Are solar panels still a good investment in 2015?

UPDATE: The Feed-In Tariff is now closed for new applications. To find out about the new scheme designed to replace it, click here.

In case you didn’t know, if you were thinking of installing a solar PV system, the government feed in tariff has just reduced!

The feed-in tariff is a payment you receive for generating energy from solar PV. Once you install your system, you are entitled to a fixed payment for 20 years. The payment has historically decreased for new applicants every six months, and this year is no different. From April 2015, the tariff decreases to 13.39p/kW for a typical home installation, down from 13.88p/kW.

With all the regular changes in the tariff, let’s try and give you a feel for how much your installation is going to pay you and get a feel for whether solar is still worth it in 2015!

A worked example of solar PV payback

A 10 panel system installed today.

A typical 2.5kW 10 panel system will produce around 2,125kW hours each year. That means you will get a generation tariff payment of:

2,125kWh x 13.39p = £284.54 per annum generation tariff.

You will also receive the export tariff payment, which assumes 50% of your electricity is exported:

2,125kWh / 2 = 1,062.5kWh is assumed to be exported each year.

1,062kWh x 4.77p = £50.68 per annum in export tariff.

Total payment = £335.22 per annum

Electricity savings from system at 75% usage – 1,533kWh at 12p/kW = £191.25 per annum

Total Savings per year – £526 per year

Typical cost of system – £4,500

Payback period – 8 and a half years

A larger 16 panel 4kW system

A 4kW system will consist of around 16 250 watt panels.

3,400kWh x 13.39p = £455.44 per annum

Export tariff 1,700kWh x 4.77p = £81.09 per annum

Total payment = £536.53 per annum

Electricity savings from system at 75% usage – 2,550kWh at 12p/kW – £306 per annum

Total savings per year – £843 per year

Typical Cost of system – £7,000

Payback period – 8 and a half years

So a fairly consistent payback period for 2 varying sizes of system. How does this compare to the tariff at the previous rate you may ask? Well the old tariff was set at 13.88p/kW, so for an extra 0.49p per kilowatt you would get £16.66 a year more. That’s a tidy little sum over 20 years of payments, but not a reason to stay away from solar since the reduction in the tariff.

Why are Feed in Tariff payments reducing?

Whilst everyone wants higher feed in tariffs, the reason the rates are coming down is that the cost of solar is also steadily decreasing over the last few years. So whilst it looks like someone might have got a better deal a few years ago, the bottom line is likely to look quite similar to an installation today.

UPDATE: The Feed-In Tariff is now closed for new applications. To find out about the new scheme designed to replace it, click here.

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