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Is solar power worth it in the UK home?

Updated on July 14, 2011

Introduction

Until the UK government introduced the "Feed In Tariffs" then the answer was a definitive "No". That was because the savings made on the gas or electricity you purchase would never pay back the cost of installation in your lifetime. In order to try to meet the government's targets on carbon emissions, the government introduced "Feed In Tariffs" in April 2010, through which they pay you to generate electricity or heating in a green way (and they have defined what qualifies). The rate is quite generous, at 41.3p per kilowatt hour (kWh), considering that you are probably paying about 15p per kWh for the electricity you buy from your supplier. Additionally, every kWh you generate for yourself is, in theory (see later), one that you are no longer paying your electricity supplier to supply, so you make an additional saving of that 15p per kWh.

So is it worth it now for heating?

No.   Gas is relatively cheap (about a quarter of the price) compared with electricity.  You are likely to be paying just under 4p per kWh (compared to about 15p per kWh for electricity) {2011 figures}.   Thus, if you have gas central heating with a modern efficient boiler, then the costs of installing a solar heating system (at around £8k to £10k for a three bedroom detached house) will take 14 years or more to recover.  That does not make financial sense, so, until they can massively reduce the cost of solar powered heating systems, I would advise you against it.  In the 14 years that it would take you to recover your up-front installation costs, technology should have improved so significantly, that there will be a system that you can buy where you can recover your costs in 3 to 5 years.  That is the one to go for, when it is invented !

If you have electric heating, then the numbers don't look quite so bad, as you will be recovering your costs four times quicker, in theory, due to the higher price of electricity per unit of heat generated.  However, the very time of year that you need the most out of your system - winter - is the least efficient time of year for a solar heating system to work.  Thus, if you have electric heating, then I would recommend that you install a modern efficient gas central heating system, which will be much cheaper than a solar system, and wait for the price of solar heating systems to come down.

So what about solar power for your electricity needs?

Well, this is just starting to be worthwhile. Again, you have the same problem that you use most electricity in winter, when you may have electric underfloor heating running and the lights are on for a much larger proportion of the day.

However, the "Feed In Tariff" also pays you 44.3p to feed electricity, excess to your own requirements, back in to the national grid. That means that in the heart of summer when your system is churning out electrical power that you don't need for your home, as you have very few electrical items switched on, you can still take advantage of the "Feed In Tariff" to earn money which will offset your electricity bill for the winter. Of course, if you have an electrically heated swimming pool, then you might also be using a lot of electricity in the summer, (although probably less of it the more sun there is), so you might use more of it yourself.

Give me some numbers

For electricity generation, there is only one system in common use, which is photovoltaic cells. These use the sun's energy falling on silicon semiconductors to generate electricity directly. There are three types of silicon technology: monocrystalline, which is the most expensive and which generates the most electricity, currently 140 to 170W/m2 ; polycrystalline, which is cheaper but generates less electricity at 120-135W/m2 ; and amorphous which is cheapest and generates the least electricity. For a retro-fit (i.e. fitted to an already-built property) you would only consider the first two. Amorphous systems have the advantage of being able to be very thin, and printed onto thin films, so they are ideal for pocket calculators, and the like, or for more imaginative new ideas like solar roofing tiles, but you would only use these on a new build (where the Feed In Tariff is slightly reduced), rather than replace your whole roof, so I'm not going to discuss this technology here.

The cost of monocrystalline silicon solar PV panels is currently about £4.5k per kWp (kilowatt peak - more on this later) as an installed price, reducing slightly as you go for bigger systems, so 4kWp is about £14,500 (these are the lowest prices than you can get; many companies will quote higher prices, up to almost double).

Having done many calculations myself, it is clear that the Feed In Tariffs make it more profitable, and with shorter payback times, the larger the system you can afford. Thus, if you can afford £19k, you should be able to get about 6.2kWp and get a return on your investment in a little under 8 years.

This is still a long pay-back time. Why would I?

Well, the payback time is not the only factor. Modern panels might last up to 30 years. Manufacturers and suppliers are not that keen to suggest that they will last longer than 25 years, but there seems to be a consensus that they are being conservative, and 30 years is not an unreasonable life expectancy. A 6.2kWp system will generate about 5,100kWh per annum. The UK government will pay you £2100 per annum for doing that - slightly more if you are selling some of that to the national grid. Once you have paid off the installation cost in 8 years, this £2k per annum income is currently guaranteed by the government for 25 years and will also be inflation protected, so it should be worth what £2,100 is today in 25 years' time. Thus, over 25 years, you stand to make a profit of £35,700 at today's prices, for an investment of £20k. That is a 78.5% return on your investment, but it is spread over 25 years, so it is only 3.1% per annum. If you work that out as a compounded interest rate, it falls to about 2.3% per annum. Now, at current interest rates on savings, that doesn't look too bad, although no one can predict how interest rates will rise in the future, whilst you are still locked in to recovering your money at 2.3% per annum profit.

