How long will the feed-in tariff money last?

I posted some analysis on this question on the Guardian site yesterday.

Someone in the comments asked if the numbers really added up on Ray Noble’s claim that the FITs budget could get used up entirely within a year or two. Here was my reply:

I agree the numbers are confusing and I hope to interrogate them properly in a future post. Some quick thoughts in the meantime.

As you say, I assume Ray means the budget could soon all be “allocated” rather than actually “spent” — though if the result was that the scheme was closed to new entrants, the net effect would of course be the same to them.

Ray’s point, I think, is that industry knowledge (months more up to date than Ofgem’s published stats) suggests a very steep curve for all kinds of installations. In particular, loads of private investors, community schemes and others (e.g. the council I was speaking to last month) are quickly putting up as many 50kW PV systems as possible to lock in decent rates while they still can.

Bear in mind the cost of each installation is cumulative. So (and excuse my very rough numbers, which are intended only as a back-of-envelope to illustrate the point and could be some way off) if a single 50kWp system earns, say, £15k per year at the current rates, that’s £60k over four years. So if 10,000 of those were quickly installed over the coming months they could theoretically eat up £600 million over the next four years or so, and that’s before you consider the majority of smaller-scale PV installations, plus wind, hydro, etc.

No idea if that particular scenario is possible but I can see how Ray’s claim could be true. Unless I’m missing something or there’s a silly error in my numbers? In which case do let me know…

Hope to get a chance to bottom out these figures soon.

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