Children and Young People Services
LBB Circular No: 080/11
Photo-Voltaic Solar Panels and Feed-in Tariffs:
Updated Advice for Schools

Organisation and Management

Administration and Management

Procedures
Audience:
Head Teachers of all Bromley Maintained Schools and Academies
Kingswood Centre/Grovelands Centre
Head of Specialist Support and Disability Services,
Phoenix Children’s Resource Centre
Action required:
None.
Timing:
N/A.
Also sent to:
Secretaries of Staff Associations
Councillor Ernest Noad,
Executive Member for the Children and Young People Portfolio
Councillor Brian Humphrys
Executive Assistant to Portfolio Holder (CYP)
Councillor Lydia Buttinger
Executive Assistant to Portfolio Holder (CYP)
CYPSMT
Mark Gibson, Internal Audit
Alastair Baillie, Sustainability
Jon Channon, Legal and Democratic Services
Dave Starling, Resources
Cliff Jones, Renewal and Recreation
Gerry Kelly, Renewal and Recreation
Jim Kilgallen, Legal and Democratic Services
Kevan Twohy, Resources
Type:
For information to the audience.
Description:
Update on Photo-Voltaic (PV) Solar Panels and Feed-in Tariffs.
Relates to:
Circular letter 037/11.
Date Issued:
19 July 2011
Contact:
Robert Bollen, CYP Strategic Property Manager (Renewal and Recreation)
Tel: 020 8313 4697 Email: robert.bollen@bromley.gov.uk
For reader’s use:
Children and Young People Services
LBB Circular No: 080/11
Photo-Voltaic Solar Panels and Feed-in Tariffs:
Updated Advice for Schools
Background
Children and Young People Services have been contacted by several schools requesting advice
concerning installing Photo-Voltaic Solar Panels (Solar PV) and the benefits of Feed-in Tariffs (FIT).
The Council supports the sustainable use of resources and the appropriate use of renewables and
similar technologies. However, it should be noted that this is a relatively new market and as such has
yet to establish accepted norms around its behaviour. This note sets out some of the areas which you
will need to actively consider to ensure you make informed decisions.
This Circular is advisory only and is not a substitute for schools taking advice from appropriate
agencies in the light of the specific circumstances affecting any intended scheme.
Prior to any activity, you need to establish your legal rights and responsibilities in relation to the
installation of Solar PV and, in particular, the role of the Council as either owner or landlord of the
premises on which the Solar PV are to be sited, and also as the relevant planning authority. In addition,
you need to observe requirements set out in the School’s finance and governance regulations, especially
in respect of obtaining value-for-money, ensuring health and safety, and correct accounting treatments.
It is strongly advised that you complete a business case which sets out what the school wishes to
achieve, the justification for the project, and considers issues relating to the outright purchase or lease
of any equipment and the payback periods this would involve. You should also ensure that any
installer/equipment you intend to use is certified by the Microgeneration Certification Scheme.
In practice, and before you proceed with any scheme, you will need to:
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obtain the consent of the Council (and/or Diocese) as owner or landlord (as appropriate);
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enter into pre-application discussions for planning permission;

ensure that the chosen course of action complies with relevant financial regulations and
governance requirements.
Initial guidance was issued in March 2011 (CYP circular (037/11) and this updated guidance provides
further information in relation to:
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Feed-in Tariff Reviews;
Procurement Options;
Planning Issues;
Legal and Financial (Property) Considerations;
Other Matters.
Information is also included concerning the Renewable Heat Incentive, which is likely to raise similar
issues but relates to subsidising renewable heat as opposed to renewable electricity.
Feed-in Tariff (FITs) Reviews
FITs were introduced by the Government on 1 April 2010 to encourage the uptake of technologies such
as Solar PV and wind power, as part of its commitment to renewable electricity generation.
-3The scheme benefits organisations which generate renewable electricity by making a fixed payment
based on the electricity they generate and use. This is “guaranteed” for 25 years and is paid quarterly.
Additional income may be earned for any surplus electricity which is exported to the national grid.
The Government has just completed a ‘fast-track’ review of the FITs regime (see table) which has
reduced the financial benefit of larger schemes (more than 50kW peak) from August 2011 but
maintains the relative attractiveness of smaller schemes. It should be noted that this is currently
subject to Judicial Review which may, or may not, affect tariffs.
The implication of this and the impact on payback needs to be considered in your business case
appraisal options.
FITs Tariff Bands
Energy
Source
Tariff bands
Original Generation
Tariff
Generation Tariff from:
1 August 2011 (p/kWh)
Duration
(yrs)
Solar PV
4 kW – 50 kW
41.3p
41.3p
25
Solar PV
50 kW – 150 kW
32.9p
19.0p
25
Solar PV
150 kW – 250 kW
30.7p
15.0p
25
Solar PV
250 kW – 5 MW
30.7p
8.5p
25
A further review is planned for later in 2011 which is likely to affect all tariff bands (including smaller
systems) from April 2012. This may result in lower payments being made for future schemes.
These two reviews mean that the issue has become more urgent for those wishing to take advantage
of the current tariff rates. The uncertainty regarding future income streams is likely to affect the deals
being offered by third party suppliers of Solar PV.
Some schools have been approached by third parties to lease their roofs/lease equipment;
alternatively. Some schools may wish to use their own funds to install Solar PV.
Procurement Options
There are three main procurement options (all of which require the Council’s consent as the
landlord/leaseholder and also planning consent).
1.
2.
3.
Outright Purchase.
Leasing (roof or other location).
Equipment Leasing (Hire Purchase Agreement).
1.
Outright Purchase
Assuming the school has the financial resources, this would normally be the best option as the
school will benefit from all of the electricity generated and all the FITs payments.

