Solar Generation Tariff with the Export Kicker!

I thought in this blog I would just briefly share a discussion I had with a lady on Tuesday, during a Green Deal Assessment. She was interested in solar, her electricity bills were really high and she was a stay at home mum, meaning energy usage was relatively even during over the course of the day.

Installing solar PV is great, since producing your own electricity means you don’t need to buy as much from the grid. The issue is that you would need a massive amount of solar panels and a battery storage system to produce ALL of your electricity and be able to use it at night when the sun doesn’t shine.

On the whole people tend to choose a grid tied solar system, because they are simple and if you need any additional electricity you can simply buy it from the grid. These systems cost about £6000 and for that you will get you a 3.5kW system, which if the sun shines an average amount during the year will produce about 2,900kWh of electricity per year.

If you could use every kWh of the electricity you produce, that would mean that on average you would be saving about £450 per year. That is great, but for the savings to pay back a £6000 system, it would take about 14 years which is not ideal!

The Solar Feed-in tariff

The solar feed-in tariff makes getting solar PV installed on your property economically worthwhile.

There are two parts to the feed-in tariff, the first is the one that gets all the press coverage – and is known as the Generation tariff. Currently that is set at 14.90p, which you get paid for every kWh your solar PV installation makes, regardless of whether you sell it back to the grid or you use it in the home, and this is guaranteed for 20 years.

So for a £6000, 3.5kW system you could get expect to get a quarterly cheque for £112 (just shy of £450 a year). Couple this with your energy bill saving and we this is starting to make financial sense!

The Export Tariff Bonus!

The final payment is known as the export tariff and this is a payment you get paid for every kWh you sell back to the grid. Unfortunately the price you get paid is about a third of the price you would need to pay your energy company for that same unit of electricity, but things aren’t all bad as we are about to see!

Solar PV systems are installed with a generation meter, which means that you can simply give the readings to the electricity company every quarter to get the exact payment for the electricity you generate. In most cases however, an export meter is not installed, so what the energy company will do is make the assumption that you export 50% of your energy. Now obviously if you are using 50% or more of the electricity you produce, you are still going to ‘export’ 50% in the energy companies eyes.

So in theory if you were to use 100% of the energy in your home, which would produce the maximum energy saving on your bill, you are also going to get a payment for exporting 50% of the energy (despite the fact in practise you don’t actually do it).

This is when the export tariff works in your favour, and until smart meters are rolled out, domestic solar installations will be installed with no mechanism for accurately reading how much energy you export.

What this actually means is that in a household that uses 80% plus of the electricity they produce, they are going to get this bonus payment.

I have done a worked example below:

3.5kW system produces 2900kWh of electricity per year, of which 90% of this is used in the home:

  • Generation Tariff Payment – £432 (2900 x 14.9p x 100%)
  • Energy saving – £391 (2900 x 15p x 90%)
  • Export Tariff Payment – £66 (2900 x 4.55 x 50%*)

*That is payment for exporting 50% of the electricity however in reality you are only going to be export 10% of it.

Once I had explained this all to her – she simply said ‘well that’s a no brainer’. We agree – it really is and with the cheeky bonus export tariff payment offering potential returns of over £900 a year now really is a great time to take advantage of it. You may of read about the ‘end of cheap solar panels’ in a blog I wrote a couple of weeks ago, so don’t delay. If you are interested in finding out if solar may work for you, give us a ring on 0208 144 0897.

Have a great weekend and enjoy the sun!