I thought I might share a recent personal experience of mine. Having considered the idea of generating my own electricity by way of solar photo voltaic panels on my roof for the last few months, I have finally taken the plunge.
My house is directly south facing, so the roof is in a prime position for capturing solar energy.
I now have a roof with 16 solar panels - a 2.96 Kilowatt (kw) array, producing an estimated 2467 Kilowatt/hours of electricity (kw/h) in a year.
The government are so keen to encourage all of us to help them reach their legally binding target of generating 30% of electricity from renewable sources by 2020, that they have made the level of subsidy available to you and I really quite high.
The main subsidy is called the Feed in tariff (FIT), 43.3p Kw/h, index linked each year to RPI inflation, currently running at over 5%.
Next is the export tariff, at 3.3p Kw/h, index linked to electricity price inflation.
And this is the interesting bit. Because it is not yet possible to determine how much of the solar electricity you are selling to the national grid, and how much you are using, it is assumed that you are using 50%, and are paid for the other 50% by way of the export tariff.
But of course you can use as much of the solar power as you want. So by changing how you use your main appliances, you can in theory save even more.
This is how figures for my house stack up:
The cost of Installation, inc VAT at 5% came to £11,000.
In round figures I then receive £1100 per year in tariff payments, and save an estimated £150 on my electricity bills. That equates to a yearly income, index linked to inflation of £1250. An 11% tax free return.
This means that in just 8 years, my solar panels will have been paid for, leaving 17 years of tax free index linked returns, and much cheaper electricity bills.
So where does the money for such generous tariff payments come from?
Perhaps controversially, it turns out that every single one of us are paying by way of a hidden levy on our electricity bills, whether you take advantage of this scheme or not.
And if you can't afford to pay for your own solar panels, there are numerous companies who will fit them for free. They pay for this by taking the feed in tariff and export tariff themselves, leaving the householder free to use any electricity generated.
But as impressive as the figures are, there are a couple of points to bear in mind when choosing from the ever growing number of companies in the solar power sector.
A Which? report earlier this month found that some companies were offering customers misleading information.
For example the amount of sunshine available each year has been exaggerated in some instances, which in turn exaggerated the amount of electricity likely to be generated, and income receivable.
Some companies were quoting sunshine totals for Cornwall for other locations around the country which get much less sunshine. The figure for Northern England, and used by the Energy Saving Trust is 833 hours of sunshine each year, based on the solar irradiance map shown below.
Also worth pointing out that some companies will quote a higher figure of electricity savings such as 70%, which again would increase the savings on electricity bills, rather than the industry standard 50%.
Finally, this is a long term investment - so check that the panels come with a 25 year warranty - which will come into play should the performance drop below 80% of total output - and that if the solar panel manufacturer goes bust - the warranty is insured.
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