The Future For Energy Costs
January 4, 2011
By Jo Butlin, Vice President – Retail, SmartestEnergy Limited, the leading purchaser and supplier of renewable energy from the independent generation sector in the UK. www.smartestenergy.com
Energy costs for consumers continue to grow and the decision making process to choose a contract is increasingly complex. Historically, when making purchasing decisions, the focus has been on wholesale energy costs. However, at today’s costs, wholesale energy only represents about 50% of the energy bill. The other 50% reflects the growing costs associated with delivery to the consumer and specifically funding the UK’s Carbon Transition Plan.
Distribution and Transmission costs included in a bill reflect the investment required to develop and maintain the electricity grid. The infrastructure is old and does not support all the localised generation of power that is required to deliver a green economy. Rises in distribution costs of 40% over the next five years have been approved. Customers are expected to fund the newly launched Feed in Tariffs (commonly known as ‘cash back schemes’) and potentially Carbon Capture Storage will be the next significant cost passed through to end consumers. Forecast increases in energy prices over the next 5-10 years range from 15-20% and more as a result of all the changes necessary to deliver a Green economy.
So what can customers do to avoid these increases?
Realistically, there are two options – look to avoid grid costs through generating power on site, or simply, use less.
Onsite generation has become a real option on a small and medium scale. Feed in Tariffs, whilst still requiring up front investment, make investing in solar panels or other technologies pay back in a meaningful period and even provide a financial return of 5-8% over the life of the tariff. Larger scale installations can also become viable through the sale of excess energy back to the grid. Companies such as SmartestEnergy Ltd can provide help and advice in delivering onsite generation.
Using less is achievable through a focused programme of energy efficiency measures. Help and advice is widely available through a range of consultants who can provide energy efficiency audits and solutions.
Delivering the UK’s Carbon Transition Plan will have the inevitable consequence of rising prices through traditional routes. Customers need to start looking now at alternative means of meeting their energy needs in order to manage their future costs.
VAT – Pitfalls and Planning
January 4, 2011
The world of VAT is not an easy one for charities. A common misconception is that charities don’t pay any VAT. Well, there are reliefs available for activities and expenditure, but they are not obvious and it is easy to get them wrong. Below are a few issues that are raised on a regular basis with charities:
Pitfalls
- 5% VAT rate for fuel – This lower rate of VAT is only applicable where a charity uses the fuel for a “non-business purpose”, which is not always the same definition for VAT law and charity law. Care should be taken when issuing certificates as penalties may be levied for their incorrect issue.
- Constructing new non-residential buildings – These projects, by their nature, are expensive and significant amounts of VAT are involved. However, complex sale and leaseback arrangements are now being attacked on a regular basis by HMRC to counter the recovery of VAT.
- VAT exemption for educational activities – In order to qualify for the education exemption from VAT, charities must be able to show that it is not possible for any profits to be distributed. In addition they must also show that any profits from the provision of education are re-invested solely in the future provision of education and not for the benefit of the charitable activities as a whole. Failure to incorporate the latter into the aims and objectives or Articles of Association can mean that the education provided is actually taxable and not exempt.
Planning
- Charities can benefit from zero-rating for their advertising (including staff vacancy advertisements), as well as for most printed matter. In addition, if the printer can provide an inclusive design and print service, this may also be zero-rated.
- Construction services – If a new accommodation building is being planned, then it would be worth considering a “design and build” contract in order to take advantage of zero-rating.
- Sales of donated goods (e.g second hand uniforms) can be zero-rated.
Helping schools save and earn with Solar PV
January 4, 2011
Solar electricity systems capture the sun’s energy using photovoltaic (PV) cells. The cells convert the sunlight into electricity, which is supplied into your school alongside your normal supply.
PV cells do not need direct sunlight. They produce electricity whenever it is light, even on cloudy and rainy days.
Solar PV is not new. The first systems were installed in the 1960s, and many of these are still generating free electricity today.
In order to meet international obligations to increase our production of renewable energy, the Government introduced the Feed in Tariff (FIT). This is an incentive payment, made to owners of solar PV systems, to encourage investment in new PV installations.
The FIT is surprisingly generous. Typically, UK electricity suppliers charge between 12p and 15p for every unit (1 KWh) you use. For every unit you generate from your own PV system, you will be paid 41.3p.
On top of that, the electricity you generate is still yours, and you can use it in the school for free – saving you a further 12p – 15p in not buying this from your supplier. Every unit you don’t use is automatically fed back into the National Grid, improving the nation’s carbon footprint and paying you a further 3p ‘Export Tariff’ for each unit.
And that’s not all. Both the FIT and the Export Tariff are Index-linked (to RPI) and tax free, and a school installation should also be able to benefit from significant capital allowances.
The benefits are enshrined in law. Payments are made by your electricity company and funded by increases in their normal customers bills – so people without solar systems effectively subsidise those with a PV installation.
With electricity prices forecast to rise by 8.2% a year, the free electricity generated by a PV system will become increasingly valuable, even more so beyond the guaranteed 25 year FIT scheme.
- Yay! I've just won a pair of CB40 cricket tickets for the #rosebowl thanks to @thewowcompany They're at #BizSouth tomorrow, go see them!
- School Procurement News Weekly is out! http://t.co/YmsYN2aC
- A successful man is one who can lay a firm foundation with the bricks others have thrown at him ~David Brinkley <like this one. Very apt!
- Office wall starting to resemble a shrine to @nigelbotterill Thanx @ReallyFlyBiz for my new poster! http://t.co/yvkGJWWS
- "@thewowcompany: To celebrate #BizSouth at #rosebowl, we're giving away 5 pairs of CB40 tickets to watch @hantscricket. RT to enter"
- My #ff this week is @BravoBCoT for his great work in the education sector and for maintaining his sense of humour during our Twitter debate!
