Solar Panels and FIT

As I mentioned in my last post, we've just had solar panels installed!

Because of Greg Barker MP's idiotic decision to scrap the Feed In Tariff with only six weeks' notice - we've had to get this done in rather a rush.

Thanks to Angi and Philip at Sunny Future Solar, we were able to get our system installed before the deadline. Yesterday, we received confirmation that panels were installed and working and had generated their first 15W of electricity!

Total cost of installation: £12,000. Ouch!

How Making Money From Solar Works

Once solar panels are installed, there are three main income streams.

1. Reduced electricity bills - when the sun is shining, your toaster and computer are powered by Earth's yellow sun.
2. Any electricity you generate but don't use is sold back to the grid* at 3p / kW.
3. For every kW the panels generate, you are paid 43.3p.

*Rather than actually measuring this, it's assumed that you only use half the electricity generated.

All the prices are index linked (so they should rise with inflation) and guaranteed for 25 years. Any money generated is tax-free.

The Economic Reality

There are two main sites which will tell you how much energy you are likely to generate over the year. The calculations are based on where the property is, which direction it faces, inclination of the roof, etc. The Energy Saving Trust Solar Power calculator estimated around 2,500 kWh per year The Europa Solar Calculator estimated around 2,700 kWh per year.

Even at the lower estimate, that's ~£1,100 per year from generating the electricity - and a further ~£40 from selling electricity back.

We're in a slightly unusual situation in that we've installed the panels on our rental property. So our tenants will be getting the benefit of reduced electricity bills.

At the moment, that's only around one hundred pounds per year. But if there's another energy crisis, the amount saved would be higher.

So as greedy landlords, could we charge a premium for a property with cheap electricity bills? Say.... ooooh... £50 per month? Well, probably not that much - and we try not to be evil bastard landlords. Especially as we've been on the receiving end of scummy landlords in the past.

The idea is that the property is more attractive and so isn't left vacant for so long between tenants.

Even if we were making a full £1,200 (tax free) from these solar panels, is that an unreasonable subsidy as the government claim? Let's do the maths.

Total earnings (excluding money saved on bills) = £1,140. The solar panels are meant to degrade by a maximum of 1% each year. Assuming they do so, that's a total of £25,000 after 25 years.

So, 25k on an investment of 12k. That's pretty good, right?

No. Not really. That's about a 3% rate of interest. Even if we were really lucky with the weather and the panels didn't degrade, we'd be looking at a return of 30k - which works out as a 4% interest rate.

Hardly the deal of the century! To give you a comparison, the government predicts a 7% interest rate if you stick your money in a pension.

Now, it is guaranteed - assuming the government doesn't renege on its promises and we don't enter a period of nuclear winter - and it is tax free, but is it really a generous subsidy which needs trimming?

And, even if it is; how can giving just 6 weeks' notice be remotely fair?

A Better Way of Subsidising Solar

Barker has announced huge cuts to the solar subsidy. Whereas before the cut, the FIT would have paid off the capital cost of the panels in 10 year, after the cut, it will be more like 20 years. And that's assuming you haven't taken a loan out to pay for the panels.

Personally, I don't understand why the government doesn't just pay for the damned things themselves. It seems bureaucratically perverse to agree to pay a subsidy, via energy providers, to people who have paid installers, who have purchased the panels.

Surely just simpler to buy the panels and give them to anyone willing to pay for installation. That way there would be vastly less paperwork, no worrying about how to keep track of who needs to be paid what, etc.

Even if you ignore the environmental impact, energy security is one of this countries most pressing problems. We cannot depend on volatile foreign sources of energy.

Surely finding a sane and simple way to subsidise should be one of this government's priorities?