In 2011 the feed-in tariff was 43.3p per unit. It was the year when everyone started talking about solar, and PV systems were hailed as a smart new alternative to investing in banks and building societies.
Fast forward one year, and the tariff has fallen to 21p after a lengthy and confusing court case. Media interest has waned and news stories have mainly taken a negative slant, focusing on government’s mishandling of the tariff change and the resulting challenges for industry.
While many have been deterred by the coverage, EvoEnergy are working hard to spread the message that solar is just as wise an investment now as it ever was. Here are two quotes we prepared for the same property, one in June 2011 and one in April 2012:
|Date of quote||14 June 2011||17 April 2012|
|System size||2.94 kWp||2.94 kWp|
|Panels||12 x Sharp 245W||12 x Suntech 245W|
|Annual FIT payments||£1,099||£553|
|Annual bill savings||£159||£176|
|Return on investment||10.48%||10.51%|
In both quotes, EvoEnergy designed a 2.94 kWp system using 12 x 245W panels, both being almost identical in performance.
As you can see, the biggest changes are the feed-in tariff (FIT) payments and the cost of the system. While FIT payments have obviously fallen, system costs have dropped considerably too. Take both these factors into account and the return on investment has actually increased.
Current FIT rates are set at 21p per unit (kWh) for new investors, providing tax-free, index-linked returns that are guaranteed for 25 years. Not only do solar panels provide a secure income, they also reduce electricity bills.
Right now a 3.92 kWp system installed by EvoEnergy on a south-facing roof pitched at 30 degrees could deliver returns of 11.7%. If you include the system payback, that’s a tax-free, index-linked return of 7.8%. In comparison, a Halifax Fixed Rate ISA Saver will deliver tax-free returns of 4.5% over a five-year period.
EvoEnergy’s figures are on the conservative side, as they don’t take inflation or increases in fuel prices into account. The Department for Energy and Climate Change (DECC) estimates energy prices will rise considerably over the next ten years. DECC figures show that electricity bills have nearly doubled over the past decade, going from an average of £236 to £433, highlighting the importance of finding ways to reduce your bill.
The government’s SAP calculations used to predict electricity generation are also cautious, as they’re based on figures for Sheffield. Many solar PV customers, particularly those in the sunny south of the country, report generation figures at 10% higher than the estimates.
Beat the July cuts
As always, good timing is the trick to getting the best deal. On 1 July 2012 the current feed-in tariff rate is set to drop to between 13.6 and 16.5p per unit. It’s also expected that the duration of the scheme will reduce to 20 years, and the RPI linking may be changed to CPI or removed altogether.
The government is set to make an announcement this week on what the actual rates will be, and depending on the outcome the industry could see a rush to get installations before July.
For a free quote, or to find out whether your home’s suitable for solar panels take a look at the uSwitch guide to the cost of solar panels.
Or if you don’t want to buy solar panels, you can also take advantage of free installation which could save you up to £176 on your electricity bills a year.