Are solar panels still worth the price?
"I'm interested in fitting out my home with solar panels, yet I've heard that the Government have reduced the subsidy they give to people who have them installed. Is it therefore still worth getting them?"
Several years ago, this would have been a very simple question to answer. With the feed-in-tariff (FIT) set at 43.3p for every kWh of energy generated by domestic solar panels, the latter were a very attractive prospect for anyone who fancied strengthening their green credentials.
Yet three years after the Energy Act of 2008, the FIT was cut by more than half, reduced to 21p per kWh.
This meant that the Government would pay only 21p for every kWh of energy people with solar panels generated.
As such, anyone with £10,000 to £12,000 worth of solar panels on their roofs would have to wait 18 years before they started recouping their money, as opposed to 10.
However, if 18 years weren't already long enough, the Government reduced the FIT once more a year later, before reducing it yet again in December 2015 from 12.47p to a new low of 4.39p.
Since actually installing solar panels on a home already comes with a considerable price tag, it's little wonder that some may see this drastic reduction as a deal breaker.
Nonetheless, this article is going to take a look at whether they're still worth having fitted, with special attention being paid to the particular circumstances under which they're still worth people's time and money.
To begin with, this question turns on several factors, all of which essentially reduce to the question of how much energy the panels produce and how much their owners spend.
First of all, solar panels can now cost anything from £2,500 to £8,000, depending on the size of the installation a customer chooses to have.
A 1 kW installation will stand at the lower end of this scale, while a 4kW system will stand at the higher end.
Obviously, an initial outlay of £8,000 is something that most people would want to avoid.
However, despite being only four times as large in terms of kWh, the 4kW system will, after 20 years, make a profit 1000% greater than that of a 1kW. This is something people ought to remember when deciding upon what size of installation to purchase.
Another important factor to keep in mind is the roof on which the panels will be fitted. This is important because the direction of the roof will determine how much sunlight they'll receive.
Current wisdom has for the most part decreed that roofs should ideally be facing south, since in the northern hemisphere these are exposed to the most light during the day.
This means that if your roof is entirely north-facing the idea of installing solar panels may be a complete non-starter, since you won't receive enough sun to make the investment pay off.
That said, some recent research has suggested that east-west - or more specifically west-facing - roofs are in fact preferable to south-facing ones.
This is because they receive a steadier stream of light throughout the entire day, in contrast to their south-facing counterparts which enjoy a marked spike around midday.
Such a spike is an especially acute problem in countries with lots of solar panels like Germany, which has occasionally produced so much energy around noon that its national grid system was unable to cope properly.
This isn't a problem for the UK though, so for the most part south-facing roofs are still probably the safest bet, if only because this is what the industry generally recommends.
More relevant for UK customers is the question of whether there are any obstructions in the way of the roof to be fitted with panels.
If there is an obstruction such as, say, a tree and it can be removed, then everything is fine. If it can't be removed, then, once again, the whole project may be doomed from the start.
Lastly, the angle of the roof is also another pivotal ingredient, with the ideal range spanning from 30 to 40 degrees.
Anything more or less would reduce the chances of creating an optimal right angle between the Sun and the roof, since the Sun bears down on the Earth at an angle between 60 and 50 degrees.
Aside from roofs and installation sizes there are other key details to weigh up.
In particular, the energy rating of your home is vitally important, since it will determine how much solar energy you feed into the National Grid as opposed to use yourself.
Also, if the Energy Performance Certificate (EPC) rating is D or higher, then the installer will receive the standard FIT rate which, as of October 2016, is 4.18p per kWh.
If not, then he or she will receive what's called the standalone rate, which is a rather negligible 0.57p
And just to clarify - this isn't zero pounds and 57 pence, but 0.57 of a pence.
Because this standalone rate is so minuscule, it's essential to have an EPC of D or above. By extension, it's also essential to upgrade the energy efficiency of your home if it doesn't meet this grade.
Having a higher rating is important even without possible variations in the FIT rate, since a more energy efficient home will require less heating and will allow more energy to be fed into the National Grid.
This is desirable because, as well as the FIT, people will receive an additional payment for supplying the Grid with their unused energy. For now, this payment - called the export tariff - is set at a rate of 4.85p per kWh.
Similarly, it's also worth considering your current electricity bills, since higher bills mean you'll save more money by generating your own electricity and earn back the installation sooner.
While this kind of information is useful in arriving at an idea of just what exactly is needed before embarking into the world of solar panels, a specific case study would perhaps be more instructive.
To this end, let's assume that your roof faces south, its slope is 35 degrees, and that there will be no obstructions whatsoever in the way of the panels.
Also, let's say that a 4kW system is installed, at a price of £8,000.
Next, we'll suppose that your monthly electricity bill is £50, which is the current UK average. In addition, we'll assume that your house has an EPC rating of D or higher.
Well, according to the Solar Energy Calculator provided by the Energy Saving Trust, you'd have the following yearly incomings.
From the FIT itself, you'd receive £152. Added to this, you'll save £62 on your fuel bill and you'd receive a payment of £90 for the surplus energy you didn't use.
This puts the annual total at £304. Using this to arrive at a long-term estimation of savings is relatively straightforward, since the FIT is locked in for households at the rate they had when they first installed their panels.
Accordingly, the total lifetime earnings of the example system would be approximately £7,300.
Here, "lifetime earnings" means 20 years of FIT payments as well as an extra five years minus the FIT to cover the guaranteed lifetime of a solar panel system.
In this case, since the system cost £8,000 to install, the installer would have a balance of -£700 after 25 years had elapsed.
|Initial cost||Total FIT payments||Total fuel bill savings||Total export tariff payments||Balance after 25 years|
In other words, they would lose on their investment, and realise that their panels weren't financially worthwhile after all.
As demoralising as this sounds, a few potentially comforting qualifications need to be added.
For one, £8,000 stands at the highest end of the cost scale when it comes to 4kW systems.
In many cases, customers may be able to find these systems for something closer to £6,000, which would mean that, in the example above, they'd earn £1,300.
Since the price of solar installations has generally been decreasing over time as the technology becomes more cost-effective, finding cheaper 4kW systems is becoming increasingly easy and likely.
Another potentially reassuring point is that, even though panel installers will provide a warranty that lasts only 25 years, panels can under good circumstances work for more than 40 years.
Of course, their performance will most likely begin to tail off after the first 25 years, although not by a drastic margin.
If, for instance, they begin working at an average of only 60% of their original capacity, they'll earn/save our example user an extra £1,515 between the 25th and 40th years of their life.
In fact, this figure could be considerably more, if only because electricity prices are always rising.
Still, using them beyond their guaranteed lifetime is an option only if you plan to remain in your home for several decades, or if you plan to pass it onto relatives.
If not, then a 25-year lifespan may sadly prove too narrow to give a sufficient return on the initial outlay.
This is unfortunate, because one of the biggest draws of solar panels is simply that they make for a cleaner, healthier environment.
For example, the aforementioned example system would prevent 40 tonnes of CO2 from being pumped into the atmosphere over 25 years.
To put this in some perspective, if all 27 million households in Britain were to have the same system installed, then the saving over the same period in tonnes of CO2 would be approximately 1 billion.
This would make for a significant step towards creating a greener environment, even if the estimated yearly output of CO2 for the entire globe is roughly 35 billion tonnes.
However, it would seem that with a stingier Government energy policy, the possibility of decreasing the UK's carbon footprint isn't enough to motivate most people to fork out several thousand pounds for solar panels.
Because of this, all we can really do is hope that their price keeps decreasing and their durability increasing, so that one day they'll save people money even without Government subsidies.