Fully Funded & Maintained Solar Pv For Social Housing
Despite the historically changeable national policy landscape over the past 5 years, the market for solar PV has seen the occupants of a million UK homes become the direct beneficiaries of the sun’s energy.
Against a backdrop of welfare reform and fuel poverty, the difference that solar PV can make to social housing tenants is huge. With energy prices rising year on year, alongside a 29% rise in excess winter deaths in 2012/13, it is clear that the widespread impacts of our national energy crisis don’t look to be slowing down. Social housing tenants, among the most vulnerable in society, stand to be most at risk.
This fully-funded Solar PV model bridges the gap between community-scale PV projects and institutional investment. It does so in a way which will not only deliver increasingly valuable free electricity to tenants, but will return benefits more broadly to the Landlord and to their wider community.
The model works by bringing full funding, off balance-sheet, for Landlords to deliver solar PV programmes. Over the course of a 20 year roof access agreement, income from the Feed-in Tariff covers all investor repayments and operational costs, as well as generating surplus profits for the local community. This community profit is shared equally between the Landlord and a local community fund (set up and administered locally to the project). Empower Community’s management fee is also taken as a revenue share.
There are no upfront capital costs for the Landlord, and no ongoing maintenance or operational costs. The Landlord benefits from a profit share of any surplus, as does the local community. Following the 20 year roof access agreement, ownership of the operating PV systems reverts to the Landlord.
Solar PV presents a viable opportunity to bring the benefits of renewable energy generation to social housing households at a community scale. There are some important factors in achieving this which this model aims to address:
- Minimisation of delivery costs through scale, optimising returns
- Minimisation of the cost of capital through de-risking and intelligent financial structuring
- Close control of ongoing operating costs and alignment of all parties’ interests
- Provision of a ‘turn-key’ solution, from procurement to operation and maintenance
- Proven model using well-orientated approaches and systems to maximise returns
This model provides key benefits to the landlord:
- 100% funding provided by Empower Community
- Easing of procurement issues (no OJEU requirement)
- Legalities and documentation already established
- Lender approval and CML valuation issues resolved
- Proven to reduce tenant exposure to fuel poverty
- Full working asset ownership after 20 years
Illustration of Benefits
To the Social Landlord
Each PV system can provide the Social Landlord and Local Community Fund with a 20 year income stream. As an example, 1,000 homes fitted with solar PV might provide an estimated income in the region of £10k per annum to the Social Landlord and £10k per annum to the Local Community Fund. This is based on the following assumptions:
- Average PV system size of 3 kWp
- Average solar irradiation for the local area over the last 20 years (PVGIS Climate SAF)
- All PV systems are installed with an orientation within 90 degrees of South
To the Tenants
If 50% of available power generation from the solar PV systems is used on-site and a cost saving of 13.5p per kWh is achieved by the tenants, this would save approximately £170 per annum per tenant, or £170k per annum for all tenants collectively within the scheme. On the basis of an assumed increase in energy costs of 2% above inflation per annum, this would provide a total economic value to tenants within the scheme over 20 years of approximately £3.4m in real terms.
To the Local Community
In addition to the above benefits, Empower Community would make an annual contribution of profits to a Local Community Fund of between £10k per annum. This money will be used to help develop new projects, skills and jobs in the local area with a particular emphasis on alleviating fuel poverty. One of our key principles is to optimise community returns, so these estimates have been deliberately prepared on what we believe is a conservative basis. If actual experience is better than these assumptions, this would increase the profit share to the Social Landlord and the Local Community Fund.
Steps for Delivery
Managing Partner, Empower Community
Mobile: 0789 490 9049