Breakthrough should have made the point – but didn’t – that the initially generous feed-in tariff rates in Germany have been repeatedly cut. The correct analysis would have not have compared today’s nuclear costs with PV of a decade ago but the current costs of both technologies. At 2013 prices, solar PV in mid-latitude countries is now cheaper than new nuclear. Put in the UK context, the proposed EdF power station at Hinkley is now more expensive per unit of electricity generated than solar farms in the south of England.  The implications of this need a great deal more consideration than they are getting.

By itself, the cost crossover  doesn’t mean that countries shouldn’t invest in nuclear power. Nuclear delivers electricity reliably throughout the year. This baseload power is more valuable than PV’s high levels of output at midday in summer when demand levels are low in most of Europe. And nuclear power stations take up little space compared to the land needs for solar farms. Nevertheless nuclear proponents, such as Breakthrough, should recognise the truly staggering improvement in the economics of solar power around the world, mostly driven by the German government’s commitment to PV a decade ago.  Costs have fallen by approximately 75%. By contrast, it probably doesn’t need saying, nuclear has nearly doubled in price.

The analysis

The ‘cost’ of the many options for generating electricity is difficult to calculate. For both nuclear and for PV, the underlying expense  of generating electricity is dominated by the required payment to the providers of the capital needed to build the plant. PV farms, for example, have operating costs close to zero and nuclear power operates at no more than £15 per megawatt hour. Whether nuclear electricity therefore  ‘costs’ £80 or £100 per megawatt hour crucially depends on the rate of interest demanded by financiers on the huge amounts of money needed to construct new power stations. This is even truer for solar farms.

We do know what EdF, the owner of the Hinkley site, thinks it needs to pay its capital providers. Press reports, not denied by the company, suggest that it believes that it needs a minimum price of £97 per megawatt hour in order to achieve a required 10% return on the capital used to build the plant. Agreement has yet to be reached with the UK government that such a price will be written into law as the ‘strike price’ which EdF will be paid for the output from Hinkley. Nevertheless, £97 is consistent with the calculations of outsiders looking at the £14bn financing challenge faced by EdF for the two proposed Somerset reactors.

The question I therefore asked was this: would a ‘strike price’ of £97 per megawatt hour (just under 10p per kilowatt hour) be enough to incentivise developers to build PV farms in reasonable locations on flat land in southern England with nearby grid connections? My extremely simple modelling assumptions were as follows.

These rough calculations suggest that a ‘strike price’ of £97 for solar electricity would yield a return of 11.3% on the funds committed.[1] This is more than the 10% return achieved by EdF on its proposed investment at Hinkley. Electricity from solar PV is therefore cheaper – in good locations – than nuclear.

This can be put another way. Developers of solar farms should be willing to accept a strike price of less than £100 per megawatt hour, if their required return is similar to EdF. My approximate calculations suggest that a figure of £88, indexed to price inflation as with the nuclear company, will give returns of 10% on PV investments. Perhaps as importantly, the financial risk attached to a solar farm is tiny compared to the roll of the dice at Hinkley. Investors will actually need a much lower return on PV than nuclear.

Are these conclusions consistent with the evidence from sunny counties? Yes, they very definitely are. Applications to build large PV farms are flying in to planning authorities. And what is the current price achieved for solar PV? A developer of large farm will receive 1.6 ROCs (Renewable Energy Certificates) worth today around £65-£70. In addition, they will sell the electricity, perhaps for £40 per megawatt hour, meaning that their total income will be just over £100 per megawatt hour. In other words, developers are rushing to build solar farms today at prices only very slightly higher than demanded by EdF for nuclear.

These farms are not always even in particularly good locations, such as the one that the comedian Griff Rhys Jones is currently complaining about in Suffolk. The marketplace is therefore saying that solar power is now cost-competitive with nuclear. I’ll try to address what I think are the enormous implications of this for energy policy, here and around the world, in a note on this web site soon. As we’re coming to realise, the fact that PV is now cheaper than retail electricity (and therefore doesn’t actually need any subsidy at all if the electricity is all used on site) has the potential to really upset many of the assumptions we’ve made about renewable energy. Electricity markets have yet to understand the disruption that is likely to be caused.

This month a hydro project to generate electricity at a weir on the Thames in Oxford won the an investment of nearly £300,000 from 95 shareholders, three quarters of whom live in Oxford, within two weeks of opening its offer. Just a few weeks ago, the village of South Brent in Devon financed a large wind turbine almost entirely with local money.

Green energy projects owned by communities – long-talked about as a way to reduce emissions, cut bills and bring people together – are starting to raising serious amounts of money. But how?

Saskya Huggins, one of the volunteers who has organised the Osney hydro project in Oxford, said “when you get an opportunity like this that helps tackle a major global issue, albeit in a small way, and raises significant funds for your own community, you grab it with both hands.”

The two ventures share many features. Both had a core group of utterly committed volunteers like Huggins working for many years to bring the project to fruition. The Osney hydro plant has been in development for over a decade. South Brent’s team got planning permission three years ago but took until the late 2012 before being able to start fundraising.

In both places, the organisers are well known and trusted in their local community. This seems to have helped build the impetus behind the fundraising.

Charlotte Robinson, one of the Osney Hydro investors, said: “when I came to Oxford 10 years ago, this idea was reported in the local newspaper and I loved it, but I couldn’t see how such a big project could happen in such a small area. So I’ve been thinking about this for a decade, and was determined not to miss the boat. This sort of action gives me hope that a climate change revolution really is possible, even for non-leaders like me, by doing things from the bottom up and locally.  I feel incredibly lucky to be able to take part.”

