As solar panels produce energy more efficiently and become more profitable for homeowners, the government is reducing green subsidies paid to homeowners such as the Feed-In Tariff (FIT). What will these changes mean for homeowners that are thinking about getting solar panels installed?
What is going to happen to the FIT?
The Department of Energy & Climate Change (DECC) is the government body that will review the current subsidy levels and decide if any adjustments need to be made. At the moment, homeowners and solar farms are paid by the government per unit of renewable energy generated. The current plan is to shelve these subsidies for certain categories of solar farms by 2016. Subsidies for homeowners will also be discussed. It is being reported that proposed changes to the subsidy scheme will save as little as 50 pence on the average electricity bill.
Energy and climate change secretary Amber Rudd has justified the review by saying: “we need to keep bills as low as possible for hard-working families and businesses while reducing our emissions in the most cost-effective way… As costs [of solar panels] continue to fall it becomes easier for parts of the renewables industry to survive without subsidies.”
What does this mean for those that are considering solar panels?
The changes are most likely to affect farmers and small businesses that are planning to install large numbers of ground-mounted solar panels to take advantage of the incentive. Many farmers had been hoping that they could keep smaller animals such as chickens and sheep in the same field as solar panels, and in this way not only double the output of their fields, but also protect themselves from price fluctuations. Farmers and small businesses that were planning to install more solar panels will have to re-evaluate the return on investment that solar panels will bring once the incentive is withdrawn. Homeowners may not be affected so badly, as there is a chance that the FIT could remain at the same level after the 2015/2016 review.
Does this mean that now is a bad time to install solar panels?
Actually, it means that now is a great time to install solar panels, so long as you do so quickly. The government’s “impact assessment” will most likely be published at the end of 2015 or at the start of 2016. Solar panels installed before September 30th, and possibly those installed as late as February 2016, will still qualify for the current generous FIT payment for the entirety of their 20 to 25 year lifespan (depending on location). After that, things are less clear. Though FIT payments could stay the same, there could also be cuts. If you want to receive the current level of FIT payments, your best bet is to act as quickly as possible.
Those that already have solar panels installed won’t be affected by the review.
Are solar panels still a good investment for homeowners?
Solar panel installation costs have fallen dramatically in recent years, from £18,000 in 2010 to around £5,500 today. This means that although the FIT payments have also fallen (the returns), so has the cost of installation (the investment). Those that install solar panels before September 30th will receive 12.92 per kWh, provided that their home is certificated at energy performance brand D or higher. Someone with an unobstructed south facing roof that installs a modern solar panel system in Essex for £5,000 can expect a combined income and electricity bill saving of about £600 a year over the guaranteed twenty five year lifespan of a solar panel, amounting to more than double the original outlay.