Are you joining the ‘solar revolution’?
Energy minister Amber Rudd plans to ‘unleash a new solar revolution’ across Britain, proposing that millions more homes should have solar panels installed on their roofs. Currently, only around 640,0001 homes use solar power.
So what’s in it for homeowners?
It wasn’t long ago that solar panels were considered niche; they were something you’d only see on the roofs of the rich, environmentally conscious or tech geeks. Just a few years on, the price of solar panel installation has plummeted and has become a viable option for homeowners keen to reduce their carbon footprint and benefit from the cash incentives offered by the Government.
Today, even the largest 4kW system will only set customers back between £5,000 and £8,000, and could deliver returns of 10% per year2.
How can solar panels make you money?
Solar panels make and save you money in three different ways.
Firstly, by generating your own electricity, you’ll need to take less from the National Grid, hence your energy bills will drop.
According to the Energy Saving Trust, the average household’s annual electricity bill is reduced by £100 once using solar power, and this saving can jump to as much as £175 per year if households use their appliances whilst the panels are generating power.
The second saving is made from feed-in-tariffs, wherein the energy supplier for the power the solar panels generate pays a customer a set amount for each unit. The current feed-in-tariff pays 13.39 pence per kWh and it increases with the retail prices index (RPI) every year. Feed-in-tariffs can pay out over £500 per year.
Finally, there’s the export tariff, which is the payment you get for selling any units you don’t use back to your electricity supplier.
This payment is 4.85 pence per kWh and also rises with the RPI. In general, you’ll export around half of what you generate.
As long as you’re running a domestic system, these payments are completely tax-free. Feed-in-tariff and export tariff rates are locked in for a 20-year time period and you’ll continue to save on your energy bills beyond this.
Solar panels pay for themselves.
The average household will save £700 per year by switching to solar power. Therefore, it takes seven or eight years for the initial outlay to be paid off, and the money received after that is pure, tax-free profit.
However, it’s important to be realistic about your own solar system, as the amount of cash you’ll make will depend on the size of the panels, cost of installation, positioning of the roof, energy efficiency of the property, geographical location and when the panels are installed.
Is now a good time for solar panel installation or should I wait for it to get cheaper?
Feed-in-tariff incentives regularly go down, not up, so if you’re considering solar panel installation, it’s better to lock in a higher rate sooner rather than later.
The risk for many consumers is that the cost of solar panels could fall faster than the government incentives do.
Paul Barwell, chief executive of the Solar Trade Association notes: “After the feed-in-tariff was cut back in 2012, a lot of people thought that there wasn’t any point in having solar put up any more, but that is a myth; as the cost of solar has gradually come down, so has the feed-in-tariff, which means that the return on investment for householders is just as good now as it was back in 2010.”
As solar panels become increasingly popular around the globe, there is no reason why this trend won’t continue.
Although the Conservative government could reconsider whether incentives are necessary at all amidst such popularity, especially if using fossil fuel becomes too expensive for customers, Amber Rudd’s show of support for solar almost as soon as she was named energy secretary suggests that the Government is likely to commit to schemes designed to increase take up.
1 HVP, 2015. Renewables market supports proposals for ‘solar revolution’. [Online] Available at: http://www.hvpmag.co.uk/news/fullstory.php/aid/3355/Renewables_market_supports_proposals_for__solar_revolution_.html.
2 This is Money, 2015. Is now the best time to install solar panels? New energy minister promises to ‘unleash revolution’ as cost of installation plummets to deliver 10% returns. [Online] Available at: http://www.hvpmag.co.uk/news/fullstory.php/aid/3355/Renewables_market_supports_proposals_for__solar_revolution_.html.
[Accessed 30th June 2015].