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Guide to Solar Photovoltaic and the Feed-In Tariff

With the introduction of the Feed-In Tariff (FIT) in 2010 you can now get paid generously for generating your own electricity at home using solar photovoltaic (PV). Such a scheme has existed for many years in Germany and has been introduced in the UK to help our government achieve its legally binding target of 15% of energy from renewable sources by 2020.

The following guide has been written by Thomas Livesey as part of his dissertation research for his BSc (Hons) Geography degree at the University of Brighton. As part of his dissertation research it would be excellent if you could respond to his questionnaire on public opinions of domestic solar PV and the FIT. Please answer the first part of the questionnaire before reading the remainder of this guide and article. Please click here to quickly complete this short questionnaire.

This article outlines the key information about solar PV and it’s financing. Figures are based on a typical domestic installation with a rated capacity of 2.5kW.

Why might I want to install solar photovoltaic on my home?

  • Earn around £910 a year tax free for 25 years from FIT payments (£22,750 in total)
  • Save around £120 a year on electricity bills (£3,000 in total over 25 years)
  • Offset (save) almost 1 ton of carbon dioxide emissions every year

Does solar PV work effectively in the UK?

Yes. Solar PV generates electricity even when it is cloudy. Germany has a very similar climate to the UK’s and experience has shown their wide use of solar PV works effectively. Solar PV will perform best in the south of the UK where solar irradiation (energy from the sun) is greatest, but northern locations are also very effective.

Can I install solar PV on my home and how much does it cost?

Solar PV can be installed on virtually any property in the UK which has an un-shaded roof facing between east and west (through south). A typical 2.5kW installation will cost around £11,000 (which will be easily recouped through FIT payments) and will require a roof area of around 18m2.

What does an installation involve?

A solar PV system consists of solar panels mounted on your roof, a solar inverter and a metering system. The components are integrated into your existing electricity system along with isolator switches for safety reasons. It has no detrimental effect on the structural integrity of your home and usually requires no planning permission. Please see page 3 for a component diagram.

How does the Feed-In Tariff work and what does it return?

The FIT pays one of two fixed rate tariffs for every unit of electricity (kWh) generated by solar PV – a generation tariff for units used to power your home and an export tariff for surplus units exported into the national electricity grid. The scheme is government backed and the rates are index-linked for inflation, tax free and guaranteed for 25 years from the date of installation.

The rates are as follows (for reference 1 unit of electricity [kWh] from the grid currently costs around 12p):

Rated Capacity of Solar PV system Generation Tariff (pence per unit [kWh]) Export Tariff (pence per unit [kWh])
< 4kW 43.3 46.4
4 – 10kW 37.8 40.9

A 2.5kW system in a typical UK location is expected to generate around 2035 kWh (units) of electricity per year. This will:

  • Return around £912 per year in tax free FIT payments
  • Save around £122 per year on annual electricity bills
  • Return combined FIT payments and electricity bill savings of £1032 per year

Over 25 years this amount will total £25,800 at present rates and electricity costs. However the final amount will likely be larger due to increasing electricity costs and index-linking of the tariff. Once the initial £11,000 investment is recouped, a profit of at least £14,800 can be expected over the 25 year period. Please note a larger system will generate more electricity and therefore larger FIT payments and electricity savings (up to around £1850 per year for a 5kW system).

What environmental benefits come from solar PV?

A 2.5kW system as discussed is expected to offset around 0.9 ton of carbon dioxide emissions each year. This is the amount of carbon dioxide that would have been emitted from fossil fuels to generate the same amount of electricity the system has generated cleanly.

How might I fund a solar PV installation?

There are three popular ways of funding solar PV: outright purchase from savings, a remortgage or a loan. The best returns on investment come from outright purchase with lower returns on remortgage and loan methods due to interest costs on the repayments. However a remortgage or loan makes solar PV accessible if you do not have, or do not wish to invest the funds upfront.

Alternatively many companies offer completely free installations, often of much larger systems than discussed here. Typically they will own and maintain the system but be warned, they will claim all of the FIT payments over the 25 year period. This will leave you benefiting from a reduced electricity bill only (around £120 – £200 per year) and no FIT payments.

In some rare cases grants and incentives are available from local governments and schemes of funding which may contribute up to several thousand pounds of installation costs.

What are the maintenance costs, warranties and insurance?

Solar PV systems are generally maintenance free with the exception of panel cleaning at a cost of around £50 every 5 – 10 years. The system components are designed and proven to last a minimum of 25 years, but occasionally the inverters do fail and need replacing at a cost of £1250 if not covered by a warranty. All components and installations come with typical warranties of 5 – 10 years with extended warranties available at an extra cost. Systems can also be insured against vandalism, theft and damage (sometimes as part of your house insurance).

What if I want to move house?

A system could be moved from one property to another but it is unlikely to be cost effective. In theory solar PV will add value to your home because a new owner will benefit from lower electricity costs and FIT payments. However if a free installation has been opted for it may devalue your home because a new owner will benefit only from reduced electricity bills whilst a third party owns and claims the FIT from the system.

Please support Thomas Livesey’s research and complete his short questionnaire. Many thanks.

2 Comments to Guide to Solar Photovoltaic and the Feed-In Tariff

  1. Andy Campbell's Gravatar Andy Campbell
    April 27, 2011 at 8:05 am | Permalink

    The export tariff payment is fixed at 3p/kWh only,

    Rated Capacity of Solar PV system Generation Tariff (pence per unit [kWh]) Export Tariff (pence per unit [kWh])
    < 4kW 43.3 46.4
    4 – 10kW 37.8 40.9

  2. Sara's Gravatar Sara
    February 26, 2012 at 10:27 am | Permalink

    About this, which are the best photovoltaics solar brands in the world?. We are thinking in make an small pv plant and we are not sure about the best brand.

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    April 11, 2012 at 8:38 am | Permalink

    […] act of the coalition has been to cut the subsidies paid to the owners of solar panels. The feed in tariff was a scheme introduced by Labour under which installers of solar panels receive a payment in pence […]

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    April 23, 2012 at 9:23 am | Permalink

    […] feed-in-tariff scheme, designed to boost the domestic scale renewable energy generation market, those who install solar […]

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