Is a Fortune Flowing through your floorboards?

The Government has recently stated its intention to award double subsidy for all types of microgeneration from April 2009 provided the renewable electricity generated is 50kw or less and regardless of when the generator was installed.

First, how much is 50kw? If the source of electricity was from a small wind-turbine – most of the early wind farms have turbines of 400kw -on a reasonable site it should generate 110 MWh sufficient for about 25 houses. If the source of electricity were a 50kw hydro-turbine with twice the efficiency of a wind-turbine, this might be sufficient for 50 houses.

Secondly, what might this be worth? At today’s prices, we are paying about 13p/kwh (£130/MWh) for our domestic electricity. The subsidy, called a Renewables Obligation Certificate – a ROC – is currently worth 4.95p/kWh, therefore double subsidy is worth 9.9p/kwh. On top of that, the Grid company will typically pay you a further 5.6p/kw giving a total of 15.5p/kwh. Thus, a 50kw wind-turbine generating 110 MWh will earn you about £17,000 pa and a 50kw hydro-turbine will earn you £34,000 pa.

Thirdly, who might benefit from this surprise largesse? In Cornwall alone, a search of the telephone directory found just over 200 ‘mill’ addresses. A recent survey of Cornwall identified over 500 potential hydro sites. If you live in a disused mill house, have a good look at what drove the mill in the past. For example, if your old mill was fed by a small leat, see what mass per second of water the leat, if re-established, might provide and what the drop, known as ‘head’, is between the top of the leat and where the water would rejoin the river.
The formula used is:

Power (kw) = mass of water per sec x head x 7

A leat delivering 250 litres per second with a head of 27 metres would generate 47.25kw. Over 8,500 hours per year, your mill might generate, at 85% efficiency, 340,000 kwh worth, at 15.5p/kwh, ~£53,000 pa. Assuming servicing and maintenance of £3,000 pa, this leaves a net revenue of £50,000 on a turbine installation and leat repair that might have cost £200,000 – a crude rate of return of 4 years. If you were to sell your house, the added value due to an annual income of £50,000 pa based on 6% savings interest rate, should add over £830,000 to the value of your old mill house. This figure would be considerably greater if electricity prices continue to rise faster than inflation. Buy a mill – we would be delighted to help find you one !

The other main beneficiary of awarding double subsidy to renewable electricity generated by systems of 50kw or less will be micro wind power. Let us suppose that a group of 25 houses gets together and decides to use a 50kw micro wind-turbine to pay for their electricity. They decide to do this because they are fed up with the volatility of electricity prices; they are worried about black outs as energy becomes scarcer; and they decide to reduce their carbon footprints.

50kw wind-turbine used by a Yorkshire school.

How might this best work? The 25 households find a landowner who is prepared, for a rent perhaps of 5% of the metered revenue, to offer them a site for a 50kw wind-turbine that could be miles away from the 25 houses. They each buy a debenture of £5,000 to raise the £125,000 required for the purchase and installation of the 50kw wind-turbine. 10% of the revenue might be required for maintenance and insurance of the turbine. The turbine generates, say, 110,000 kwh pa worth £17,050. After deducting 15% for rent and maintenance, this leaves £15,000 for distribution to the 25 households. Therefore each of the 25 debenture householders earns £600 pa – a 12% rate of return on the debenture, sufficient to purchase 4.4 MWh which is slightly more than the average modern house is likely to consume.

Payback on the initial debenture of £5,000 is 8.3 years, and probably faster if electricity prices rise faster than inflation, thereafter it becomes pure profit. As with the water mill example above, at 6% typical rate of return on savings, the £600 income per year will add £10,000 to the value of the house, should they sell up, leaving the debenture with the house.

If all 25 houses do not each buy a debenture, the spare debentures would be offered to those who have bought into the project. If they do not buy the spare debentures, then they can be offered to neighbouring houses and then to the general public.

There are grants available for ‘going green’ the latest of which is the Low Carbon Buildings Programme which gives individual houses each £2,500 towards the cost of an approved renewable energy system. For example, it should be possible for the 25 households buying debentures in their £125,000 wind-turbine described above to each claim £2,500 thereby reducing the net cost of their £5,000 debenture to £2,500 while halving the payback time to just over 4 years without reducing the value added to their house. The same programme offers 50% grants for RE equipment installed by charities, public buildings such as schools and ‘not for profit’ organisations.

There are variations on this theme. For example, the 50kw wind turbine could be used to pump water from a lake or quarry up hill to a reservoir and then the water, supplemented by stream water, is run down through a pipe to a 50kw hydro-turbine at the lake or bottom of the quarry during the 11 hours per working day when the grid company will pay peak tariff rate (~12p/kwh) for the electricity generated. If the difference between the height of the reservoir and the lake at the bottom of the quarry is 80m and the electric pump pumping water up hill is 80% efficient, the 50kw wind pump, with a capacity factor of 25% – a term used to indicate the average output over a year, will pump 56,260 tonnes of water per year about 22 litres per second.

As the peak tariff hours are 55 hours out of 168 hours in the week and the stream feeding the reservoir is adding water at, say, 10 litres per second, the hydro-turbine during peak hours will be fed with ~100 litres per second to generate at 85% efficiency 47.6kw or 132 MWh pa worth £210/MWH (peak rates plus double ROC) or £27,700 pa. While the 50kw wind-turbine does not export electricity to the grid, it does earn double ROCs, worth £99/MWh, for the 110 MWh it generates worth a further £10,900. The two turbines together earn £38,600 pa on a capital investment of perhaps £200,000 giving a payback of 5.2 years, a return at today’s electricity prices of 19% pa.

Again, this could be a grant assisted community project for 50 households thereby reducing the capital cost of the turbines while providing each with an income £600 pa at today’s electricity prices. This could also become a means of providing affordable homes while attacking fuel poverty as these would be houses where the income that comes with the house covers the annual cost of electricity and is unaffected should this cost rise faster than inflation.

The Government is considering as part of the Energy Bill going through Parliament awarding some form of subsidy for renewable heat at household and community level. If they do, then this will open up similar possibilities for solar thermal and ground source heat pumps which need a subsidy if they are to achieve an acceptable pay back time. So, watch this space, too.

If you would like to know more about the above schemes, Gage Williams who is a director of the Renewable Energy Office for Cornwall can be contacted at 01208 841378 or gagewillms@aol.com .