Solar panels: what a bright idea

Fitting solar panels could make financial sense when the government pays up to 44p a unit for home-grown electricity

Gordon Miller and Emma Wells

Patrick and Frances Colquhoun are happy pensioners. Since they installed solar panels on the roof of their five-bedroom detached home on the outskirts of Cambridge last July, they have seen substantial reductions in their energy bills. Things look set to get even better for the couple, and others embracing the micro-generating revolution, after the government announced details last week of the rewards it will pay homeowners who generate their own electricity.
The Clean Energy Cash Back scheme — which will start on April 1 and apply to systems completed between July 15, 2009, and March 31, 2012 — introduces a series of so-called “feed-in tariffs” (FITs). These give homeowners up to 41.3p per kWh (kilowatt–hour) of electricity they generate from renewable sources, even if they use it themselves. That is about four times the market cost of electricity — and there’s a bonus 3p for each unit they export back to the grid. It is all part of the government’s effort to provide 15% of the UK’s energy through renewable means by 2020.
“The guarantee of getting an income, on top of saving on energy bills, will be an incentive to householders and communities wanting to make the move to low-carbon living,” said Ed Miliband, the energy and climate-change secretary. To make the scheme even more attractive, any income received will be tax-free.
The Colquhouns spent £12,348 on installing their system, of which £2,500 was covered by a government grant. The 1,600kWh of energy it is expected to generate each year should earn them £736 and save another £112 on bills — an annual return on their investment of more than 8%.
“I am renowned for being frugal,” says Patrick, 70, a volunteer with a special interest in healthcare in Romania. “The £2,500 grant definitely helped, and the promise of further payments made a big difference. The only snag is, despite generating your own electricity, if there is a power cut you can’t use it.”
Another motivating factor was the positive impact the panels had on the value of the house. “We will now be selling a house with an income,” he says.
Solarcentury (020 7803 0100, solarcentury.co.uk), the firm that initially advised the Colquhouns, estimates that the system could generate a profit of more than £19,000 over the next 25 years if electricity prices continue to rise at 5% a year — which may prove an underestimate, given the warnings last week from Ofgem, the industry regulator, of a looming energy crisis.
According to the Department of Energy and Climate Change, a typical three-bedroom home uses 3,300kWh of energy a year. A system producing peak power of 2.5kW on an optimum south- or southwest-facing site should generate an annual 2,125kWh, earning the homeowner £900 a year and saving a further £140 off their electricity bill.
Nor are payments confined to solar energy. Those with wind turbines, or even their own biomass plants, are also eligible — albeit at a lower rate.
Research by the Energy Saving Trust, which works with the government to reduce emissions, suggests that at least 800,000 householders could benefit from FITs. “The trust has appointed specialist advisers around the country to help people choose the right technology for their homes,” says Marian Spain, its director of strategy. Its website will have a tool to let people calculate how much they could earn (0800 512012, energysavingtrust.org.uk).
So, should you rush to bolt solar panels onto your roof or install a water wheel in your stream? “A lot of people will be jumping on the green-energy bandwagon,” says Tony Juniper, Home’s green adviser and a former director of Friends of the Earth. “Make sure the installation companies you are considering look at your whole house properly and give neutral advice on the best supplier to use. It’s also important that they address possible planning issues if, for example, you live in a conservation area.”
Correct certifications and good local recommendations are also vital. Solarcentury says you should pick brands that offer a minimum 20-year guarantee. Following manufacturers’ advice on cleaning and maintenance will keep the panels functioning properly for as long as possible.
As one financial incentive is given, however, another is being taken away. The £2,500 grant offered by the Low Carbon Building Programme, provided by the government since 2006, is set to end this April — although those who buy their panels before then could benefit from both schemes (visit lowcarbon buildings.co.uk).
Surprisingly, perhaps, real eco-pioneers, such as Neil Hammond, will not benefit directly from either scheme. Hammond, 51, and his wife, Amy, 34, moved to Glenelg, on the west coast of Scotland, in 2000 with the dream of living off-grid. Hammond, a trained engineer, has designed and built a micro-hydro generator, as well as installing solar panels and a wind turbine. “It’s been a labour of love,” he says.
Hammond does not seem unduly concerned that he won’t personally be eligible for the incentives — he is just hoping others will. He recently launched a new business, Wind Harvest, to take advantage of the expected boom in people keen to follow his example. “Thanks to feed-in tariffs, smaller-scale generation is becoming more financially viable,” he says.
cleanenergycashback.org
Show me the money
Retrofitted photovoltaic (PV) systems of up to 4kW for existing homes will earn the highest initial payments, 41.3p per unit (although this declines over time). Lower rates, up to 36.1p, apply to new-builds and larger setups. Payments for wind power go up to 34.5p, depending on size, and for hydro up to 19.9p. Visit decc.gov.uk for details.
A warm glow
Although the new feed-in tariffs apply only to electricity generated in the home, the government intends to extend the scheme to heating systems. The Renewable Heat Scheme, due to be introduced in April next year, will reward homeowners who install equipment such as air and ground-source heat pumps, biomass boilers and solar thermal panels (used for heating water). Under the plan, a ground-source heat pump installed in an average semi-detached house would generate income of £1,000 a year and lead to savings of £200 if used instead of heating oil. The tariff levels are calculated to give a 12% rate of return on investment.