Just over a year ago, I installed an array of solar photvoltaic panels on the roof of my house, which have generated about 3MWh (3000 units) so far. I thought it would be a good idea to add my 2p to the discussion of the various issues surrounding solar panels and the feed-in tariff in the UK.
A nice sunny day for electricity generation
Generating Green Electricity
So first up I’ll briefly cover what a feed-in tariff (FIT) is, although there are plenty of websites that already cover this topic adequately (such as the energy saving trust or http://www.fitariffs.co.uk/), but here is my quick summary, based upon current (Aug 2011) levels:
- You get 44.3p for every unit of electricity irrespective of whether you use it or not.
- You don’t pay 12p or so/unit for buying a unit of electricity if at the time you are generating it instead of importing it.
- You get 3p/unit for every unit of electricity you export. In practice most people don’t have an export meter (it’s not financially worthwhile for domestic solar PV to install one), so instead they deem that you have exported half of what you generate (the 50% figure is current guidance and may change).
- The feed-in tariff goes up by inflation (RPI) each year and lasts 25 years. After that you will only get a reduction in your bill (and maybe a small amount for the energy you export – if you have a suitable meter).
I usually prefer to simplify things and combine the first and third point into one so in practice you get 44.3 + 0.5*3 = 45.8p/unit for all electricity generated. The important thing to note is that this far outweighs what you save off your electricity bill – although that saving becomes a little more significant if energy price inflation (currently 7-10%) exceeds the RPI (currently 4-5%).
Note that the generation vs consumption balance applies instantaneously – that is any electricity that you consume in excess of what you are generating this second is imported, and billed (*) and if you don’t use it, it is exported. This leads to you being encouraged to use the electricity as it is generated, e.g. running dishwashers, washing machines, etc. at peak generating time (midday or just before in our case).
(*) Actually in my case we were lucky in that we have an old electricity meter. It ran backwards when we exported electricity. This means we pay for the net energy imported, rather than the sum of the instantaneous import. In practise that means we have cheaper bills – as all the generated electricity gets taken off what we use and also we don’t have to worry about timing when to do things. Unfortunately after the summer the fact that the meter reading was lower than it was in March meant that npower finally cottoned on.. and came round and fitted a new meter which doesn’t run backwards. It would have been nice if they had fitted a smart meter instead. I requested one, they said yes, then the guy who came to the house seemed to know nothing about it.
Thinking of trying it yourself?
How much electricity will I generate?
Although an installer can give you an estimate, who is to know if it is at all accurate? I used this website http://re.jrc.ec.europa.eu/pvgis/apps4/pvest.php to get a 2nd opinion.
What they don’t tell you (although if you look at the details on thay website, you’ll see) is that in the UK generation is very seasonal. The best month (normally June, although it was May for us this year) will see you generating more electricity than the whole of October-February and half of March. On the flip side, system does seem to work whatever, so even when it’s dull and overcast you get some power generated, just not that much.
What can go wrong?
I believe the most expensive single component (in excess of £1000) is also the one most likely to fail – the inverter. This is the device that turns the DC from the panels into an AC in a phase such that it will drive into the grid. Without it the system doesn’t work. So if it does break mid-way through your 25 years, you probably need to invest in a new one.
There is the potential for a panel to break in bad weather (although it’s uncommon). If you can get one, the same size and rating it would be straightforward to replace, access aside.
Who should I get to install it?
There is no reason to treat PV panels any differently to any other purchase. The only thing is to make sure you get a MCS installer so that you can get the Feed-In Tarriff. Get a couple of quotes from companies and compare them. If they work like double glazing salesmen, you can quite happily show them the door straight away. There are plenty of companies who don’t work that way. We experienced both – the double glazing tactics at least got us interested, but they were far too expensive. We eventually chose evoenergy, who will give you a quote on the basis of an email and looking at your house on Google maps. If you do go for them, please quote PV4959 and they’ll give me a small referral fee.
Costs and Investments
How much does it cost?
Before we installed, evo were quoting about £4000 per kWp + £2000. It’s probably a bit less than that today. The panels themselves only amount to half the cost – the inverter, electrical cables and switches, meter (or two) scaffolding, brackets and installation – it took 4 men one day to do our straightforward installation, although the company had made an allowance for 3 of them to return for most of the following day as well.
To get best value for money you want a fairly south-facing roof with a large enough area to get 3-4 kWp of panels.
Can I really get a 7-10% return on my investment?
