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Solar PV Panels Cost & Feed in Tariffs Explained

The UK government recently introduced Feed in Tariffs which mean that you can receive payments for generating electricity from photovoltaic solar (PV) panels installed on your roof. You certainly won't make lots of money in a short period by installing solar panels, but it can be possible to make a good return over the 25 years that the Feed in Tariff is guaranteed to be paid for.

For a fair evaluation you need to compare the benefit of Solar PV to leaving the cost in a savings account for 25 years. Current interest rates for savings accounts are around 3-4%

Now we'll look at what would happen if we invest £8,000 in buying a Solar PV system. This amount will buy a system with around 4 Kwp capacity.In an average UK location this system will produce around 3500 Kwh's (units of electricity) per year.

Assuming a 4 Kwp system installed before July 2012 you will receive a Generation Tariff (FIT) of 3500 x 21pence = £735 in the intial year. You will receive this payment for ALL the generated electricity whether you use it or export it to the grid.

For the Exported Electricity you will receive an extra payment know as the Export Tariff, this is 3.1 pence and is paid on an assumed ratio of 50%. Your energy supplier assumes you will use 50% of the generated electrcicty and that you will export 50% to the grid. This is why you receive this 3.1 pence for half of the electrcicty your Solar PV system generates, your Export payment for year one would be £53.

There is also the benefit of FREE electricity, assuming you use 50% of the generated electrcicty and assuming you pay 12 pence per unit (Kwh) from your supplier this gives you a saving of £210 in year one.

The total financial benefit from the system is £998 in the first year (plus any interest earned in that year). The Feed In Tariff payments are Retail Price Index linked to will rise every year, elecricity prices are predicted to rise faster than inflation so this figure too will rise, we also need to take into account how much interest we could earn from a savings account.

If we take these factors into account and assume RPI is 4% and energy prices rise by 6% per year and then run the calculation we get a return of approximately £32.235 over 25 years, Tax free.This is equivalent of a flat rate of interest of over 16.1%. 

A Small amount does need to be allocated to maintenance-The inverter is likely to need replacing/repairing over the 25 years of the Feed In Tariff, Even so excellent financial gains can be made by installing Solar PV.

It is possible to improve on the figures above depending on where you live (where your Solar PV equipment is installed) in the UK, for example the further South you go the more energy your Solar PV system will produce. There is also the cost of the System, we have used an assumed cost of £10,000-it is possible to install a 4kwp system for under this figure.

The larger the system (up to 4 Kwp), the more the return, so you should consider installing the largest system possible subject to budget and space!

Solar PV (photovoltaic) installations are now a viable proposition for domestic households.

With a guaranteed 25 year income installations can pay for themselves in under 10 years, with any revenue generated thereafter being pure tax-free profit.

Whilst it's easy to generalise these figures every installation and circumstance is unique and for that reason it's important to research the viability of solar PV for your own specific requirement.

Contact us to calculate your individual Feed in Tariff & payback schedule.

Benefits of Solar PV:

  • Energy from the sun generates electricity.
  • Feed in Tariffs pay for each unit generated.
  • Save on bills by using some electricity.
  • Sell surplus electricity back to the grid.
  • Protect yourself from rising energy costs.
  • Earn & save hundreds of pounds each year.
  • Up to 10% tax free return on investment.
  • Increase the value of your property.
  • Low maintenance, durable and completely noiseless.
  • Reduced CO2 emissions by up to 1 tonne.

Domestic systems cost between £3,000 and £4,000 per kWp installed, plus a fixed cost of around £2,000 to £3,000. The difference in the kWp cost depends on the type of panels used and whether they are integrated with the roof tiles. Most domestic systems are between 1.5kWp and 3kWp, so an average 2kWp system will cost in the region of £8,000 to £10,000.