Are Solar Panels Still Profitable – Feed-in Tariff Changes

by 00str1

For those of you that don’t know, the UK government had been paying £43.3p per kWh created for solar panel adopters through the Feed-in Tariff. A little under 2 months ago the government announced a earlier than previously planned cut to this tariff, cutting it down from £43.3p per kWh to just £21.0p per kWh. There’s no hiding that this is a dramatic drop, and largely un-expected, as the government hadn’t planned a review of the Feed-in Tariff, until 2013.

Why is this so important?

Well if you don’t already know, your return on investment into solar energy largely comes from two sources, the Feed-in Tariff and the Export Tariff i’m not going to go into vast amounts of detail in this blog about these tariffs, if you would like to read about them separately in more detail click through on the links. As a very brief roundup the Feed-in Tariff, is paid to you per kWh your system produces, by the government, as an incentive to create renewable energy. You might be sitting there asking why the government are doing this?

Well good question, but the answer is quite simple really, they have to. The UK government along with many other EU countries agreed to attempt to meet a target for producing renewable energy. The UK has pledged to making 15% of it’s useable energy via renewable sources by 2020. The UK government believes we can deliver 234 TWh of renewable energy overall in 2020 – equivalent to 15% of our entire energy useage as a country.

The Export tariff provides a secondary form of income via a tariff of around £3.01p per kWh that you do not use in your home and export back into the grid.

Why have the UK government reduced the tariff

There are many reasons, but partly because the UK is on course to meet it’s 2020 target, lower solar panel costs we’re making the tariffs very profitable. High adoption rate meant large outgoings and high consumer profit yields, something the government is not exactly largely associated with. Some residential installations we’re paying as much as 17.2% return on investment per year. Over 25 years working out to be a very tidy profit margin.

High adoptions rates, lower panel cost at market and more installers effectively gave the UK government an easy choice.

Is it still worthwhile getting solar panels?

Very much so! And as an independent advisory service, that do not do installations, that’s the honest truth. Theres really nothing in it for us to say that there is.

We’re not going to lie, those of you who managed to get in there before the 12th of december at after the summer of 2011, you’ve got a great deal! Well done.

Here are some great reasons why it’s still very much worth while for those of you that didn’t:

  • Solar Panels are much cheaper than they we’re in previous years.
  • Full installations can be done for as little as around £7,500 and it’s coming down constantly.
  • Solar panel efficiency ratings are going up, the panels are cheaper, and better! Meaning you’ll make less per kWH but you’ll make more kWh’s!
  • £21.0p p/kWh is still a return on investment of around 10% p/year. Still much better than any investment in high street bank ISA’s paying on average 3.25%
  • Installer competition is making the market competitive, driving demand from manufacturers and thus driving down the cost of equipment and installations whilst encouraging innovation in the industry.
  • Renewable energy, is what it says on the tin, green, clean and renewable. Going green, feels good and no matter your stance, if we we’re all a little less negligent we could be powering more of our electrical equipment with it, and cutting down on ruining our own planet.
  • Self sufficient, many solar panels can have a battery connected to the system, often meaning that, houses can be self sufficient from the grid to a certain extent.
  • Less reliance on public utility companies
  • It feels good to be charging the public utility companies for your exported energy for once eh?

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