Returns are better than they were when the feed-in tariff started – but people need to act now to benefit before it is reduced further on 1 July 2012, says YouGen founder Cathy Debenham.
She adds that PV installations have slowed down radically in April despite still offering good returns on investment. And that there is a mistaken belief that the feed-in tariff (FiT) ended on 31 March 2012.
Her point is proven by two calculations based on her own PV installation, installed in February 2010, and an even larger system installed at present costs and eligible for the current FiT rate of 21p/kWh.
Said Cathy: “I installed solar PV in the early days of the feed-in tariff, and because costs have fallen radically since then, people installing today will get a better return on investment than I did in February 2010.
“The trouble seems to be that people think that the feed-in tariff ended on the first of April . That is not true. It’s still there. It still gives rates of return that are significantly higher than you’ll get from a bank. And the capital costs of installation have more or less halved, making it accessible to more people. However, the rates are due to reduce on 1 July 2012, so it’s worth acting now to get the best deal.”
To illustrate the situation, see below what you get today with Cathy’s solar PV installation – which was installed in February 2010. She has a 2.1kW system, predicted to generate 1,672kWh (it actually produces more, so for ease of rounding we have used 1,700kWh in the calculations below).
Cost of installation: £9,000 (this included panels at cost, so most people installing at that time paid more)
Annual output: 1,700 kWh
Feed-in tariff generation rate @41.3p/kWh: £702.10
Used in the home: 850 kWh
Savings from electricity bill @12p/kWh: £102
Exported: 850 kWh
Income from export @3p/kWh: £25.50
Total return: £829.60
Annual return: 9.2%
Payback: 10.9 years
Now you can get a 4kWp system for less than Cathy paid for a 2.1kW system. So here are the same calculations run again for a bigger system.
Cost of installation: £8,500
Annual output: 3,400 kWh
Feed-in tariff generation rate @21p/kWh: £714
Used in the home: 1,700 kWh
Savings from electricity bill @14p/kWh: £238
Exported: 850 kWh
Income from export @3p/kWh: £51
Total return: £1003
Annual return: 11.8%
Payback: 8.5 years
These calculations are rough guides only, as they do not allow for any maintenance costs, and do not annualise or levelise the capital expenditure.
She adds: “These calculations demonstrate that solar PV is still attractive and as electricity prices continue to rise, and installation costs fall, it will get closer and closer to grid parity, and will no longer need government incentives.
“There is a two month window of opportunity to still get solar PV before the rates reduce again. It’s not as attractive as it was pre 12 December last year when the returns were ridiculously high, but it’s still a good insurance against the steadily increasing energy prices.
“Don’t leave it until the last two weeks of June to ring an installer. They’ve proved that they are good at reacting to deadlines, but if you leave it too late, they may have laid off their staff.”