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The future of centralised power generation

This is an excellent commentary on what might happen to the US grid as power generation is increasingly decentralised. The same could well happen in the UK as what happens in the USA generally happens here a few years later.

http://www.businessweek.com/articles/2013-08-22/homegrown-green-energy-i...

Few people realise the implications of home brewed renewable electricity not only being tax free but also that it replaces grid supplied electricity that would have been paid for out of taxed income. The same applies to businesses with regard to VAT and also corporation tax.

Take my 4kWp of solar PV as an example:

Capital cost was £6,000. Life expectancy is 30 years. O&M including new inverters might be £2,000 over 30 years. Annual out put is 4,000 kWh - life time output is 120,000 kWh.

Cost per kWh over 30 years is (6,000 + 2,000) x 100 pence divided by 120,000 = 6.7p/kWh.

Cost of retail daytime tariff incl percentage of the daily standing charge and VAT is 18p/kWh. This is paid for out of taxed income costing 22.5p/kWh for a standard rate taxpayer or 30p/kWh for a higher rate (40%) taxpayer.

If 3,000 out of the 4,000 kWh generated is used and the remaining 1,000 kWh is exported to the grid at a derisory, but income tax free, 4.64p/kWh (worth 5.58p for a basic rate taxpayer and 7.73p for a higher rate taxpayer), the annual grossed up savings are:

For a basic rate taxpayer:

(3,000 x (0.225 - 0.067)) + (1,000 x 0.0558) = £530

The tax fee ROI without any FIT on the £8,000 invested is 6.62%, better than any ISA. Last Sunday's very negative feature on solar PV in Countryfile stated that better returns could be had with an ISA.

The tax free FIT for a 4kWp solar PV array is currently (until 1 Jan 14) 14.9p/kWh worth 18.62p to a standard rate taxpayer. The FIT is paid for all the 4,000 kWh generated each year (and is RPI linked for 20 years) yielding an extra £745 in Year 1.

The total Year 1 return to a standard rate taxpayer is therefore £530 + £745 = £1,275 for a return on an investment of £8,000 of 15.9%. Countryfile should be challenged.

For a higher rate (40%) taxpayer:

(3,000 x (0.30 - 0.067)) + (1,000 x 0.0773) = £776

The tax fee ROI without any FIT on the £8,000 is 9.7%, better than any ISA.

The tax free FIT for a 4kWp solar PV array is currently (until 1 Jan 14) 14.9p/kWh worth 24.83p/kWh to a higher rate taxpayer. The FIT is paid for all the 4,000 kWh generated each year (and is RPI linked for 20 years) yielding an extra £993 in Year 1.

The total Year 1 return to a standard rate taxpayer is therefore £776 + £993 = £1,769 for a return on an investment of £8,000 of 22.1%.

In the 1970s, the craze for home brewed beer, costing a few pence per pint, seriously rattled the large breweries. However, home brewed beer generally tasted awful whereas a home brewed kWh is just as good as a kWh generated by a coal power station 200 miles away. For the 1.8 billion people without any grid supply, home brewed renewable electricity is most welcome of all and, like mobile phones, is becoming both essential and affordable. British companies such as http://www.azuri-technologies.com are bringing affordable solar electricity to off-grid villages with little prospect of ever being connected to the grid.

Gage

Gage Williams OBE,
Chief Executive
West Country Renewables Ltd (Reg No 7329220),
Menkee, St Mabyn, Bodmin PL30 3DD,
01208 841378, 07825 018116
'Power to the Parish'