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Friday, April 12, 2024

The Energy Crisis Is Pushing Solar Adoption—for Those Who Can Pay

When John Topham first thought about putting solar panels on his roof in north Wales, the numbers didn’t quite make sense. It was November 2021, and although energy bills in the UK had just risen by 12 percent, the money he’d save on his monthly bill wasn’t enough to justify the thousands of pounds it would cost to kit out his house with solar panels and battery storage. “At the time, we couldn’t get the finances to stack up,” says Topham, an aviation engineer.

But then the energy crisis really started to bite. In February 2022 the UK’s energy regulator announced that its cap on energy prices would rise by 54 percent, taking the average bill for home electricity and heating from £1,277 ($1,660) to £1,971 ($2,560) per year. Before prices started skyrocketing, Topham’s monthly bill was usually £104. After the hike he was facing payments of just under £300. “We looked at the tariff and thought, ‘Oh my God, we’re going to have to start trying to cut this back.’” He installed a smart meter and turned on each device in his home one at a time, measuring how much power each one drew. He kept reminding his children to turn off the TV and the lights.

The UK’s energy price cap is supposed to stop firms from charging too much for electricity and heating, but with soaring gas prices, many households find themselves in a situation similar to Topham's. An unusually chilly winter, high demand from Asia, and the war in Ukraine have quadrupled gas prices compared with this time last year. And although the UK’s electricity supply is much greener than it once was, around 35 percent of it is still generated by burning natural gas. Add to that the 85 percent of UK homes that are heated by gas and you’ve got an energy system that is extremely vulnerable to the vagaries of fossil fuels. Even after two price hikes in a row, a research briefing from the UK House of Commons warned that energy bills may go up by another 30 to 50 percent in October.

The prospect of further price increases was enough to convince Topham that he needed to reduce his dependence on the electricity grid. In March he took the plunge and ordered three wall-mounted batteries and 20 solar panels—12 of them to be wired up directly and the other eight as backup in case he wanted more capacity later down the line. If the sun is shining, Topham’s solar panels generate enough electricity to power his household appliances and send excess energy to be stored in the wall-mounted batteries, which he draws on when demand and prices peak in the evening. Topham’s monthly electricity bill will still go up—all energy customers have to pay a daily charge no matter how much or little electricity they use—but he estimates that it’ll be about half what he’d be paying otherwise. “I was looking at immediately securing my energy finances,” Topham says.

Other homeowners are following suit. “On that very first weekend when the price cap change came in, our inquiries increased by 300 percent,” says Richard Moule, a director at the Sheffield-based solar installers All Seasons Energy. “We weren’t even advertising that much for solar at the time,” he says. “It just went ridiculous.” Chris Tague, director of the Renewable Energy Network, which plans and installs solar panels mostly for businesses, says that last spring around 85 percent of his work was on heat pumps. Now 90 percent of enquiries are from people who want to install solar panels. “I’d love to say that we’re coming at it from the point of view of business owners really caring about the environmental crisis,” he says, but that’s not their primary concern. “Largely what they do care about is looking across their profit and loss and accounts and seeing that one area of their expenditure—energy—is increasing exponentially.”

The gas price crisis is pushing forward what the UK needed anyway: more solar panels on rooftops. In 2021 the UK’s electricity grid operator set out three different pathways the UK’s energy sector could follow to reach net zero emissions by 2050. Two of them required a tenfold increase in rooftop solar panels by 2050. The third envisaged a fivefold increase. “All else equal, we need people to be installing solar panels,” says Eoghan McKenna, a senior research associate at University College London’s Energy Institute.

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But the government’s approach to rooftop solar has been lukewarm. In April 2019, a long-running scheme that paid people for generating their own electricity came to an end, bringing interest in rooftop solar crashing down. Moules says the lack of interest in solar meant he had to lay off some staff and ask others to retrain. Despite the government reducing the value-added tax on solar panels from 5 percent to zero this April, and some local authorities supplying grants for them, the onus now is overwhelmingly on individuals to foot the bill for solar panels. “The only incentive for you to install solar panels on your roof is to offset what you import on the grid,” says McKenna.

In other words only people who can afford the hefty upfront cost of solar panels are able to insulate themselves from high energy prices. Topham’s solar panel and battery setup cost £17,500 ($22,890), which he covered in part through a loan. In Hampshire, Rachel Rombough says she may be able to apply for a local council grant for the solar panels she is considering installing, but that the final decision will rest on whether or not her husband gets a bonus. Her monthly energy bills have gone up from around £80 a month to £240, and she’s getting quotes for a solar and battery system that will drastically reduce the amount of electricity she draws from the grid. “I can’t see energy costs crashing down,” she says.

The current demand for solar panels hints at two possible futures for decentralized energy generation, says Nicole Watson, a doctoral researcher at University College London’s Energy Institute. “These systems could be designed in a very individualistic way or a more progressive way,” she says. Energy costs are so high at the moment that solar panel owners don’t have strong incentives to sell their excess energy back to the grid. That’s why people like Topham have opted for battery systems that let them store energy and only draw on the grid when electricity prices are low or their household demand is very high.

Dan Schoenhofen had solar panels installed on his rooftop in Airdrie, Scotland, in March. Any excess energy he gets, he sells back to the grid at a rate of 3.5 pence (4.6 cents) per kilowatt hour. That’s way below the average cost of electricity, which is now typically between 20 and 30 pence per kilowatt hour. The payback Schoenhofen receives is so meagre that he’s thinking of installing batteries so he can store excess electricity instead of sending it back to the grid.

That’s not the only way solar panels could work. Another option would be to allow people to trade energy with their neighbors. Watson points to one trial in south London where residents in a housing block will store energy generated by rooftop solar panels in batteries and then trade that energy with their neighbors. She also points out that enabling people to take part in peer-to-peer energy trading could make people feel more connected to their community and help them feel like they’re tackling the environmental crisis. In Oxford another trial involving the local council and energy firms allows people to trade energy from solar panels and batteries.

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The UK’s current energy system is leaning in the opposite direction. People are locked into a single electricity supplier, so they can’t buy electricity from their neighbors. And for most people, buying rooftop solar panels only makes sense if they own their own home and plan to stay there for the long run. “It doesn’t make a lot of sense if you’re not planning on staying in the property,” says Rombough, who is looking at around a £9,000 bill for her solar setup.

While homeowners who can afford solar panels are lessening the shock of the energy crisis, it’s those people who can least afford it who are being hardest hit. The charity National Energy Action has warned that April’s price increase has put 2 million more UK households into fuel poverty, bringing the total to 6.5 million. The UK has some of the oldest housing stock in the world, and these drafty old houses often face inflated energy bills due to poor insulation and inefficient heating systems. “If you’re in private rented accommodation, it’s hard to do anything about the efficiency of your home,” says Sarah Darby, an associate professor at the University of Oxford’s Environmental Change Institute.

Improving homes should be a win-win. Better-insulated homes cost less to heat, and they have smaller carbon footprints too. The body that advises the UK government on climate change warned in 2019 that emission reductions from the UK’s 29 million homes had stalled, putting the government’s climate change targets at risk. This part of the climate equation won’t be fixed by homeowners looking to slash their own bills. “The government needs to get really serious about treating the demand side as part of the energy system,” Darby says. “There are things that the market can’t do but that desperately need doing to face the energy crisis and the climate crisis.”


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