However, direct procurement means that the school will be responsible for organising
maintenance, inverter replacement, checking warranties and guarantees, etc (see
Legal/Finance section). However there will be more operational flexibility.

The Council does not currently have a framework contract for the provision of
renewables, but the Yorkshire Purchasing Organisation is developing a framework for
the design, installation and maintenance of Solar PV and other renewable energy
systems and schools may wish to investigate this. This framework means that
tenderers have already been vetted but your school should still conduct a minicompetition to select a contractor. More information will be provided on this when the
Framework agreement has been finalised (August).
-42.
Leasing
The school leases its roof or grounds to a third party, which raises a number of issues set out in
this Circular.
3.

Typically, the school will receive free electricity (from the PV array) and the third party
will usually receive all of the FIT payments - usually for the full 25 years.

Most PV leasing companies will cover the array maintenance cost for the lease period
(generally 25 years). Schools may need to verify with the Secretary of State that were
they to acquire title to the Solar PV at the expiry of the lease that this did not amount to
a ‘finance lease’.
Leasing Option Two (Hire Purchase Agreement)
A third party purchases the PV array and receives most of the FIT payment in the early years to
repay the cost of the equipment and to cover interest charges (like a Hire Purchase
Agreement). There may be flexibility about how quickly the school chooses to repay the
agreement (by contributing to the cost).

The school benefits from the electricity generated and an agreed percentage of the FIT
payment until the solar array is purchased outright. This can be on a sliding scale with
greater repayments via the FIT in the early years to minimise interest payments and
maximise the FIT gained in later years.

The school can also usually make a financial contribution to reduce the payback period,
minimising interest payments and maximising benefit over the life of the FIT.

In effect the school owns the PV array from the start of the arrangement (rather than at
the end as in option 2) and therefore needs to ensure that the cost of maintenance and
inverter replacement etc is covered in a contract or separately from school funds.

The process will usually be complete in between 7 and 14 years, depending on the
contract, but may be shorter depending on any funding contribution by the school.
Thereafter, the school benefits from the full FIT payment for the remainder of the 25 years.
Planning Issues
Irrespective of any other issues, it will be necessary to apply for a planning consent and consideration
should be given to the following:

application may be made by, or on behalf of, the third party supplier or school and will be
treated by the Council like any other planning application;

if the supplier makes the application, the school should read it carefully and check its accuracy;

in support of the planning application, consideration needs to be given to:
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pre-application discussions (to identify issues relating to the individual sites)
clear and cited reference to planning policies (local, regional and national)
scale and proportionality (is the array in keeping with the building?)
socio-economics (justification for the development: why renewable energy is required, etc)
landscape, ecology and archaeological Impacts
visual impacts
construction impacts
decommissioning;
it should be noted that planning permission does not provide, by itself, authority to proceed with
any works. If not implemented planning permissions normally expire after three years
-5Legal and Financial Considerations
Schools should consider the following issues:
1.
2.
Council Consent

Irrespective of whether the school purchases the equipment upfront or enters into a
leasing arrangement, it will be necessary to obtain the Council’s consent as the
landlord/leaseholder.
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For PV arrays of any significant size, and for any procurement option, it will also be
necessary to obtain planning consent (see above).
Certification
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3.
Financial Regulations
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4.
Both the equipment installer and the PV array must be approved and listed on the
Microgeneration Certification Scheme for FITs payments to be made. Schools are
advised only to use an installer or equipment which has been certified.
In accordance with schools’ financial requirements/other governance requirements, you
need to be able to demonstrate that you have obtained value-for-money.
Value-for-money is most readily demonstrated through a competitive procurement
process. Any other option needs careful consideration. The use of a framework panel
can demonstrate this without the need for further advertising.
Contractual Arrangements
In entering in to any agreement with a third party, you need to consider the liabilities taken on
by the School in the event of change, default or termination. It is likely that any early
termination of the contract will have significant legal and financial implications – some of these
are considered in more detail below.

