Household Energy Prices and PV Generation

Since installing Air Source Heat Pumps (ASHPs) in January 2020, we have been on all-electric fixed-rate tariffs, initially with Scottish Power before switching to Good Energy in April 2021. Our current (geddit!) fixed-rate tariff ended yesterday (31st March 2023). Most energy suppliers are not providing fixed-rate deals at present due to price volatility and uncertainty about government support/price caps. Consequently, Good Energy has informed us we will be moving to their default variable tariff as of today (April 1st 2023).

Figure 1: New and Old Good Energy Tariffs

And, as Figure 1 shows, that will mean an estimated doubling of our energy bill. We could, of course, switch to another supplier provided they had a reputable renewable tariff. We can absorb this increase with only relatively minor sacrifices; however, there are a great number of people, households, and businesses that cannot. There is any number of solutions to this problem including additional targetted government support, windfall taxes on energy companies directed to those most in need, a country-wide programme to insulate houses, faster development of renewable energy sources, reduced energy demand through more efficient use of energy, further research and development into energy storage (hydrogen?), fusion power (in another 30 years?), expansion of wave, tidal & geothermal energy sources, etc. None of this will be quick except, possibly, for targetted government support.

The Good Energy estimates for annual energy costs are based on an annual usuage of 12399.8 kWh (Figure 1). To be fair, that estimate may be one I gave them, although I think it unlikely I gave a value to the first decimal place. Furthermore, the estimate does not take into account the electricity produced by my rooftop solar PV. Looking back over the past year (April 1st 2022 to March 31st 2023), my readings show:

Electricity Purchased from Good Energy: 10135 kWh

Electricity Generated by Rooftop Solar PV: 3753 kWh

Electricity Sent to Grid: 1840 kWh

Electricity (PV) used at Home: 1913 kWh

Annual Household Electricity Requirements: 12048 kWh

So, the Good Energy annual estimate is pretty close to actual demand though we only required 85% of that with the rest coming from our solar PV. We are still receiving the Domestic Renewable Heat Incentive from the installation of the ASHPs (ca £1600 per annum) along with feed-in tariff (FIT) payments for the PV electricity generated (ca £500 per annum). Interestingly, when I set up the FIT payment scheme with E.ON, I only had a generation meter (i.e. no export meter) so E.ON estimated that half the electricity generated would be exported. Again, a rather good estimate by E.ON.

As I have mentioned elsewhere, His Majesty's Government (HMG) went about incentivising domestic renewable energy installations in completely the wrong way when they opted for FIT payments. A cheaper and simpler way would have been to change building and planning regulations so that all new builds were (i) properly insulated, (ii) fitted with a minimum of PV solar panels (at least 1.5 kW), (iii) heated by ASHPs with underfloor heating, (iv) located and positioned to maximise passive solar gain (even if this meant fewer houses on a plot of land).

Such measures would mean that instead of having 1.4 million new houses (built since 2010) poorly insulated and heated by fossil fuels (i.e. gas boilers), we could have reduced overall energy demand (through better insulation and use of heat pumps), added at least another 1.5 GW of renewable energy generation to the UK grid and all at zero cost to the UK taxpayer. [Note: current UK solar PV capacity is around 15 GW in 2023].

Older domestic properties could be offered a free 1.5 kW installation, paid for by HMG/energy companies, with an option to install extra PV at the householders' cost (this option could also be available for new builds). Overall costs are controlled by establishing how much can be spent each year (e.g. £500 million per annum). The rollout of solar PV would increase year on year as the costs per kW decrease (economies of scale). At current costs of around £2000 per kWp (panels and installation), an investment of £500 million per year, over the past 13 years since the start of the FIT scheme, would have added at least another 2.5 GW grid capacity.

To encourage commercial solar PV developments, the generators could be offered an inflation-proofed agreed price per MWh (e.g. £90) for a guaranteed term (say 25 years). This is the option chosen by HMG for the Hinkley Point nuclear power station - although the PV option would be available much sooner, cost considerably less, have greater generation capacity, and provide cheaper electricity.

These schemes would be a vast improvement on the unpredictable (read uncontrolled) nature of the FIT payment scheme that promises to payout for 25 years (per kWh payments increase with the Retail Price Index). Note that FIT Export and Generation payments for the last quarter (1st October - 31st December 2022) were just shy of £434 million (Figure 2). 

Figure 2: Year 13, 4th Quarter FIT Payments

Furthermore, a planned PV installation programme would need a highly-skilled, motivated and well-paid workforce paying taxes and spending money which leads to increased economic growth. [note: not all  economic growth is good].

HMG's FIT scheme was a bit of a disaster. Initial tariff rates were too high; they encouraged early adoption of solar PV payments but overexposed the Government to potentially huge future liabilities. So tariff rates were regularly cut which led, inevitably, to a fall in the rate of installation of new solar (Figure 3). 

Figure 3: Cumulative Solar PV Capacity in the UK

Compare the growth rate of solar PV (Figure 3) with that of UK wind (Figure 4) to see where HMG went wrong with the former.

Figure 4: Cumulative Wind Power Generation in the UK