A blog post

Why installing solar power looks increasingly attractive for homeowners

Posted on the 25 July, 2011 at 10:30 pm Written by in Blog, Feed In Tariff, Finance, Government, Incentives, Quality and service

An article in The Guardian over the weekend suggests that falling costs plus generous feed-in tariffs mean return is higher than ever – but payback will fall in April 2012

Are you a homeowner with some spare cash? A 20%-25% collapse in the price of rooftop solar power units in recent months has turned the government’s feed-in tariff scheme into one of the most lucrative financial propositions for households with the right sort of property.

The scheme was introduced in April 2010, when the Labour government introduced generous feed-in tariffs to encourage households to install solar photovoltaic systems. Back then, anyone spending, say, £13,000 up front to fit a 2.5kWp system to their home was paid 41.3p per kilowatt hour (kWh) generated – enough to earn them a typical annual income of £900 a year in payments, on top of a £140-a-year saving in reduced electricity bills.

t was described as a good investment because payments for each unit of electricity generated were guaranteed for 25 years, paid tax-free, and set to rise each year in line with inflation.

If you were planning to stay in your home and had a suitable roof (unshaded, at a pitch of about 40 degrees, and facing between south-east and south-west), the main question was how big a system to install – assuming you could raise the installation costs. The bigger the system, the greater the financial return.

However, you shouldn’t worry if you put off doing anything because it has emerged this week that waiting has worked in your favour.

Solar experts say that as a result of the installation costs coming down, the investment value of the scheme has become even better. These lower installation costs, an inflation-linked increase to the feed-in tariff payments and the prospect of rising electricity prices all mean the guaranteed returns are now above 10% a year, depending on how you calculate it. And if you install before next April – when new payment tariffs look set to come into force – you are guaranteed the tariffs for the next 25 years at the old rate.

David Houston, Managing Director of Chester based PV FIT, says that “costs of solar panels have dropped dramatically since April 2010 when the feed in tariffs were launched. A year ago we were installing a 4kWp system for £15-16,000 however now we are less than £13,000 including VAT. This means a potential return on investment of 13% per year!”.

The fall in costs can be attributed to higher volumes of solar panels being installed in the UK, as well as falling tariff levels in Germany. One solar expert suggests that PV manufacturers set their prices according to the level of subsidy available.

Feed in tariff levels are not likely to remain as generous, with tariffs due to drop by 9% or more as of April 2012 to counteract the dramatic cost reductions seen to date.

Houston goes on to say “having been involved in the solar energy industry since 2003 I am used to seeing government tampering with incentives if they are seen to be too popular, or generous. We have recently seen the coalition implement a ‘fast-track review of feed in tariffs for larger scale installations’ (above 50kW), so there is no guarantee that smaller scale systems will not be put under the microscope before the end of 2011″.

The one guarantee is that existing solar installations will not be affected, with any changes only affecting new adopters. This will mean there will likely be a ‘solar gold rush’ with prospective solar generators rushing to install a photovoltaic system before any FIT reduction comes into effect.

“The current number of solar installations in the UK to date is only the tip of the iceberg. There are a vast number of residential and commercial roofs that are suitable for solar energy systems up to 50kW. The potential for growth in employment and manufacture are astronomical due to solar being one of the easiest renewable retrofits available as it inhabits your roof rather than your rooms. In addition, fuel prices are only going to continue rising based on 2 of the ‘bog six’ raising their prices for electricity by as much as 16% recently” says Houston.

PV FIT offer a free no-obligation solar survey over the phone after which you will receive a formal fixed price quotation via email. Just call 0344 567 9032 or request a solar survey to find out how much you can earn from feed in tariffs.

reply