Edward Chapman, one of the Devon organisers, actually discouraged publicity outside the area, saying he wanted to make sure as much money as possible came from individuals living close to the turbine.

He remarked on how early publicity for share issue had galvanised more support from local people. “The team of volunteers who assembled after the first open meeting back in January did an amazing job – the village was covered in banners and posters and they opened the “pop-up” shop for a week.”

The two schemes independently decided to offer investors an annual return of about 4% on their investment. This leaves large surpluses available for local schemes to reduce fuel poverty and meet other energy priorities within the community. Osney says it will put a total of £2m into energy projects in West Oxford during the forty year life of the hydro plant, more than three times the initial cost of the scheme. South Brent has its eye on using the money from the wind turbine to provide the seed funds for its own large hydro power scheme as well as insulating local homes.

The volunteers that have driven the two schemes forward were already experienced renewable energy investors. The Osney group had raised the money to invest in several large solar photovoltaic arrays on local buildings while one of the South Brent directors had rebuilt some of the village’s small electricity-generating water wheels and another works as a surveyor for a large renewable energy company.

In South Brent about 130 people put money into the wind turbine from a village population of only 3,000. Although other Devon wind turbines have been fiercely resisted – including some planned by other community groups – few voices were ever raised against the proposal. At Osney, over half the money came from less than a mile from the weir at which the generating plant will be built.

The average amounts invested were broadly similar in both cases. The Thames scheme raised an average of just over £3,000 per investor compared to £2,300 in Devon. All the Osney shareholders are individual people. A few companies and trusts invested in the South Brent wind turbine – usually buying relatively few shares – but over 95% of the investors are individuals.

The big brother of these two ventures is the Westmill Solar cooperative, which raised £4m from 1,600 small shareholders in the summer of last year to buy an existing solar farm near Swindon. The profile of the investors is similar to the two newer schemes. At £2,500, the average investment is about mid-way between the Osney and South Brent figures. Three quarters of the Westmill investment came from within twenty five miles.

The experience in Germany shows what might be achieved by encouraging such community power companies.

By the middle of 2012 over 500 energy cooperatives were operating in the country, with almost 170 founded in 2011 alone. Although the pace of growth is faster there, other features are very similar. At around £2,800, the average size of shareholding in these ventures is about the same as in the UK and, like here, over 90% of investors are private individuals. The typical dividend is 4%, similar to the rate proposed at Osney and South Brent.

Even in Germany, cooperatives still produce less than one tenth of one percent of the country’s electricity. However, the speed of growth suggests that local energy companies may eventually produce a respectable amount of the country’s power.

According to a recent survey [LINK??], the prime purpose behind the German cooperatives is not to make shareholders rich but to promote renewable energy and to keep money in the local economy. The same survey showed that the most important reason that the founders decided to form cooperatives, rather than conventional companies, was because of the democratic ‘one member, one vote’ nature of the decision taking. If my straw polls are any guide, it’s the same in the UK.

The experience at Osney and South Brent suggests that deeply rooted, cautiously run and philanthropic energy ventures can raise significant amounts of capital from local investors – even if the promised financial returns are quite limited.

(With many thanks to the volunteers in Osney and South Brent, particularly Saskya Huggins and Edward ‘Joddy’ Chapman, who answered my incessant questions).

Most power plants supported by Feed In Tariffs (FiTs) are small, often very small. Their output isn’t recorded in statistics of electricity generation. In fact most of the time the PV panels on your neighbour’s roof are reducing her electricity consumption rather than producing a flow of electricity into the power network. But knowing the rated power of installations claiming FiTs, and estimating how much yearly electricity each kilowatt produces,  we can guess the total amount of power produced over the course of a year.

The March FiT statistics have just been published. The total capacity of all installations registered under the scheme is now about 1.8 gigawatts (slightly larger than one of the new nuclear power stations planned for Hinkley in Somerset). Most of this capacity is solar PV.

The imbalance is even more pronounced if we look at the number of installations. Solar PV is 99% of all sites claiming FiT because these installations are typically much smaller than wind or other technologies. Over 1 household in a 100 now has solar panels on the roof but these are generally below 4 kilowatts in size. A new wind turbine claiming FiTs might be hundred times the potential power.

PV panels don’t work at night, and barely  function on a cloudy December day. In fact, solar panels produce an average of about 10% of their rated capacity. So a 4 kilowatt array on a roof will, over the year, average about 400 watts. It’s more in Cornwall and less in Aberdeen but this is a roughly correct average.

We can use similar estimates for the other main feed-in technologies: wind, hydro and anaerobic digestion. My figures are in the table below

The smaller technologies have higher percentage outputs, meaning that they contribute more to the electricity generated under the FiT scheme.

Simple multiplication produces the following estimates of annual electricity output from the currently installed FiT plants.

The total amount of electricity consumed in the UK in 2012 was about 317 GWh. (The amount generated was greater because of losses in distribution and in running the power stations themselves). Therefore the electricity generated under the FiT scheme was about 0.6% of all electricity used in homes, offices and businesses.

The amount of generating capacity inside the FiT scheme rose by 65% in the year to March 2013 and growth is fairly steady. Wind and AD grew much faster than the average, albeit from a small base. If the growth continues, all FiT installations in March 2014 will supply about 1% of UK electricity in the following year.