Key points:
- Rural estates and farms can generate significant extra income from renewable energy feed-in tariffs (FITs)
- FIT payments are index linked and guaranteed for up to 25 years
- You can still claim FITs even if you use the electricity yourself
- Wind turbines offer the shortest payback time
- Most rural estates can benefit from some sort of renewable energy scheme
Rural estates and farms could use the new renewable energy feed-in tariff scheme to increase their annual income by tens of thousands of pounds each year, according to an analysis by Knight Frank’s renewable energy team, contained in the firm’s latest publication, The Rural Report. For the full press release and the specific Renewables article from Knight Frank's Rural Report please go to www.knightfrank.co.uk/theruralreport.
The firm created a hypothetical “renewable energy” estate (see Table 1) that utilises all the main forms of renewable energy – solar, wind, hydro and anaerobic digestion. It then calculated how much income could be derived from each using feed-in tariffs.
Two wind turbines created an annual income of £300,000 assuming all electricity produced was exported to the national grid. An anaerobic digester created an extra £460,000 per year while a modest hydroelectric scheme added £190,000. The contribution from photovoltaic solar panels was a more modest, but still significant, £26,300. The total annual income came to £916,000 with a lifetime potential of £18.5m.
If the electricity produced was used on the estate the annual benefit increases to £1.1m. This is because the estate will still receive the FIT payments, but will be saving on its current electricity expenditure.
Feed-in tariffs were introduced in the dying days of the Labour government and were designed to encourage people to create their own renewable electricity. An index-linked payment guaranteed for up to 25 years is made for each unit of electricity produced even if it used by the generator for their own consumption. The tariff varies (see Table 2) depending on how the energy is being generated and the scale of the scheme. The smaller the scheme and the longer its potential payback, the larger the payment.
Table – 2 FIT rates (p/kWh)* and life (years)
| Anaerobic digestion |
9.0 -11.5 |
20 |
| Hydro |
4.5– 19.9 |
20
|
| Solar photovoltaic |
29.3 – 41.3 |
25
|
| Wind |
4.5 – 34.5 |
20
|
add 3p/kWh for all electricity supplied to the national
grid (large schemes can negotiate a higher supplement)
Table 1 - The Knight Frank model renewables estate
| | Scheme details | Fit rate
p/kWh | Cost | Annual*
income | Lifetime
income | Payback
time (years)
|
| Wind | Two 250kw** turbines near farm buildings based on wind speed of 7m/s | 18.8 | £1m | £300,000 (£400,000)
| £6m (£8m)
| 2-4 |
| Solar photovoltaic | 900 sq metres (450 panels) on dairy roof | 31.4 | £405,000
| £26,300
(£31,670) | £658,000
(£792,000)
| 3-15
|
| Hydro | 100kw water turbine | 17.8 | £800,000
| £190,000 (£254,000) | £3.8m (£5m) | 3-5
|
| Anaerobic digestion | A 350kw system with 200 cows and 600 acres of maize | 11.5
| £1.25m
| £400,000
(£460,000)
| £8m (£9.2m) | 3-4
|
| Total income from FITs | | | £3.45m | £916,300
(£1.1m) | £18.5m £23m) | 4-5 |
*Income figures will vary based on local conditions and equipment performance. They do not include tax or the cost of finance. Figures in brackets assume all electricity produced is used on the estate and would normally cost 10p/kWh to buy in (AD schemes assume a lower buy-in rate of 5p/kWh).
** A 250kw turbine produces an equivalent amount of energy to that consumed by 125 three-bed houses for a year.
Christopher Smith, head of Knight Frank’s Renewables and Energy department, said:
“We have already seen a huge surge in enquiries from landowners looking to take advantage of feed-in tariffs. One of the most attractive things about them is that the payments are guaranteed for up to 25 years, which means it is now easier to get bank funding to set up renewable energy projects.
“Reassuringly in the current fiscal environment, there is also no danger that FITs will be hit by government cuts because they are funded by electricity generators (via our bills) not the exchequer.
“Although it would be unusual for a typical rural estate to be able to utilise renewable energy to the same extent as our idealised estate (see Table 3 for the pros and cons of each type of renewable energy), there are very few rural properties that cannot benefit from FITs in one form or another. The estate shows the extent of the potential income available, even from relatively modest schemes. The wind turbines we are using, for example, are much smaller than those used in large-scale wind farms.
“At a time when the income streams on many rural estates are under threat from poor agricultural commodity prices and falling farm subsidy payments, renewable energy will play an increasingly important role in securing a viable future for landowners and farmers.
“Next year we should see even greater opportunities when details of the Renewable Heat Incentive are finalised. This will pay a tariff for heat produced by renewable sources and could be of real benefit to rural landowners who use a lot of heat themselves or who can supply heat to other users. Our estate already benefits from a wood fuel-boiler. This uses waste timber from the estate and saves £10,000 a year in heating bills.”
Table 3 - Renewable pros and cons
| Pros | Cons |
| Wind | Short-payback time, easy management | Needs reliable wind and planning consent, local opposition can be fierce
|
| Solar Photovoltaic | Planning consent generally not needed for rooftop schemes, suitable for environmentally sensitive areas | Long payback time if not using electricity yourself |
| Hydro | Consistent energy production, requires little management | Very site specific, potentially a long way from usage or connection point
|
| AD | Works well in energy-intensive farming systems that create a lot of waste, by-product can be used as fertiliser | Requires specialist management for optimum output, large acreage needed for feedstock |
To read the full article in The Rural Report please see that attached PDF or find it online at ww.knightfrank.co.uk/theruralreport
For more information on renewable issues please contact: Christopher Smith, head of renewables and energy, christopher.smith@knightfrank.com; +44 (0)1179 452630
Source: newsroom - meattradenewsdaily.co.uk
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