Yes, and no. The returns can indeed be in the 7-10% region, however it is not directly comparable to savings account. The capital outlay (i.e. installation cost) cannot be (driectly) recovered. One can easily argue that it would add value to your house, so the capital isn’t really lost. While this may be true, I suspect the value is related to the expected return – so as the installation ages, so will its value – probably down to close to zero at the end of the 25 year feed-in tariff. You certainly can’t cash in your investment and get your capital back, like you can with shares or a savings account. In many senses I think this is very similar to an annunity – you pay out a large capital fee up front in turn for a regular income.
I found it more helpful to consider the comparison of a solar installation versus putting your money in a savings account earning a similar amount to the inflation rate. For our installation (facing more west than south) I was better off with solar panels after 11-12 years. So it did seem a reasonable investment. However I don’t think we’d have done it purely for investment reasons as I’m sure if we were prepared to tie our money up for such a long period there would be plenty of alternative financial products offering something similar or better.
However for large (domestic) installations (i.e. near the 4kWp after which the feed in tariff rate changes) on south-facing unshaded roofs it must be a fairly good investment, particularly with the lower prices today. How do I know this? because other people are prepared to offer this for free – any they are willing to do this on the basis of the feed in tariff (and export) alone.
Free Solar Installation
A number of companies in different parts of the country are offering to install solar panels on your roof for free (or for a small fee). Firstly consider what this actually means. You are effectively renting your roof in return for a modest fee, in the form of a bit of free electricity. The latter is probably only worth a couple of hundred pounds. Some of these offers ask you to pay a small sum for installation. That’s not a lot of return and I’ve read an argument that by agreeing to a 25 rent you may be depriving a future homeowner of putting their own panels up an thereby reducing the value of your property. I wouldn’t go that far, but there is no such thing as a free lunch. They will only install where they can get a reasonable sized installation (probably 3-4 kWp) with a good site (good orientation and no shading). Also the small print (what happens if you need work done on the roof – who pays to remove / replace panels, etc.)
The environmentalist in me tells me that overall these schemes are a good idea because it make sure installations in good locations actually happen. What it more clearly tells me is that many big companies believe that the feed-in tariff alone on a good site is a sound investment. Otherwise they wouldn’t do it. So if you have such a site it must be a good investment for you, assuming you have a necessary capital. If you don’t have the capital then money lenders (banks) are happy with giving loans on the basis that the feed-in tariff is a reliable income source, but you have to ask who is making the money here? (the bank!)
More info in free solar installtions is available here.
Is it a tax on the poor to give money to the middle classes?
The short answer to this is no, not really – but the short answer doesn’t really cut it. Many people, particularly those who can’t afford to install their own panels, see the (sometimes overstated) benefits and realise that ultimately the feed-in tariffs will come out of their fuel bills. While the latter is true, the impact is only slight and is similar to power companies investing in new power stations themselves. It is important to understand what the feed-in tariff is trying to achieve. The government has limited money to spend, but is also committed to various climate change / green energy targets. To address the latter it obviously wants to encourage people to install things like solar panels, but they aren’t economic at the moment purely on bill reducing grounds. In the past it has used grants but these are bad for a government because:
- They have to pay up front (and don’t have the money)
- They have no guarantee that the panels will actually deliver their promise
The feed-in tariff directly addresses both of these issues by using private finance (i.e. my savings) to fund the installation and only paying back in proportion to what is delivered. In addition, the sliding scale where future feed-in tariffs are supposed to reduce year on year for new starters on the scheme encourage people to spend their money now rather than later. Furthermore, the aim is to stimulate the market in order to commoditise the process and drive down costs – so that future feed-in tariffs are still cost effective, but also to get green electricity more economic. Given that a few of my friends have had quotes that are a little less than mine, it appears that the costs are coming down, to the FITs are having the desired effect.
How green is it?
First up, the embodied energy in producing the system is recovered by the energy the panel generates in 3-4 years. So only after 3-4 years is a panel carbon neutral. That is somewhat less than the 25+ years nominal lifetime, but it’s not brilliant. One of ecotricity‘s wind turbines recovers its embodied energy in 3-6 months.
Is the UK a good place for solar power? I mentioned earlier that the generation is highly seasonal. The high lattitude of the UK means although we have very long days in the summer, winter days are very short and in total we have less daylight. So if you are a pure green, maybe you should argue for panels to be installed in the tropics. BUT there is no UK FIT to do that. So I have just taken advantage of what have available. A reasonable feed-in tariff on an imperfect site (my own home). Maybe if I lived in Austrailia it would be better, but I like it here in the UK.
I hope you’ve found this interesting. I’ve opened up this article for comments (until the spam becomes excessive).