This is the Kirk Hill site in SW Scotland. Planning permission was granted in 2020 and they are currently installing the hard standings for the turbines which should be arriving in the summer. It is due to become operational in November following which I will start to receive a regular discount to my electricity bills...just in time for next winter! I was encouraged to learn that over the past year, investors in the first project in S Wales have received an average of £977.
In less than 10 minutes, the much larger Kirk Hill site will generate enough electricity to power the average home for a whole year.
Energy Bills
This time last year I was paying 21.8p/kWh for electricity and 23.5p/day standing charge. Just 12 months later and charges have increased dramatically... 66.1p/kWh - an increase of 203% before the price cap discount and 44.7p standing charge.
Last March the energy price cap was £1,277 but next month this will be £3,280. I’m not sure how Ofgem arrive at this figure as wholesale gas prices - which set our energy bills - have fallen back significantly over recent months and are now below the level of last February when Russia invaded Ukraine. However the government have held average prices at £2,500 for the past 6 months under the Energy Price Guarantee and there is a strong possibility this could continue for a further 3 months. In addition most households have received £400 winter support over the past six months but this will not be extended so we will need to find the extra £67/month to fill the gap until the next quarterly review of the price cap. Hopefully this will fall below £2,500 from July.
Buying directly into a renewable energy project is a way for everyone to protect themselves from rising energy costs.
The New Solar Offer
Building on the two existing wind turbine projects, Ripple are now proposing their third offering which will be solar. This will offer investors a chance to diversify their energy mix.
So basically, you buy shares in the new solar farm based on your average annual electricity consumption. Enter your annual consumption here to give an idea of the likely initial cost.
When the project is completed and connected to the grid and starts generating power, your electricity provider eg Co-Op Energy (powered by Octopus), buys your share of electricity generated from the solar farm and pays the operator a low amount to cover operating costs and passes on the rest to you via a reduction in your bill.
The initial purchase is a one-off payment...typically £2,500 which would buy enough electricity for the average house. This payment can be spread over 12 months. At current prices, this would mean a saving of around £200 per year and therefore a payback period of under 15 years. The estimated lifespan is 40 years. Of course, wholesale energy prices will fluctuate - they could go higher which would mean even more saving but could go lower but then energy bills should come down.
Of course only a proportion of our bills are for the actual energy consumed and you still have to pay the daily standing charges, VAT, green levies etc. which can account for over 40% of the average bill.
Environment and Climate Change
In addition to the savings on our energy bills, there are significant benefits to the climate. This is a new solar farm which would not otherwise have been built. So the more consumers who join up means Ripple have more confidence they have a good model and can plan ahead with more new clean energy projects in the future. Around 950 people signed up for the first wind farm project and over 5,000 for Kirk Hill. I expect this third offering to be far more popular after the energy crisis of the past year and around 18,000 people have registered a firm interest in this latest project.
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| Windier in winter, sunnier in summer... a good combination |
Onshore wind and solar are some of the lowest CO2 sources of power in the UK. The model is around 50% to 60% cheaper than individuals installing their own rooftop solar PV...currently around £6,000 on average.
The Kirk Hill site is estimated to save 12 million Kg of CO2 every year which is equivalent to taking 8,200 petrol/diesel cars off the road.
Obviously the invasion of Ukraine has brought into sharp focus the need to reduce our dependence on Russian oil and gas and become far more self reliant.
Conclusion
So, last year I signed up for my small share of the Kirk Hill wind farm and have just paid the final monthly instalment. I like the idea of solar and the opportunity to share in the first consumer-owner solar co-operative. However, my initial calculation suggest that it will be roughly 50% more than the cost to buy into the Kirk Hill project so I will need to look into the details when the prospectus and formal share offer is launched. I need to find out why the up front cost is significantly more expensive as I think the construction costs for onshore wind and solar are very similar. Obviously inflation and the increased costs of construction will be a factor; I believe the load/capacity factor is different for solar compared to onshore wind. In the UK, wind is 3x more efficient than solar but has higher long-term maintenance costs; also the estimated 40 year lifespan means more savings compared to the 25 years for the wind farm.
But initial costs considerations aside, I do like the idea of ordinary people joining together to establish a new solar farm feeding clean energy into the grid which would not otherwise be built and which will be a small part of the transition to net zero emissions.
It will probably be 2025 before the solar park is completed but in the meantime I look forward to getting my regular monthly discount off my bills from Kirk Hill wind farm later this year.
As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!
Thanks for posting.
ReplyDeleteI like the idea of Ripple but I won't be investing myself for a variety of reasons.
The main one being that I don't understand why I can just own a share of the windfarm and share I. The profits. Why give my power company money towards my bill?
The tax status is also murky. Do I pay tax on the money?
Answers on a postcard.
But it's an innovation in financing infrastructure that we need to get to net zero.
5% of the income is deemed return of capital. The rest, which they call 'trading benefit', is taxable and will be reported to HMRC if over £15. Ripple haven't been able to confirm whether this is taxed as savings interest or self employed income. Maybe the solar prospectus will reveal all.
DeleteThank you for sharing. I’ve struggled with understanding the economics of this approach vs buying shares of one of the listed yield co’s like UKW or TRIG ( now trading at discounts) which have more diversification and no construction risk. Has anyone taken a look at this?
