The recent announcement that the Feed in Tariff for solar PV will be cut in December 2011 rather than April 2012 has caused consternation among many home owners, but what is the real impact going to be? Under the old system, domestic customers received a tariff of 43.3p per unit (kilowatt hour), index linked for 25 years, with the operating life of the solar panels guaranteed for 25 years as well. In practice that meant a £10,000 installation would pay for itself in ten years and then go on to earn the homeowner an additional £15,000. With the reduced tariff of 21p per unit the payback time increases to 18 years and the surplus profit drops to £3,800; not so attractive.
But before anyone shelves their plans for installing an array of solar panels on their south facing roof they need to think again. The calculations above are based on all things remaining equal. If the cost of solar panels were to halve, which is quite possible now that they are being mass produced in China, the payback time under the new tariff would drop to 11 years and the profit would increase to £7,700. An increase in energy prices would also have a significant effect on the arithmetic.
There is also something else to consider; if you sell your house a few years down the line, complete with solar panels, the lucky new owner will get a guaranteed income of at least £550 per year (including the savings on their electricity bill). That is very likely to have a positive effect on the sale price of your house, so it is not time to give up on solar PV just yet.
There are also a number of other renewable energy sources that could be a sound investment thanks to government subsidies, including small wind turbines, solar water heating and ground source heat pumps. Now is a good time to go green.
Craig Brown
Estate Agent
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