The set up

The set up
5.36mm jet delivering 0.63 l/s to the pelton which is rotating at 870 rpm and generating 127 watts into the grid.

Sunday, 9 December 2018

The benefit of offset

In the UK, people who generate electricity can be paid for what they generate. The scheme is called the Feed-in-Tariff scheme (FiTs), - and next year it comes to an end.  The end is on March 31st 2019.

It comes to an end only for new schemes. Schemes already accredited, like mine, will continue to receive payments for the duration of the original contract, - 20 years.

Feed-in-Tariff payment is made up of two parts: a payment for the total energy generated and a payment for the energy exported to the grid.  Payment for both components ends.

This change in government policy forces a re-think for those considering a renewable energy scheme: does it still make financial sense? The thrust of this blog post is to suggest that if the renewable scheme is very small hydro then there is still a strong case for going ahead.

The case rests on the idea of offset, by which is meant the expenditure saved when electricity is not purchased because you are generating it yourself. There are two aspects to commend the proposition:

First, in years to come, the cost of electricity purchased from the grid will go up. If you generate it yourself, so the value of what you save will increase over time. Since the design life of a hydro is upward of 40 years, these savings will have many years to play out.

Second, there is a benefit unique to very small hydros operating 24/7. Putting out power at the relatively low level of 500 watts (+/- 300), the turbine's output closely matches the base load demand of a property.  Base load is made up of that multitude of appliances which are 'on' all the time - from battery re-chargers to fridges, freezers, central heating pumps, computers and so on. Totted up their power requirement can typically be 400 watts. That translates over a day to an energy consumption of 10 kWh.

Purchased from the grid, day after day, week after week, 10 kWh per day amounts to a significant expense, but supplied from your own turbine what would have been an expense becomes a saving, - a saving which can be thought of as justifying the initial cost of the turbine.

To illustrate how great the saving is, consider some real life figures below showing energy taken from the grid (kWh) in the first quarter of each year for the 10 years before I installed my turbine and for the 5 years after:

... there is an unmistakeable step-down in kWh taken after the turbine was installed, - and this represents the saving made by installing it. (Incidentally, the increase seen in 2018 resulted from acquiring a Nissan Leaf in late 2017).

The value of the saving in this one quarter is £350.  For a whole year it is £546.

So, whilst Feed-in-Tariffs may be ending, a small hydro can still pay for itself through the savings of offset. Certainly, without FiT's payments the time taken to recoup the cost of installation will be longer.  With FiTs payments for me it has been 5 years.  Without FiTs and keeping to 2018 electricity prices it would have been 16 years. 

So 16 years is about the period of time someone starting out in very small hydro after 31st March 2019 should be thinking of as the time it might take to recoup the installation cost.  It seems a long time, but it could be shorter, perhaps much shorter if electricity prices really go through the roof.