Feed-in Tariff and Renewable Heat Incentive
Changes in legislation, especially to the value or availability of the Feed-in tariff and the Renewable Heat Incentive may affect the Co-operative’s income. In particular the FIT and the RHI may be subject to change at short notice. BHESCo has included the most recent tariff in our finance models for their projects. The government has been consistently reducing the Feed-in tariff subsidy, to the extent that it ceased for new projects on 1 April 2019. We expect that a similar reduction pattern will apply to the Renewable Heat Incentive payments
Mitigation: All agreements are based on the subsidies to be received, ensuring that the agreement term is sufficient for the Co-operative to meet its required rates of return to pay the interest to shareholder members. BHESCo has received Pre-registration approval from OFGEM for FiT for the relevant projects in this share offer. This pre-registration is valid for 12 months.
Projects encounter delays
There is a risk that projects are not installed in time to meet the pre-registration deadline, meaning they will not qualify for FiT payments.
Mitigation: BHESCo have agreed a realistic timeline with our installers such that the projects should be completed by the end of 2019, well inside the 1-year deadline granted by the pre-registration.
Future energy prices
Assumptions of future energy prices used in the Financial Projections may turn out to be incorrect.
Mitigation: BHESCo make estimates based on best estimates informed by historical price fluctuations and market conditions. They also consult industry experts for their opinions. Any shortfall in income arising from a lower than anticipated energy price may be reflected in changes to the agreement term or monthly payment. In cases where the monthly payment is fixed, sufficient margin has been built into the contract to cover this risk
Atypical short-term weather conditions and equipment loss or damage could affect expected levels of energy generation and therefore income, although overall patterns outside anticipated parameters are unlikely.
Although modern solar panel installations are extremely reliable, electrical or other failure can interrupt the generation of electricity or the distribution network and lead to unexpected costs and interruptions of generation.
Mitigation: Manufacturer warranties and guarantees offer some protection. BHESCo will also insure this risk to the extent possible. BHESCo monitors the performance of their systems remotely to identify shortfalls in energy production as soon as possible to take action to rectify any problems. BHESCo also employ technology to reduce the impacts of shading where needed.