price

53. Solar PV comparison
 Cost
 Capacity
 Aesthetics
 ROI and Payback
 Profit
 BUT are they really the same?

54. Installation example

55. Installation example

56. String layout
Show how important the string layout is.
The wrong string layout

57. String layout
Show how important the string layout is.
The right string layout

59. The wrong panel layout
Panel layout

60. The right panel layout
Panel layout

61. The preferred installation

62. Financial comparison
System
Panels close to parapet wall
with poor string layout
Close to parapet wall with
improved string layout
Panels repositioned
further from parapet
wall
Cost per watt installation £1.05 £1.05 £1.05
System Cost excluding 20% VAT £52,500.00 £52,500.00 £52,500.00
Annual Energy Generation (kWh) - as PV Sol simulation 46,979 47,116 47,632
FIT Rate (p/kWh) 12.57 12.57 12.57
Payback Period (Yrs) 4.59 4.58 4.51
Annual Return on Investment 21.8% 21.8% 22.2%
IRR % 21.4% 21.4% 21.8%
20yr Profit £235,513.73 £236,353.64 £240,680.18
Carbon Savings per year (tonnes) 24.85 24.92 25.20

63. Less is more

64. Shading impact

65. Preferred method

66. Financial comparison
System 65.25kWp System 92.5kWp System
Cost per watt installation £1.05 £1.05
System Cost excluding 20% VAT £68,512.50 £97,125.00
Annual Energy Generation (kWh) - as PV Sol simulation 63,856 85,049
FIT Rate (p/kWh) 11.10 11.10
Payback Period (Yrs) 4.70 5.04
Annual Return on Investment 21.3% 19.8%
IRR % 20.7% 18.9%
20yr Profit £298,054.29 £385,389.52
Carbon Savings per year (tonnes) 33.78 44.99

67. Current system costs
System 50kWp System 150kWp System 250kWp System
System Cost excluding 20% VAT £52,265.68 £151,077.41 £245,092.96
Annual Energy Generation (kWh) 47,889 134,955 219,318
FIT Rate (p/kWh) 12.57 11.10 10.62
Payback Period (Yrs)
Annual Return on Investment 21.6% 19.7% 19.4%
IRR % 21.1% 18.7% 18.3%
20yr Profit
Carbon Savings per year (tonnes) 25.33 71.39 116.02
4.64 5.07 5.154.64 5.07 5.15
£231,158.39 £594,978.88 £944,750.86£231,158.39 £594,978.88 £944,750.86

68. PPA options
 Power Purchase Agreement (PPA)
 Zero cost
 Reduced electricity rate
 Index linked
 Protected from rising costs
 Green credentials
 Carbon savings

69. Invested installations
£1,912
Savings
Yr1
£76,979
Total Yr 20

70. System commissioning
 MCS certificate
 EPC certificate
 System handover and training
 Servicing and maintenance
 FiT application form

71. 70kWp PV roof array (30 & 40kWp)
Estimated payback less than 6 years
Estimated return higher than 16%
Exeter Council
Civic Centre:

72. Met Office, Exeter: 250kWp PV array
Estimated payback 7.3 years
Estimated return 13.5%

73. Numatic Int Ltd: 250kWp PV array
Estimated payback 4.6 years
Estimated return 21.6%

74. SunGift test array

75. Customer Portfolio

77. SunGift Solar

78. Darts Farm
Solar Project
In partnership with
SunGift Solar

84. BENEFITS OF BUYING LOCAL
• Money spent with local farmers and producers
all stays close to home and is reinvested with
businesses and services in your community.
• Local foods promote a safer food supply, the
further you are from the source of your food,
the greater the chance of contamination.

88. ECO-FRIENDLY DARTS FARM
• Cardboard baling and recycling
• Plastic baling and recycling
• Glass recycling
• Water sourced from on site bore hole
• Wetlands project
• Solar panels

90. DARTS FARM PV SCHEME
• Conceived April 2011
• Installed end July 2011
• Eligible for the higher feed in tariff rate of
32.9p
• Proposed performance of around 70,000kwh
• Aim to reduce our carbon footprint and utility
bills

92. DARTS FARM PV SCHEME
• Estimated 67,347 kwh
• Feed in tariff 32.9p per kwh
• Estimated annual earnings EDF £22,157
• Annual savings from electricity bill £4,714 (50%)
• Total system cost £171,606
• Estimated payback 6.15 years
• Income generated over 25 years £697,025
• Total profit over 25 years £525,418
• Carbon emissions offset 43.5t per annum
• Equivalent rate of return 16.25%

94. DARTS FARM PV SCHEME
• Estimated 7,410 kwh
• Feed in tariff 32.9p per kwh
• Estimated annual earnings EDF £2,438
• Annual savings from electricity bill £518 (50%)
• Total system cost £29,500
• Estimated payback 9.6 years
• Income generated over 25 years £76,693
• Total profit over 25 years £47,165
• Carbon emissions offset 4.8t per annum
• Equivalent rate of return 10.4%

95. DARTS FARM PV SCHEME
Actual income received period from
June 2012 – June 2013
• Total projected income FIT £24,595
• Actual income received EDF £25,818
• Assumed electricity usage 50%
• Actual electricity usage 100%
• New projected payback approx 6 years

96. FUTURE DARTS FARM PV SCHEME

97. FUTURE DARTS FARM PV SCHEME

98. FUTURE DARTS FARM PV SCHEME
• Estimated 65,000 kwh
• Feed in tariff 10.62p per kwh
• Estimated annual earnings EDF £6,920
• Annual savings from electricity bill £5,213
• Total system cost £75,500
• Estimated payback 5.55 years
• Income generated over 20 years £187,600
• Total profit over 20 years £ 262,600
• Carbon emissions offset 34.5t per annum
• Equivalent rate of return 18%

99. DARTS FARM CARBON OFFSET
• According to Forestry
Commission data we
save 27,865 trees a
years.
• An average of 76 trees
per day.

100. Thank you
for
listening.

101. Question & Answers