UPDATE: The Feed-In Tariff is now closed for new applications. To find out about the new scheme designed to replace it, click here.
Is the solar PV feed-in tariff about to be cut?
After last weeks announcement regarding the end of the Green Deal, we had a very interesting chat today with one of our solar installers who has some great contacts in DECC and OFGEM. He shared with us the news that those in the industry are expecting the solar PV feed-in tariff to stop within the next 12 months. It is not going to be reduced like it has in previous years – it is going to be completely canned!
This is bad news for solar installers because demand will undoubtedly fall, but it also reduces the return on investment for those looking to install solar panels on their homes.
Currently a 4kW system costs approximately £6,000 and after taking into account the Feed-in tariff, the return from installing the panels is about £1,000 a year. This £1000 is made up from the feed-in tariff payments (generation and export tariff) as well the energy savings from not having to buy as much electricity from the grid – the split is approximately 50 : 50.
If the feed-in tariff for solar PV does stop – this will mean the only way people will benefit from a Solar PV system is from the energy savings created by generation, so instead of the £1000 annual return it will be more like £500. This essentially doubles the length of time it takes for the investment to pay back. Undoubtedly this will reduce the attraction of getting solar installed, but to be honest it is probably the right decision.
Solar PV doesn’t need the Feed-in Tariff
Investing in solar panels doesn’t need to be incentivised any more. It is not like 3-4 years ago when the cost of getting a system installed was £15k plus. While finding 6k to spend on a system is not always easy, the investment should make sense still for anyone who is going to live in a house long term. People will now put bigger systems on their roofs and advances in technology, such as Tesla’s Power Wall, means that even when the sun doesn’t shine, they will still be able to benefit from the electricity they have generated during the day time.
Solar PV return improves as energy prices continue to rise
We think it is important that people start installing these kinds of solutions, not because they are being bribed to do so (or financially incentivised!), but because they take a longer term view – energy prices are going to continue to rise. Yes British Gas just announced a 5% cut in the price of their tariffs, but the underlying oil price is about half what it was in 2014 – where is the 50% cut in tariff prices? As the underlying oil prices begin to rally, the energy companies will once again put up their energy prices. Remember in 2006 the average energy bills was £650 – 8 years later we find it is double that!!
As time goes on and energy prices do continue to rise, investments in renewables like solar PV become more and more attractive because the annual energy savings get bigger and bigger, despite the fact the household isn’t using any more energy – it is simply that a kWh of electricity will cost more.
So while stopping the feed-in tariff is undoubtedly going to have a negative effect on the number of solar installs, solar PV will still work for a huge number of households – it might just take a bit more explaining to make people make the investment.
That being said, if the solar PV feed-in tariff is cancelled, there will be huge surge in solar PV installs after the official announcement is made as people rush to get it installed so they still get the Government tax free feed-in tariff payments for the next 20 years!
If you want to get solar installed on your home, fill in the form below and one of our team will be happy to help. We can provide estimated costs based on desktop surveys as well as the estimated spec (i.e. number of panels to be installed) before we provide a finalised quote and then if you are happy the install.