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Guest blog – Solar panels are still a great investment

Will Feed-in Tariff changes put you off?

feed in tariffs

Feed in tariffs are the amount you get paid for the energy you generate

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
Cost £12,002 £6,932
Annual FIT payments £1,099 £553
Annual bill savings £159 £176
Annual total £1,258 £729
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.

Other considerations

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.

For more about EvoEnergy see their website for details.

  • I was lucky, because I had my panels fitted at the beginning of February. Due to the government’s defeat in court, I was placed on the original 43.3p tariff, with an inflation-linked increase already notified to me. However, I made my decision on the assumption I would be stuck with the lower 21p tariff. I calculated that I would still be getting a far better return than if I left the money in the bank.

    Incidentally, EvoEnergy did my installation. I chose them because I felt that their quote, although the most expensive of the three I received, was the most realistic in terms of projected benefits. The other two quotes were citing crazy, unrealistic rates of return (15% or so) and also were saying they could install twice as many panels as my roof could hold. On that basis, I feared I was dealing with cowboys.

    I am not under any agreement with EvoEnergy to promote their service, and I will not get any payment for this posting. I simply wish to recommend the company on the basis of my experience.

  • M Greenwood

    Looks good, but they have missed out what the maintenance costs are,
    and the life expectancy of the panels.
    What is the payback then?

  • Lee

    To those unfamiliar with the whole solar experience. The government will only pay the current feed in tarrif rates to ‘domestic’ properties if the system is under a maximum of 4 KWh. Therefore the returns quoted in the above article was very close to that figure.
    I had 6 x 250 watt Suntech ‘Black Pearl’ panels which gave me a ‘peak’ (emphasis on the word peak-not constant) power output of 1.5 kWh (excluding the panels extra 5 % positive tolerance). Don’t forget none of these quotes take into account general system ‘losses’ of around 20%, and you can see your returns start to drop.
    Having carefully researched Solar for about a year, I wasn’t taken in by the sales hype and am very realistic about the returns in terms of electricity produced and any monies back from the government or energy supplier.

    Unless you have a very large roof and I do mean large, you wont get a peak 4kw of power at all. From mid February 2012 to end of July 2012 my 1.5 Kw system has produced 680 Kw.

    Would I go for Solar still, probably yes, anything back albeit a few pence in my pocket or knowing your appliances are being run ‘free of charge’ during the work week is worth it to me. Oh by the way I have a solar switch to power up my immersion in my hot water tank- yes that’s more stored energy to use when I get home.

    Do you buy a second hand car which will depreciate from day one or spend the same amount on solar? I believe solar would win.

    • Nicolas Frankcom

      Great comment! The point you make about power output is a good one, the size of your roof and what part of the country you’re in will impact how much you can generate, making it vital to get a number of quotes from reputable installers.

  • Lee

    Response to M Greenwood:
    Maintenance costs are low.
    1) Most inverters have either 5 yr to 10 yr warranties. If anything is going to go wrong it’ll be the inverter. If you buy cheap you’ll pay twice. Go for a good inverter (Sunny Boy= German).
    2) The panels just sit there and have no maintenance costs, the rain washes the surfaces clean.
    3) Virtually all panels will degrade to 80% efficency after about 25 years. Some do it in staggered stages every ‘x’ amount of years, others it’s more of a linear drop ie slowly over time.
    Expect 100% for at least 5 years or so.
    4) Payback, the thorny question. Dont get too hung up on this one, just enjoy what its doing for you. Does anyone ever ask the same question when they buy double glazing or loft insulaltion- I doubt it? Remember Soalr panels are an active product, double glazing et al is a passive product.

    Payback will depend on your total costs versus how much sun (or effective light) you actually get.
    Payback can be between 7-15 years or thereabouts depending on number of panels/system size/cost/sun output etc.
    No one knows what the future holds and you may not be around anyway so why worry?

    I view it as for every kilowatt my panels produce is one less kilowatt I pay for to the energy supplier. The panels are mine and I’m not renting my roof to a company for them to get the FIT benefits for 25 years.

    Just fit them and enjoy.

    I hope this helps?

  • Lee

    Even reputable companies can only usually quote from a set of guide lines. They can only say what the ‘peak’ output is of any one type of panel. In all honesty it’s the actual fitters who will tell you how many panels will fit on your roof, no matter what the salesman or ‘technical’ guy says. Not fogetting the 300mm you have to leave all round your roof area for wind uplift. What you think appears to be a large roof area actually becomes quite small once those panels are fitted.
    For an average 3 bed semi with panels on one roof you will be very hard pressed into getting that ‘holy grail’ of 4 kilowatts (peak). For me it worked out to be a 1.5 Kilowatt system.
    Without getting swamped by all the gumpf, use the benchmark 250 watt panel times how many will actually fit = systems total peak power.

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