Solar Panels for Your Home are Better Than Money in The Bank

Yes, Your Money Really is Safer on Your Roof

Tuesday 12 October 2010

Since April 2010 more than 10,000 Solar PV systems have been installed across the UK. According to market analysts, iSupply, there has been a growth of 1500% since 2009.

The explanation for this growth is a very simple one - for the first time Renewable Energy in the UK makes financial sense.

Up until April 2010, installations in the private domestic sector and in public buildings were driven largely by environmentally-minded individuals, willing to invest thousands of pounds to have a renewable technology installed simply because they wanted to lower their CO2 emissions.

In short, investing in Solar panels for your home made environmental sense, but little or no economic sense. The Renewable Energy industry was effectively a cottage industry dependent upon the good will of individuals and, to a limited extent, the ever-changing, unreliable, and variable grant regimes of national and local governments.

All that changed in April 2010 when the Government introduced the UK Feed in Tariff scheme - otherwise known as the Clean Energy Cashback Scheme.

Under the Clean Energy Cashback Scheme, domestic households and other small-scale electricity generators who install a Solar PV system on their home or property are guaranteed up to 41.3p for every unit of electricity produced (kWh).

In addition, the household also benefits from not having to buy as much electricity from the Grid for which they usually pay around 13p per kilowatt hour

Finally, the householder can also earn a further 3p kilowatt hour for exporting the electricity they produce but donít use (at the moment this is assumed to be 50%).

So, how financially viable are Solar panels for your home?

As an example, letís consider a typical installation in a part of the UK that is hardly the sunniest - Newcastle upon Tyne in the North East of England.

Installing a 2.5kWp Solar PV system onto a south facing roof with a 30 degree slope here would produce:

  • £860 for the electricity generated (paid from the Clean Energy Cashback Scheme)
  • £135 from savings to your electricity bill
  • £31 from the assumed 50% electricity exported/generated but not used (paid from Clean Energy Cashback Scheme)

This gives a total of £1027. Unlike income from interest earned at the bank, this income is tax FREE

To install this system you can expect to pay around £11,025 including VAT. Clearly this is a significant investment. Even if you have that sort of money in the bank you would probably want to keep it there for a rainy day, rather than have it tied up for 25 years. So what about borrowing the money?

If you have a mortgage, you should ask your lender for an additional loan on your mortgage to pay for the Solar PV system

On a mortgage extension of £11,025 borrowed at a rate of 4% over a 15 year period, the repayments each year would be £984.

So each year you would be £43 each year better off for the period of the loan.

But it is even better than that!

To really calculate how much better off you would be borrowing the money to buy Solar panels for your home, you also need to take into account:

  • The rate at which you get paid by the Clean Energy Cashback Scheme increases in line with inflation
  • The amount you save each year from your electricity bills will increase each year as the price of electricity goes up.
  • BUT remember as well that once you have paid off the loan after 15 years you continue to get the income from the Clean Energy Cashback Scheme for another 10 years.
  • AND you continue to get the savings from your electricity bill at least another 15 or 20 years.

So, even if you donít have the savings to invest in Solar panels for your home, it still makes financial sense to extend your mortgage to pay for a Solar PV system. Thatís what 10,000 households have done already since April this year. Whatís stopping you?

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