As part of the Green Deal, I am going to a lot homes at the moment and solar PV tends to come up a lot. People are unsure about how the numbers stack-up, they have heard in the news about the recent drop in the Feed-in-Tariff payments, but they are also aware that energy prices are going up substantially every year. So is getting solar PV installed on your home still worth it?!
In a word – Yes!
But the speed of payback is actually fairly dependant on when you use the energy, as you will see in a minute. So here goes and if you want to query any of the numbers, please drop a comment at the bottom of this post. A typical system is about 3.6kW (3,600 watts) in size, which will cost you approximately £6,000.
How much electricity will your Solar PV system Generate?
If you take this figure (or the size of the system you are interested in getting – obviously the bigger it is the more electricity it can produce) and multiply it by 0.8 it will give you the approximate number of kWh the system produces in a year, so in this case a 3.6kW system would work out as follows.
So 3600 x 0.8 = 2880kWh
To give you a rough guide, the average home uses about 4,800kWh each year, although your energy bills will reveal what you actually use.
The Generation Tariff – payment for every kWh of electricity produced
As part of the Feed-in Tariff, the Energy Suppliers are obliged to pay you 15.44 pence for every unit of energy you produce, regardless of what you do with it – this is known as the Generation Tariff and is guaranteed for 20 years, i.e. regardless of whether the FiT drops over the coming years, you will get this payment of 14.90 pence for every kWh you produce.
2880kWh x 14.38 pence = £414.14
But there is more!!
The Generation Tariff is only half the story!
Now unfortunately, as anyone who has done GCSE science will be able to tell you, it is not possible to store electricity so you can either use the electricity as it gets produced by the solar PV system or you can export it back to the electrical grid (you have have battery back-up, however in the UK 99% of homes with Solar PV have grid-tied systems).
The final payback of the system is dependant on the ratio of using the electricity in the home compared to the amount exported.
The Export Tariff – payment for every kWh of electricity exported
For every kWh produced and sold back to the grid you get 4.77 pence (this is known simply as the Export tariff), but for every kWh you can use in the home, it means you don’t need to buy it from the grid at approximately 15.32 pence / kWH.
I hope you can see therefore that it is about 3 times better (financially) to use the electricity you produce rather than export it back to the grid.
Having said all that – it is worth bearing in mind that most residential solar PV systems installed in the UK don’t come with a export meter, so they will simply half the generation meter reading and assume you export that this – this means you will be paid as if you exporting 50% regardless of whether you use all the electricity in the home or none of it.
As a result of this – in an ideal situation you would use 100% of the electricity in the home and you would still be paid as if you were exporting 50% of it to the grid – so a nice little bonus!
In the scenarios below however, I am going to include the export calculations as if you have an export meter, since the move to smart meters will unfortunately remove this nice little bonus!
Maximising the return from your Solar PV investment
So the key here is obviously to have lots of panels, all facing south, and use every kWh of electricity that they produce, however in most cases this simply isn’t feasible.
Imagine being at work all day, your solar system is producing lots of electricity, but you aren’t there to use it. Conversely, a stay at home mum would be much better placed to use all the electricity.
So in the next section I am going to look at 3 scenarios which will determine the amount of electricity a household can use in the home and how much they need to sell (remembering you can’t store the electricity), and therefore their total yearly return from installing a 3.5kW solar system within their home.
Scenario 1 (Parents both working, children at school)
In this scenario, it makes sense that the family will only be able to use their energy early in the morning and when they get home in the evening (obviously they can set washing machines / dishwashers to run as they leave the house), but lets say they use 25% and sell 75%.
Export tariff – 75% x 2880kWh x 4.77 pence = £103.03
Saving on Energy Bill – 25% x 2880kWh x 15.32 pence = £110.30
Total Yearly Return = £414.14 + £103.03 + £110.30 = £627.47
Scenario 2 (1 Stay at home parent, other at work and children at school)
In this scenario, while parent at home will use a decent proportion of the electricity produced, it will be nowhere near the usage if all the family where at home at the weekend for example. In this example lets say usage is about 50% and therefore 50% needs to be sold back to the grid.
Export tariff – 50% x 2880kWh x 4.77 pence = £68.69
Saving on Energy Bill – 50% x 2880kWh x 15.32 pence = £220.60
Total Yearly Return = £414.14 + £68.69 + £220.60 = £703.63
Scenario 3 (retired grandparents at home for the majority of the day)
In this scenario, the vast majority of the electricity that is produced will be used in the home, so I am going to use the ration 80:20.
Export tariff – 20% x 2880kWh x 4.77 pence = £27.47
Saving on Energy Bill – 80% x 2880kWh x 15.32 pence = £352.97
Total Yearly Return = £414.14 + £27.47 + £352.97 = £794.58
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