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Solar Panels: Separating Fact from Fiction

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The sun: lighting our way to work and saving us from rickets since life began. Now it’s offering us more, a way to redeem our dirty ways with clean, green energy but also a financial reward to boot. 

Article by Christie C. 

The collective knowledge about investment in solar panels is riddled with muddled information and misunderstandings. From the general public looking to invest to people heavily involved in the alternative power industry the false rumour that the days of good returns is abound.

Many renewable energy companies are going into administration due to misconceptions that it’s now a bad deal. It’s time to get the facts straight before the bubble bursts completely and solar companies have to be tagged and tracked to stop them becoming extinct.

It’s easy to be easily confused by confusing things

Laden with jargon, it can be difficult for the interested lay-person to untangle the facts. News of the financial gains and then the subsequent drops has left many feeling that the solar panel bandwagon was moving too damn fast. From ‘Feed in Tariffs’ to ‘kwh’ it can be easy to get lost, still choking on your own carbon emissions.

Everyone has an opinion and, without wading through pages of information, it can be difficult to know who to believe.

Aren’t they for hippies in hemp trousers and chickpea necklaces?

Solar PV (photovoltaic, in case it comes up in a pub quiz) is a form of renewable energy, and therefore has significant green credentials. However you don’t have to love lentils to reap the benefits on offer.

Subsidies are in place to encourage investment in solar PV and the financial rewards are better than those from typical investments. However for most, familiar terms, such as ‘bank’ and ‘interest rate’, are easier to deal with, even though in these dark times of recession they might not be able to offer the best returns.

The tariffs, however, can be easily explained and understood. Your energy company will pay a feed in tariff (FiT), currently at 15.44p, for the energy you produce (Kwh).

Further still, you can use this energy to power your popcorn machine and egg-steamer, proving much more efficient than those mice on treadmills. As the price of power from fossil fuels continues to rise, this can result in significant savings on your electricity bill.

Why stop there? There is also an export tariff, which means that you will receive money for the energy that you don’t use. You can even choose which company in case you have a grudge against one in particular, after an exceptionally annoying call centre incident.

hasn’t the tariff-boat already sailed?

All bubbles burst. I know it’s hard to hear. Father Christmas doesn’t exist and that wrinkle cream is not going to work. It can’t be denied that there was a time when investment in solar PV would throw money back at you, but in return for a much higher up-front investment. The rewards haven’t disappeared.

Far from it, in fact. The money gained from the boom has meant that technology has improved and the price of systems has plummeted. So even though the feed-in tariff has been reduced, the initial investment has dropped significantly.

what exactly does this all mean?

As a dead-eyed actress would say, ‘here comes the science.’ Well maths really, but never mind.

Since 2010 prices of solar PV systems have dropped from roughly £18,000 to around £7,000 for a 4kWp system.

Installed on a south-facing house, with no shading, you would pay approximately £6,288, including VAT. Producing 3,880 kWh annually would generate the following returns:

  • £599.07 feed-in tariff
  • £89.30   export tariff
  • £279.17 savings on your electricity bill

(Data from SunGift Energy using PV Sol modelling software.)

This is a total of £965.54 per year from your PV system, which doesn’t include that happy, bubbling feeling of reducing your carbon footprint.

From your initial investment this would equate to an annual rate of return of 15.36%. To put this into context those banks that you are so attached to can only offer you, at best, 3.1% for five-year fixed rate savings, or a 2.85% 3-year fixed ISA.

Solar PV tariffs are index-linked and guaranteed for twenty years. Using the above conservative estimates you will pay back your initial investment in under seven years and continue to make roughly £1,000 profit for the next 13 years. And the cherry on the cake is that this is all tax-free earnings. Yeah, stick it to the man!

Politicians have shifty eyes. Won’t the tariffs keep dropping?

The tariffs you receive will be guaranteed for long enough to recoup your money and start to see a clear profit. The trend suggests that an increase in solar installations will mean a reduction in the feed in tariff. However, the subsidies are in place to increase the uptake of renewable energy until the point is reached when it is as cheap, or cheaper, than national grid power.

Hold on, this is a purchase not an investment.

Although you’re money can’t be taken out to spend on trinkets think of it as a seven-year investment that will provide you with gradual income and then begin to make you profit. That’s better than a new sofa, isn’t it?

Wait, I haven’t seen the sun in months.

We don’t live in the sunshine state but thankfully the improved technology of solar PV means that only daylight is needed to generate electricity, not sunlight. Also, despite the fact that south-facing houses will generate the most energy, east and west-facing houses can all stand to make decent returns.

The Energy Saving Trust’s solar energy calculator will help you estimate the income you’ll receive. However renewable energy companies are champing at the bit to get your custom and so will evaluate your house for free and give you an accurate quote.

The rates of return for solar PV are the best they’ve ever been. It’s that simple. With this knowledge you can wield the power of the informed to make your house and your money work for you, while helping the country meet its carbon emissions targets and move towards a more sustainable energy future. I’m just saying…

Are you a solar PV devotee? Do you have any hint or tips on finding the best installers? Share your thoughts here.

(NOTE: Please note that the figures above are set on a fixed rate basis and do not take into account, interest on loans, the effect of inflation on FiT tariffs, any change in the cost of electricity or any decrease in system performance. The performance of solar PV systems is impossible to predict with certainty due to the variability in the amount of solar radiation from location to location and from year to year. This is given as guidance and it should not be considered as a guarantee of performance.)

Christie has become an authoritative voice on everything and nothing, during a career path that resembles the twists and turns of a badly-written mystery novel. Welcome to her world, viewed through the smeary glass of bewilderment. 

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