UPDATE: The Feed-In Tariff is now closed for new applications. To find out about the new scheme designed to replace it, click here.
Well over 500,000 properties in the UK now have solar panels installed on their roofs – this equates to approximately 2% of the 28,000,000 homes here in the UK.
There is therefore a reasonable chance that if you are in the market to buy a new property you will come across properties that already have solar panels installed. In this article we want to look at some of the questions you need to ask yourself before buying a house with an existing solar system.
Question 1 – how big is the solar system?
Firstly how big is the solar system – this can be calculated very easily by counting the number of panels. On the whole most solar panels are 250 watts each so if you had 4 panels you would have a 1kW (1000 watts) system and if there were 14 panels, then you would have a 3.5kW system (3500 watts).
This should give you an idea of how much completely free, renewable electricity you are going to produce from your new solar system and therefore how much you can use in the house.
If you count the panels and multiply the size by 90% – this will give you a very approximate number of kWh you will produce. A kWh is a unit of electricity – this is what most of us buy from the grid and depending on your energy supplier this could cost anywhere between 10-15 pence. Take for example a system with 10 solar panels on the roof:
- 10 panels x 250 watts each = 2500watts (also known as 2.5kW).
- 2500 watts x 90% = 2250 kWh
- 2250 kWh x 10p = £225 worth of electricity is being produced by your solar panels
Now you just need to find a way to use it!
Question 2 – who installed the solar panels?
Ask the existing homeowner who installed the solar panels – this is important for a few reasons, firstly you can find out if they were MCS approved. The lack of MCS approval isn’t necessarily a deal breaker but for reasons we shall see shortly it can make the solar system considerably more attractive! The Microgeneration Certification Scheme (MCS) is a nationally recognised quality assurance scheme, supported by the Department of Energy and Climate Change. The Government are keen for all installers of solar PV systems to be signed up the MCS register, however there are some installers out there who have shunned the whole MCS process to allow them to install solar systems for cheaper.
What does MCS approval show? Well it should provide a certain level of comfort that the installer did the job well – to certain industry standards. Likewise the MCS certificate also shows that the panels that have been installed have gone through rigorous testing that satisfy European and International standards.
The real kicker about inheriting an MCS approved solar panel system is that you should be able to benefit from the feed-in tariff. This is a payment for producing electricity from the solar system. The payments will depend when the system was installed so the next question to ask is exactly that.
Question 3 – When was the system installed?
Not only will the age of the system dictate the Feed-in tariff payments you can expect to receive it will also give you a rough idea of when you are going to need to replace the inverter – normally the whole system should be good for 20-25 years, with the exception of this component. The reason the inverter only last this length of time is because they need to deal with kilowatts of power and high input DC voltages, so they need high power transistors and electrolytic capacitors – these components unfortunately just don’t last as long.
The cost of replacing an inverter on a 3.5kW system is approximately £800 – so if the system was installed 5 years ago – you need to budget for this payment within the next few years.
So back to the feed-in tariff – what will you receive? Well the table below shows how the Feed-in tariff has changed since its launch in 2011. On the left hand side of the table are the digression dates – these are the dates that the effective FIT payment was reduced from. For example if a system was installed and registered on the 10th July 2013, the payment would be 14.90 pence per kWh produced.
|Digression Date for Solar PV||Feed-in tariff rate (pence / kWh)|
The feed-in tariff is paid over 20 years, however if you were lucky enough to get in before this date it was paid over 25 years, so the returns will be even larger.
In order to calculate your expected feed-in tariff payments, you take the size of the system (see Question 1 for how to do this) – multiply this by 90% and then multiply it by the relevant rate from the table above.
For example – a 3.5kW system installed on 10th July 2013
- 3500 watts x 90% = 3150 kWh (you can expect to produce each year)
- FIT payment = 14.90 pence per kWh (from the table above)
- 3150 kWh x 14.90 pence = £469.35 annual payment
- This is tax free and goes up annually with RPI
That means that if you were to buy the house today, you would therefore receive a total income of approximately £8000 without taking into account RPI increases. This is on top of the energy savings that are illustrated at the end of question 1 – so including these you could expect a total return of over £13,000.
Question 4 – Were the panels installed as part of a rent a roof scheme?
Some people installed solar panels on their home as part of a rent a roof scheme – this is where a third party will pay for the solar system to be installed, however the homeowner needs to sign over all the feed-in tariff payments to this third party.
Mortgage companies don’t like these schemes! The third parties required a lease to be signed, which gave them access to your roof for 20-25 years. These leases are binding on any future buyers, so as the new potential homeowner you will need to everything set out in the lease. Mortgage lenders will be concerned if installations come with a requirement to cover maintenance costs or grant onerous access rights to the provider so may not be happy to lend against such a property.
Also since the panels are in place and can’t be removed under the terms of the lease, it means that if you have big plans to put on a roof extension or a similar development, you will need to wait until the lease lapses!
Our final thoughts on buying a house with solar PV
As a buyer certainly shouldn’t be put off buying a property with solar panels, however if the panels lack the MCS accreditation or were installed as part of a rent a roof scheme we would be very cautious. We would certainly seek legal advise if this is the case just to see where you stand. Having said that – it should certainly put you in the driving seat in terms of negotiations over the price. If however the owners own the property outright, since the panels will be a cash generating asset, you can expect to pay a small premium on the house price as a result.
Installing Solar PV
Are you thinking about installing a solar PV system at home? We have scoured the country for the best tradespeople, so that we can make sure we only recommend those we really trust.
If you would like us to find you a local installer to help install a solar PV system in your home, just fill in the form below and we will be in touch shortly!