Expiry: How long are you tied into the deal? Does this represent value for money?

Early termination by contractor: What will happen in the event of contractor default
during the lifetime of the contract or if the Contractor went bust?
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Early termination by school: What happens if you change your status to an Academy?
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Roof Repairs or Replacement: An array will last for a considerable period and it is likely
that at some stage roof repairs (planned maintenance) or replacement will need to be
carried out. If the Council Grants Agreement, it will expect the school to meet any
consequential costs and liabilities in terms of payments to the Contractor for loss of
potential income and, therefore, you need to seek clarity in its arrangement with the
contractor regarding installation and reinstallation of the array (and loss of any tariff).

Roof Damage: If the roof or the fabric of the building is damaged either during
installation, maintenance, or due to poor workmanship by the Contractor, the Contractor
should be required to make good the roof and deal with any consequential damage.

Damage: The school and the contractor need to be insured against any damage or
loss arising from the installation and operation of the Solar PV, including malicious
damage or injury.
-6-
5.

PV Array Malfunction: If the PV array malfunctions, the Contractor should make good
the panels. Schools are advised to verify that the stated performance standards are
maintained and what happens if they are not.
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Inverter: The inverter (which converts DC to AC current) is likely to have to be replaced
during the lifetime of the array. Financial provision must be made for this cost in the
agreement contract or separately.
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End-of-Life/Contract Disposal: Schools need to consider the implications of disposal of
PV units and associated infrastructure at the end of its useful life or at the end of the
lease or other agreement as relevant.
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Insurance: Are there any additional insurance liabilities that you need to consider?
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Maintenance: How will this be dealt with and how much will it cost?
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Academies: If your school plans to convert to an Academy, have you sought assurance
that the benefits and liabilities under the agreement can be moved from the
Council/Governing Body to the Academy?
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Bond: Do you need to secure additional comfort against the Contractor going bust and
being unable to perform their duties under this agreement? If equity providers are
funding the scheme are they prepared to guarantee the Contractor’s obligations for the
life of the agreement?
Finance Leases

If your school intends to enter a leasing arrangement, are you sure the agreement does
not constitute a finance lease (for which the Secretary of State would have to give
consent)? Amongst the matters to consider are:

Does the agreement transfer ownership of the panels to the school during, or at
the end, of the agreement?

Could you buy the PV array at such a favourable rate that it is certain to
exercise that right?
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Is the lease of the asset for the major part of its economic life?
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Would the rental payment (or deemed payment) discounted for inflation amount
to most/all of the fair value of the asset?
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Are the Panels so bespoke that only your particular school could use them?
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If you cancel the arrangement do you bear all the lessors’ losses and would this
be the balance of any rental payment?
Other Matters
1.
Structural Integrity: Has your roof been assessed to ensure it is able to support the PV array?
Some roofs may require structural reinforcement before installation.
2.
Roof Replacement: Have you considered when your roof may need to be replaced? The extra
financial liabilities for the removal and re-installation the PV array will not be funded as part of
any Local Authority capital or maintenance project and cannot be offset against a school’s
de minimis contributions.
-73.
Energy management: You should be aware that, at the current time, investing in energy
efficiency (eg insulation, new more efficient boilers) is a much better return on investment that
investing in renewables (although the gap may be expected to close in future).
4.
Carbon Reduction Commitment (CRC): The Council purchases CRC allowances for all schools
in Bromley and installing a PV array and claiming FITs does not reduce the Council’s financial
liability. If, in future, Academy schools become responsible for their own CRC purchasing,
installing a PV array (and claiming FITs) would still require allowances to be purchased.
Renewable Heat Incentive
Schools should be aware that the forthcoming Renewable Heat Incentive supporting renewable heat
technologies such as biomass, solar thermal, ground and water source heat-pumps is likely to raise
similar issues.
Contacts:
Robert Bollen, CYP Strategic Property Manager, Renewal and Recreation
Alastair Baillie, Environmental Development Manager, Environmental Services