ReplyDeleteThey are different propositions. If you're after an investment then UKW or TRIG every time. Ripple just basically locks your electricity prices at the wholesale sale cost (plus standing charge) and offers you the opportunity to help create a new source of renewable energy.
DeleteIndeed. Tried to do a back of the envelope IRR calc of ripple vs the yieldco’s. Obviously depends on wholesale power assumptions but looked to be very slim (c.3%) vs the typical returns the Uk listed renewables players are assuming (8-10%). I suspect they are providing much better deal structuring (ie, leverage) to increase equity returns.
DeleteI think the long term returns are difficult to predict but suspect the ~3% may be on the low side.
DeleteWhen I signed up for Kirk Hill the long term annual return was based on 4.3p/kWh which worked out at 7%p.a. however if the price based on mid 2022 power prices was 14.6p which would give a return of 25%.
The projected figure for the first year is now expected to be 6.4p giving a return of 10.3% on initial investment.
I am guessing the returns from the solar farm with less generous buy-in terms will be lower than wind but difficult to put a figure on it at this stage.
Although wholesale prices have dropped recently, I think the 6.4p has been used by Ripple since even before Putin invaded Ukraine. Looking at forward pricing, the Kirk Hill 'saving' could be in the region of 12p.
Delete> and you still have to pay the daily standing charges, VAT, green levies etc. which can account for over 40% of the average bill.
ReplyDeleteThank you for that clarification. I despise these with a deep and rabid vengeance, and the opportunity to kick this monkey off my back was the reason for my interest in Ripple, so I am reconsidering Ripple for the vastly less efficient and fundamentally stupid option of rooftop solar, though I need to reflect on this deeper. I had misunderstood a share in Ripple as a way to use capital to get a professionally run operation at scale to avoid paying more for my power to subsidise other people. This does not appear to be the case; I get to perhaps pay less for my power over a depreciation period that is greater than my expected lifetime and still pay the unit multiples to subsidise other people's bills.
I infer that I actually have to reduce my intake to reduce these parasitic charges, which implies the engineering folly and safety issues of local storage as well as the inefficiencies of smaller scale. Bonkers, but if the effective saving is only applied to just over half the bill then it weakens the business case for Ripple investment a lot.
Which is a shame, there was a lot to like about it :(
Hi ermine,
DeleteThere are several parts to our energy bills. The main aspect will be the wholesale costs when our supplier buys energy, sometimes a year or two in advance. These costs will fluctuate according to basic supply/demand and will be different for electricity and gas. This is basically the element which gets the reduction from ownwership of Ripple energy as the supplier will be buying the energy generated by the solar farm.
Then there are the network costs for building and maintaining the infrastructure.
On top of this are the green levies and social obligation charges to help vulnerable consumers e.g. the Warm Homes Discount of £140 to help households on low income. These are weighted more towards electric bills but I think that is about to change.
Then there are the supplier's operating costs for such things as billing and customer service, then their profits...they claim just 2%.
Finally 5% vat.
So, my understanding is that you would only get the discount off the wholesale costs on your wholesale electricity element (not gas) so for those on dual fuel it would be a reduction applied to perhaps 25% of the total bill.
To avoid all the other charges you will need to go off grid!
Curiouser and curiouser. It is indeed the social obligation stuff I want to dodge - I can live with paying that from taxation but on the power bill it is highly regressive IMO. Even as a retiree I am an income tax payer but
DeleteArmed with your info, I looked at my supplier's description of the tariff, I looked at Ofgem, I looked at Uswitch how do I read my electricity bill. Apart from feeling that they assumed I was a moron, none gave me the specific detail I wanted. Are these parasitic charges loaded on the standing charge, or on the unit charge, or both?
If I could understand this, I could look at what to attack. The export offer on a SEG tariff for export looks paltry, ~6p where they charge three times that to supply. The idea of paying tax on top of the substituted consumption via Ripple incenses me and I definitely won't be doing that unless I see something to the contrary in the prospectus, it weakens the case yet further.
At the moment it would appear my best usage for small solar is to take over deadweight background loads which amount to about 100W in my case. This is a combination of IT kit and the fridge and freezer. This would need only very modest panels and storage capacity, and maybe a smaller more modern inverter for the 200W peak load of the cooling stuff but would disappear about 2 units a day for me (24h x 100W = 2.3kWh) out of an average use of 7kWh a day, and the IT gear I could save losses by running DC-DC or direct off line to the battery.
It's a shame that way back when, we decided that raising income tax was anathema. We get to pay the same tax but in a different form on some of the other things that are essential to living, in this case energy, though transport is another way.
I never understood why people were keen to put industrial scale lithium batteries inside their houses (google lithium battery fire to find out why that's a bad idea) but the tax and tariff position on grid-connected renewables I learned about in this post makes this understandable even though off-grid micropower is a bit barmy from an engineering point of view in an urban setting. If I'm going to end up paying tax on renewables I may as well buy energy stocks and pay the tax on the dividend, at a lower rate ;) Today wasn't a bad day to top up TRIG, though of course tomorrow or next week could be even better...
I've looked at Ripple since inception. I haven't invested because of the gap between wholesale and retail. A couple of years ago it was sub 10p now greater than 30p. For the project to work in the best interests of the shareholders the cooperatives would ideally need to become distributors also. Buying when there is a shortfall and selling excess in the market. This would close the gap between the retail and wholesale prices reducing the overall risk.
ReplyDelete