There is another factor, which is the effect upon the price of your house. It is currently estimated that a solar system increases the value of your home by about 9%. Thus, a 6.2kWp system on a £500,000 house, would increase the value of the house by about £45k, for a £20k investment.  Whether that will still be true in 25 years, when solar power is ubiquitous, who can say?  It would seem unlikely to still be true then.

Added to this is the reduction in the amount of electricity you are buying from your supplier. Since you will be using most electricity when the solar system is not producing anything, e.g. when it is dark and you have your lights on, or when cooking an evening meal in an electric oven in the months from October to March, then you may find that you are not, by any means, reducing the amount of electricity that you buy, by the amount that you are producing. Thus, it is difficult to calculate the savings you will make in practise. It will depend upon the exact set-up in any given household, but it will be several hundred pounds a year for a larger system in a larger house.

Now, if you are a "green" and want to do your bit for the environment, then the numbers themselves are not necessarily as persuasive as the fact that you are producing electricity at very low cost to the environment - almost zero at the point of consumption (although for an accurate figure, you need to factor in the cost of manufacturing and transporting the solar panels to your house). This may be enough to persuade you that even if the profits are not great, and you only broke even in the worst case scenario, then at least you have done your bit for the environment, so it was worth doing. There are estimates which say that you might save around 30 tonnes of CO2 emissions over a 25 year life of the system. Ten tanks of petrol in a car generates about 1 tonne of CO2 emissions, so it is the equivalent of 300 tanks of petrol over 25 years, or 12 tanks a year in an average-sized fuel tank (50 litres).

What else should I know?

Firstly, you should know what kWp means, as a power rating of the system. It stands for "kilowatt peak" and is the peak output power of the solar panel with the sun shining directly on the panel around the middle of the day. Unfortunately, as there is shade from clouds, darkness at night, and a lot more darkness in winter, the average output power over the year of a solar panel installed in a good position, such as a south-facing sloped roof is about a tenth of that, so 400W from a 4kWp panel. So that is enough to power just fewer than seven 60W light bulbs all year around, 24/7. Of course, you probably have more than seven light bulbs in your house, and you don't leave your lights on 24/7 all year around, but it illustrates that, for a smaller property, it might cover your annual lighting consumption.

Secondly, the Feed In Tariffs are going to be phased out for new installations in 2013, or maybe sooner, so if you are thinking of taking advantage of them to make this investment, then you need to act sooner rather than later.  Those who have made the installation before the deadline will still have the 25 year guarantee (unless a future government decides to scrap that).

Thirdly, research is improving the power output of solar PV panels all the time, so the technology will become cheaper for the same capacity over time.

Fourthly, you don't need planning permission to put solar panels on your roof, subject to a few restrictions, and assuming the building is not protected, or of historical significance, etc.

An interesting statistic

Did you know that enough sun light falls on the surface of the earth in one day (24 hours) to provide the entire power consumption for the planet for a year?   The trouble, of course, is in harnessing it, especially as most of it falls on the oceans.  

Conclusions

We've not looked at wind power, or other systems such as heat pumps, but that is because this hub was expressly about solar power.

It seems inevitable that, over time, almost every building in the land will have solar power generation on its roof. This will massively reduce the demand for centrally generated electricity, thus reducing fossil fuel consumption, reliance upon other countries for the means of generating our electricity, and reducing the need for more nuclear power reactors. However, PV solar panels alone will never be able to generate the electricity needs of the entire country 24/7, so these other means of generation will still be a necessity. It's nice to think though, that you could, for an investment which will pay back, albeit over a long period of time, have a system fitted to your house, that would, during the day time at least, give you some electrical power in the event of a grid failure. No doubt, there will be systems available soon which will store generated energy through the day, to enable you to use it at night, giving you added protection overnight in case of a grid failure. The technology already exists and I'm surprised that it is not already being widely offered to increase the attraction of solar power. The battery costs would increase the installation costs, of course, and you'd need somewhere to put all those batteries, which may be two reasons why it isn't !

I have no doubt that 20 years from now, our homes will be much more efficiently powered, probably using a combination of systems, all of which will have greatly reduced in price from their current levels. It makes sense on every level to use these new technologies to harness nature's natural abundance of power. I look forward to seeing what the future brings.

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      *Voice_Of_Reason* 5 years ago

      Everything has changed now. The UK government announced on 31st October 2011 that the feed-in tariffs for installations up to 4kWp will be reduced to 21p per kWh generated from 12th December 2011. This means that you will not get any return on your investment for 20 years, and then the annualised compound rate of return will be so low that you will undoubtedly be better off leaving the money in the bank in a savings account.

      What a terrible shame. The government, in looking solely at its own problem - one of such large take-up of solar power that it will blow its budget for paying the tariffs - has taken a selfish approach of simply reducing the tariffs, with no concern for the effect that it will have on future take-up, and on the businesses built around manufacturing and installing the panels.

      This move will kill off the solar power industry in the UK at a stroke. People will stop buying the systems, as the returns are far too low over far too long a period, so the manufacturing costs of the panels will stop coming down as demand decreases, and the companies installing the panels in the UK will go bust, as there will be a massive decrease in business, putting more people on the dole.

      What a step backwards for power generation policy in the UK. How short-sighted and ill thought-through!