How do I choose?
Asking the right questions will give some confidence that a provider is able to deliver a quality installation and in most cases it will be appropriate to get independent advice. Questions will vary from technology to technology but those outlined below will give some assurance that you are not being sold the standard sales pitch. Demonstrating that you have a good grasp of the subject and asking the right questions can encourage a provider to give you a solution on the right terms.
Are the income projections correct?
A potential installer may show you a 20-year spreadsheet, which will almost always show a big return. Taking the time to question all the assumptions is important. It is too easy to manipulate data with a slightly bold assumption to show favourable returns. Scrutinise technology performance, local data (wind and solar) and tariff levels. Identify any areas that are critical to the success of your project and the sensitivity of your returns. Also look at the returns of the whole project and not only how your equity performs compared with the cost of the money you might need to borrow. Some providers are a little too reliant on the use of gearing to make a project look attractive.
How likely is it that incentives might change?
A large proportion of income is likely to be generated from incentives. Tariffs have changed significantly over the past few years and, as a result, very different returns have been observed across a range of technologies. Providers are very aware of incentives – they are the basis of much of their business – but they can take a rose-tinted view. There are often on-going consultations that could change the relevant tariff by the time you complete the project. Take professional advice to give you a degree of insight into potential policy changes, and, if any changes are due, note when they are due and how they might affect the project.
What is the cost of a gas grid connection?
The price of grid connection can make a project unfeasible. Understanding this cost as early as possible is essential to ensure a project is viable. Early dialogue with the district network operator will give an outline guide, and questioning the ‘non-contestable works’ can bring down costs considerably. The provider should assist you in this.
Who should I go to for funding?
The provider will have a good idea of organisations that have financed installations before, and which ones like their particular offering. Some banks will provide non-recourse project finance, and a few even recognise a percentage of the revenue for wind and solar investments. For other technologies, finding the right funder can be more difficult, and, in many cases, you will have to pay for the due diligence process as a prerequisite to lending. Often high street banks will require the loan to be secured against other assets and will want to ensure the technology will perform as much as you do.
How many systems have you installed?
Asking this question allows you to quickly ascertain a provider’s ability to deliver on your project. We would also recommend speaking to their past clients. No installation is without challenges and it is good to find a firm that supports you through the life of the project and not just the installation. Past clients can often be a very open about the faults and strengths of a provider. With so many technologies being imported it is important to check that they meet UK regulations and qualify for the incentive scheme you are going to use.
How long to commissioning?
With the uncertainty of incentives experienced by the industry over the past few years, it is important to seek a realistic timeline for the project, highlighting significant milestones along the process. This should serve as a good guide to you both, and ensure your eye is always on the critical path, as well as flagging up when you need to be making decisions, submitting applications and instructing third parties.
What guarantees can you give?
Technical warrantees on equipment are usually available and are provided by the technology provider, who should not always chosen on the basis of cost. A more financially secure firm, expected to be liquid for the lifetime of your warranty, is often going to provide better support post-installation than simply the cheapest offering. The life of the equipment is especially relevant for the Renewable Heat Incentive (RHI), which is only paid while the system continues to work. If you have to replace the entire installation after five years, then you will no longer qualify for your initial RHI tariff.
Performance guarantees to cover loss of earnings are often available from providers and insurers. Be careful to ascertain with whom the liability lies. It is common for the provider to point the finger at a problem with a feedstock or at a part of the process that they did not install. Getting the main provider to accept liability for the complete installation will help overcome some of the associated risks. Also agree with the provider early on about the quality of the feedstock (if relevant) and how you intend to measure it.
There are firms that make bold promises, fail to meet them and go out of business only to reappear as a similar business. Carry out a credit check on a company if you are going to be placing a large order with it. It is not expensive and may save you a considerable sum of money. It would also be wise to check that the parent company’s guarantees are extended to you and not reliant on the installer’s continued solvency.
How will you support me through planning and applications for incentives?
Finding a provider who will assist you through the planning process is very important for larger schemes. Having a credible technology provider is a real help in answering all those difficult questions at public meetings and consultations. Providers are also more frequently offering to submit applications on your behalf, and this may well be a cost-effective way of obtaining planning consent and securing the incentives.
For electricity technologies up to 50kW and heat technologies up to 45kW the product and the installer must be MCS (microgeneration certification scheme) accredited to be eligible for FiT and RHI. There is also increasing pressure on sustainability criteria and EPC (energy performance certificate) ratings for buildings utilising technologies.
How long is your offer going to stand?
It is not uncommon for technology providers to put up their prices just before you sign on the dotted line. It is worth getting an indication of the validity time of any offers. If you are going to commit to a large initial capital expenditure you do not want to find out that prices increase at the 11th hour.
What is the cost of a servicing contract and what does it entail?
Every installation of each technology requires some maintenance and servicing. A static photo-voltaic panel needs less servicing than an AD facility with numerous moving plants. Parts for renewable installations are just like parts for a tractor; they’re never in stock when you need them and often they need to be imported. Ensuring the provider has good and timely access to parts and qualified engineers is more important than the cost of the contract offered. A provider should be able to demonstrate adequate servicing support for your installation. It is not unreasonable to expect 24-hour call-out when you have spent a large sum of money on the system.
The best way to ensure your risk is minimised and favourable terms are obtained is to seek independent professional advice. Some technology providers will pay for this advice, particularly if they are funding a good proportion of the project or looking to lease your land. Understand the impact of the investment on your core farm and farming system – the best renewable projects are those that support or complement your existing business.