There have been some significant changes to the economics of solar power in recent years. The popular and successful feed-in tariff closed to new applicants in 2019 meaning that photovoltaics were no longer subsidised. Further to that the government changed the rules so that not every installation is eligible for the preferential 5% VAT. However, solar panels are still a fantastic and affordable investment due to the steady drop in solar prices that has occurred for many years. Thankfully, it appears that Covid-19 has not significantly affected the cost of solar panels, except to perhaps slow down the year on year drop in prices. The solar industry is expected to flourish again when normality returns.
According to government data, installing 4kW of solar panels in the first 3 months of 2020 was already £288 cheaper, on average, than it was in 2019. Thanks to an increase in demand and the development of new technology, solar panels costs have fallen by more than 50% over the past decade.
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Overall, the cost of domestic solar electricity is now around 8p per kWh. This is a lot less than the 16p average domestic import cost from the grid, a cost that has increased by an average 4.75% each year over the past decade. Just this fact alone makes installing solar PV extremely worthwhile as you will be protecting yourself against future increases in the cost of importing power from the grid.
Financial considerations aside, installing solar panels is a good way to lower your carbon footprint. Solar energy is a natural, renewable source because it can be replenished unlike fossil fuels which are finite. As solar energy relies entirely on gathering energy from the sun and converting it into electricity (or hot water) for use in your home, using it means that you are not producing any greenhouse gases or contributing to global warming. The Energy Saving Trust estimates the average UK home with a solar PV system installed could reduce carbon emissions by 1.3 to 1.6 tonnes per year depending on where you live in the UK.
Here are a few things to consider before installing solar panels:
- Payments for solar energy that you don’t use:
The Smart Export Guarantee (SEG) launched by the government on 1st January 2020 requires all large energy providers with at least 150,000 customers to pay households for the renewable electricity they export back to the grid. This is electricity you generate but don’t use yourself that is then pumped back to the National Grid. In order to qualify for the SEG your solar panel system must be 5MW capacity or less.
Energy suppliers have to pay a set rate for each kilowatt (kWh) of electricity you export. The amount you receive will vary by supplier but you’re free to shop around to get the best rates.
Though the scheme isn’t as generous as the feed-in tariff, the tariffs being offered by most suppliers are very reasonable and similar to the export tariff rates previously being offered by the government. Some energy providers are offering around 5.5p/kWh of exported electricity.
Depending on your circumstances, a 4kWp solar panel system could make around £340 per year which will go a long way to helping you recoup your original investment.
Homeowners with solar panels need no longer feel that their unused electricity is being wasted and the SEG rates should gradually increase as energy companies compete with one another.
- You will need a smart meter to get the smart export guarantee payments:
In order to get the SEG tariff, you’ll need a smart meter that’s capable of tracking how much solar electricity you’re exporting to the grid.
If you have what’s known as a ‘SMETS 2’ meter, the second generation of smart meters or certain ‘SMETS 1’ meters (the first generation) you will be able to receive payments from your supplier for your exported electricity.
If you’re not sure what type of meter you have, you can contact your electricity supplier to help you find out what type of meter you have and whether it supports the SEG. If needed you can arrange to get a new meter installed.
- Your solar panel system & installation must be MCS certified:
To qualify for the SEG tariff your system and installation must be MCS accredited. MCS, or the Microgeneration Certification Scheme, is a quality assurance scheme for microgeneration technologies. Technology which is MCS accredited has been installed to a high standard and will operate both safely and efficiently. The MCS is certified by the Department for Business, Energy & Industrial Strategy (BEIS).
- Get the most value out of your solar panels:
The savings you make on your electricity bill depend on a few different factors including system size, electricity use and whether you are home during the day to use the energy you are producing. It is best to use more energy during the day when the solar panels are generating. This will save you even more money as you will need less electricity from the grid.
In the winter, when there is less sunlight and you’ll generate less solar power, it’s a good idea to set appliances such as washing machines and dishwashers to run while it is light outside to avoid taking energy from the grid as much as possible.
The Energy Saving Trust estimates that a typical four-kWp system can reduce your bill by between £90/year and £240/year depending on where you live and how much you use the energy you are producing during the day (kWp stands for kilowatt peak which is how the power produced by panels is measured).
- A south facing roof will work best:
The best type of roof for solar panels is a south facing roof as they tend to generate the most electricity. South facing roof panels generate the most energy because they get the sun when it is at its most intense for the longest period of time. You’ll still get some benefit if your roof faces south-west or west, but it may be less effective, and you might not get the maximum savings. Ideally, your roof should be unshaded between 10am and 4pm.
- The further south you live the better:
When you are calculating how much installing a solar system will save you it’s important to take into account where you live. The further south you live the better. Though you don’t need to live a hot sunny climate to benefit from solar panels, where you live can make a difference when it comes to the panels’ effectiveness. Northern homes will get slightly less daylight than their southern neighbours.
The Energy Saving Trust estimates that panels in Manchester could save you between £95 and £230 each year on your electricity bills, compared with around £100-£240 in London and £90-£220 a year in Stirling.
- You can still switch energy supplier:
Your energy supplier doesn’t need to be the same as the supplier that pays you for your solar generated energy, so you are still free to switch and take advantage of the lowest priced and/or fixed tariffs being offered by different suppliers.
There is a range of suppliers offering the SEG. Ofgem has a list of all of them on their website.
- Solar panels can affect the value of your property:
There may be some people who find solar panels on the roofs of houses ugly which could push the value of those houses down, but it is much more likely that buyers will find a more efficient home generating its own energy an attractive proposition.
Something else to bear in mind for those living in energy inefficient homes is that they could soon find it harder to get a mortgage, after a Government report called on lenders to help improve energy performance.
Mortgage lenders may soon be required to track and annually disclose the average Energy Performance Certificate rating of the properties they lend against.
The Government could then use this information to publish ‘lender league tables’ based on the average EPC ratings within their portfolios.
- Planning permission should not be needed:
Generally, you will not need planning permission for solar PV systems. There are a few exceptions which include, if your property has a flat roof, is listed or in a conservation area.
You might need to get approval from your council’s building control team, so remember to check with your local authority before starting your solar project.
In England and Wales, the Government’s Planning Portal says that panels are likely to be considered as “permitted development”.
- Solar panels are mainly low maintenance:
If your solar system has been properly installed and well-designed little maintenance will be required. It will however be likely that you will need to replace the inverter, a gadget which is a key part of the mechanism within about 25 years at a cost of approximately £800.
There are of course things that can go wrong. Make sure to check the installer warranty which can cover you for up to 20 years.
If the panels have been damaged by something unexpected such as a storm, you may also be covered by buildings insurance. It’s worth checking what your insurance covers before you have the solar panels installed.
Solar panels are still a very good investment despite the lack of government subsidies. As long as you use at least 50% of your solar power on site, then, with a sensible choice of import tariff, solar will make financial sense. The more you use on site, the greater the savings. It’s definitely worth bearing in mind that the cost of grid electricity is rising.