Are Solar Panels A Good Investment?

Solar Panels are still a good investment providing you shop around to find the best deal. The feed in tariff reduction due to come into affect after December 12th 2011 will have an impact on the industry and jobs will be lost. Consumers can still make 5-7% return on investment by finding installers who are offering cheaper deals. We recommend researching the market thoroughly.

What do you stand to save?

Firstly, it must be noted that solar panels cost around £12,500 to install which is a considerable sum of money for anyone. It is estimated that an average household would save £140 a year on electricity bills once the panels had been installed. The fact the energy regulator, Ofgem, forecast standard electricity prices to rise by 20% by 2020 also adds to the appeal of solar panels – any money saved on such bills must be a good thing. However, this saving alone is not enough to label the panels as a good investment. The initial outlay is not going to be recovered until several decades have passed.

Feed-In Tariffs

However, a government scheme, launched in April 2010, paints a much better financial picture. The scheme, known as Feed-In Tariffs or FITS, pays sonar panels owners for the electricity they produce, even when they use it in their own home. The scheme offers 41.3p per unit of electricity produced and a bonus 3p per unit for any unused electricity which is returned to the national grid. Approximately £850 a year can be made following this scheme. It gets even better. The UK government has promised this scheme will last at least 25 years and that all payments will rise with inflation and, most importantly, be tax free. In all, over the 25 years a profit of £42,500 can be made.

Energy Saving Benefits

The UK is set to face increasingly high energy costs over the coming decades, as climate policy tightens and oil prices rise. Figures from the Department of Energy and Climate Change show electricity prices are expected to rise 40% over the next 10 years. Energy companies are legally bound by the Government to pay out Feed in Tariffs for 25 years. This money has to be recouped from somewhere and energy companies are likely to raise their prices even more to cover these pay outs. Energy customers who do not install solar panels will effectively be subsidising those who do.

Are there any drawbacks?

Of course it cannot all be good news. Whilst the UK government has promised to run the scheme for 25 years, subsequent governments could change the payment system so it becomes less profitable. It should also be noted that solar panel systems may come down in price as their popularity grows meaning paying £12,500 may not seem like a good deal in later years. However, on balance with the promise of a substantial profit and savings on existing electricity bills there is little doubt solar panels are indeed a good investment.

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