SHU Role Play (23rd March 2020)

Introduction

This thread contains the learning materials and interactive discussions for the Future Energy Ltd role play taking place at Sheffield Hallam University on 23rd March 2020.

The opening/closing meetings will take place online at:

https://fsi.whereby.com/plenary

Future Energy Ltd

Future Energy has developed self-build renewable community energy technology. Now the project has completed, a housing association would like to contribute roof space (on blocks of flats and semi-detached homes) and internal infrastructure (piping and plumbing etc.). This would provide sites to implement the new solar panel technology created by Future Energy Ltd. There are community groups who want to contribute labour to install the self-build systems in housing association properties.

You are a member of Future Energy Ltd, which is structured as a FairShares Company. You are being asked by the housing association and community groups to supply panels and share engineering skills to make the panels efficient. They are proposing that all partners contribute time and technology without making ‘up-front’ labour charges, and that Feed-In Tariff payments will be shared when energy is generated.[1]

Estimated Benefits, Profits and Surplus

A consultant has worked out that a household participating in a scheme will – on average – save £100/year in energy costs and generate a payment of £250/year. The first £170 is for generating electricity, and the other £80 is for exporting surplus energy to the national grid.

The housing association in this project has 20,000 properties, but only 7,500 are ‘south facing’ and fully suitable for installation. A further 2,500 might be suitable if the housing association does some work before installation work begins. This means that the scheme can save at least £750,000 a year in energy costs for residents and generate at least £1.85m of additional revenue to be divided equally between the housing association and Future Energy.

Future Energy would normally charge £5,000 per installation, but after training community members in the self-build technology, it estimates the cost will drop to an average of £2,000 per installation (for the solar panels themselves and transportation costs). Currently, the cost of producing solar panels is falling at about 30% every 5 years.

The consultant estimates that each household will generate an average 3000kWh of energy, cut CO2 production by 33 tonnes and earn £7,000 in revenues over its lifespan (20 years). Of this amount, £2,000 goes to the household in energy cost savings. This leaves £5,000 to be split between the housing association and Future Energy Ltd.  The total earnings (based on 7,500 homes) would be a half share of £37.5m (£18.25m).

However, Future Energy Ltd would spend £15m in materials and transport costs so the nett return is between £3.5m (7,500 homes) and £4.38m (10,000 homes). You will need to raise working capital of £2m from your (social) investors to make the scheme work. As a FairShares Company, the first 30% of surplus (£1.05m) is allocated to reserves. The rest is split between Investors (30%), Employees (35%) and Users (35%). Over the life of the project this would generate:

1.      Between £0.74m and £1m in earnings for Investor Shareholders (30% share of nett surplus).

2.      Between £0.86m and £1.17m for both Labour and User Shareholder (35% share of nett surplus).

[1]    Gov.uk, ‘Feed In Tariffs’, https://www.gov.uk/feed-in-tariffs;
Energy Saving Trust, ‘Solar Energy Calculator’, http://www.pvfitcalculator.energysavingtrust.org.uk/