Are Community Solar PV schemes in the UK, still a good investment in 2013?

David Raven, Renewable Energy Systems Consultant, I was reminded about the investment potential for community solar PV schemes recently, following an article he read about a solar farm in Oxfordshire started in 2011.

The reason this particular solar farm caught his eye was news they had secured a finance package comprising a loan of £12m from The Lancashire County Pension Fund.

David said, "Whilst this particular scheme was a large undertaking, starting with about 1,600 investors, out of interest I crunched some numbers to see if a smaller, perhaps more doable solar PV installation can still make sense to investors now in 2013."

Solar farms were in the news right from the start of the feed-in-tariff when it began in April 2010 that is until last year, when the tariff was reduced not once but three times in 12 months, effectively switching off many potential investors.

The Oxfordshire solar farm is large by any standards, comprising 21,000 panels and capable of producing 4.5 million kilowatt hours of electricity per year “ powering about 1,400 homes. This produces an income of around £1.4m per year, index linked for 25 years “ clearly the hook for the pension fund.

However, new schemes starting now run for 20 years and the feed-in tariff rate for greater than 250kW and under 5MW is 7.10p per kW/h.

David Raven went on to explain his strategy saying, "My back-envelope sums call for a 500kW installation. We require a spare pasture/paddock large enough to site 2,000 panels (as compared to 21,000 in the Oxfordshire scheme) and we need £500,000 to pay for the supply of all the equipment, installation and maintenance of the system for 20 years."

Once this is all operational the scheme is projected to earn £1,351,717 over the full 20 years. Shareholders, pension fund managers, whoever, will make £851,717 ROI, having assumed 4% inflation. Annual return on investment is 10% and the moneys all paid back in 8.8 years.

David said, "And remember this is a sovereign backed investment linked to the retail price index for the whole 20 year period. So, I'm not an investment advisor but these numbers still seem good to me and any opposite views will be warmly welcomed."