Around 655,000 homes – less than 3% of the UK’s housing stock – have solar panels, but if government plans to slash the industry subsidy go ahead, further installations could be halted, campaigners are warning.
The solar industry, backed by at least 35 MPs, is proposing an alternative plan to encourage further installations while adding just £1 to the average electricity bill. But amid fears their plea will fall on deaf ears, householders are rushing to take advantage of feed-in tariffs (Fits) while they last.
Is installing solar panels still worth it?
Yes, though you’ll have to move fast: in January, the government is set to slash the Fits it pays to households installing photovoltaic panels. Currently it pays 12.47p per kilowatt hour, which translates to about £440 a year for someone who installs the maximum 4kW system.
Households get to use the free electricity generated, which can be worth around £100 a year with some behavioural changes, eg using washing machines on sunny days etc. They also pocket the export tariff (payments for units sent to the national grid) worth around £80 a year. If you can get a system up and registered with your power company before 31 December, you can expect to receive around £620 a year for the next 20 years (tax free and rising each year in line with inflation).
Note that these figures are based on those published by the Energy Savings Trust and are only averages. Incomes from solar vary significantly according to PV system and local conditions.
What’s the cost/payback?
When solar first appeared in the UK, large installations typically cost around £20,000. Today, a decent 4Kw system from a reputable installer will set you back £6,000-£7,000 depending on the roof and ease of access. Smaller systems are cheaper, but in essence the promise is this: pay £6,000 up front to receive around £600 a year for the next 20 years. So after 10 years you’ll have recouped your outlay; from then on you’re generating income. After 20 years the Fits stop, but your panelswill still produce electricity, and an income of sorts.
What sort of roof do I need?
The ideal is a perfectly south facing, entirely unshaded roof at a pitch of around 45 degrees, although homes that deviate from the ideal still generate reasonable returns. Also, the further south the better. To gauge your likely income use the Energy Savings Trust’s calculator.
In order to qualify for the quoted Fits your home must have an energy performance rating of band D or better. Frankly, it’s worth it (financially) if your home has a lower rating than D.
Why do I need to act fast?
Because the government no longer wants to subsidise renewable energy. In August, the Department of Energy & Climate Change announced a consultation into the subsidy and proposed a new feed-in tariff of just 1.63p/kW – an 89% cut – starting on 1 January. This is despite admitting this week that it does not have the policies in place to meet its EU target of 15% of energy coming from renewables by 2020. However, the government must formally announce any rate change 40 days before it is implemented, meaning all eyes will be on Decc next week.
The cut looked a near certainty until it emerged this week that there have been 55,000 submissions to Decc’s consultation – mostly from those in the industry who are furious it is about to be obliterated as a result of this change. Those managing the consultation are duty bound to read them all. The latest thinking is that the cut will be delayed until mid January, or even longer.
But it’s clear that those wanting the current Fits need to have solar installed and registered by 31 December.
Will the rate cut kill solar financially?
Pretty much, yes. The reduction would see a large household’s Fit payments fall from £440 a year to £55. The export tariff, set at 4.85p/kWh and worth £80 a year, should remain, largely because the consultation made no proposals to change it.
The potential savings of £100 a year from the free electricity remain irrespective of any change. But will most households be prepared to spend £6,000 up front for a combined income/savings of £235 a year, albeit for 20 years? It seems unlikely.
Is January a realistic deadline for installation?
It will be tough, but it’s possible. Some well regarded installers are struggling to cope with demand as customers rush to grab the deal ahead of the cut. Adrian Clayton, sales manager at Hertfordshire installer Chelsfield Solar, told Money this week that his firm is running a waiting list and looks set for “a very busy Christmas period”.
For households who want to beat the deadline, the YouGen website is a good place to find reliable installers.
Clayton says it is not just the Fits cut that is driving demand. In October, the government announced it was also cutting the tax relief that community solar projects – those typically put on schools and village halls – have until now enjoyed. Community energy was added to a list of activities excluded from receiving Enterprise Investment Scheme tax relief. The axe falls on 30 November and installers have been rushing to finish projects ahead of the deadline.
Clayton says around six community projects his firm was working on are now “highly unlikely” to go ahead because of the tax relief changes.