Far from setting, as one Sunday paper suggested this weekend, the sun is shining on the solar industry here in the UK and investing in solar Photovoltaics (PV) makes real financial sense.
Thanks to our Feed-in Tariff (FITs) scheme householders and businesses are paid for the green electricity they produce from solar PV and a range of other technologies. They are also paid for any excess power they export back to the grid.
The scheme has proved extremely popular, with solar power really taking off as an alternative source of energy over the past few years. Three years ago there were only a few thousand solar PV installations in the UK. Now there are over 420,000. As demand has risen and uptake has increased, the installation costs have fallen dramatically. Over the last two years the cost of solar panels has fallen by almost 50% – making this technology even more accessible to householders than ever before.
As the costs have dropped we have had to reassess how much we pay out under the scheme, to ensure we still encourage people to invest but don’t over-subsidise a scheme which is paid for by consumers on their electricity bills. That’s why we have reduced the tariffs on offer and have introduced a new system to keep them at the level which offers broadly constant returns.
In 2013, three years since the launch of the scheme, solar panels are still an attractive investment, offering a great rate of return. For example, the Green Deal Feed-in Tariff Quick Guide includes figures that demonstrate that a typical 4kW household PV system costing £7,000 would give an annual income/saving of around £860 and would pay for itself in 10 years – that’s a 10% rate of return, far higher than the best ISA on the market! It’s worth remembering too that both the generation tariff and the export tariff are linked to the Retail Price Index (RPI) meaning that your investment is shielded from the negative effects of inflation.
When thinking about whether to invest in solar PV, it is important to remember that the level of sunlight does vary across the country. Some houses get more sun than others, so clearly, in these cases; it may take longer to recoup the cost of the panels. This also means that for some (myself included, as I live in a ground floor flat!) PV is not a practical option.
Householders interested in getting solar panels for their home can speak to the Energy Saving Advice Service on 0300 123 1234 to find out how they could benefit from the FITs scheme and the steps involved in getting solar PV or other techs installed. As well as money for the electricity generated, householders may also be able to get help with the upfront cost of the kit under the Green Deal, and pay this back through savings on their bills.
Individuals who are interested in solar PV should rest assured that there is a robust consumer protection regime in place. All companies selling to homeowners must sign the Renewable Energy Consumer Code (RECC), which protects consumers against mis-selling. In addition, the Microgeneration Certification Scheme (MCS) also ensures that only reliable, proven technologies can be installed under the scheme.