In 2015 saw the Feed-in Tariff near brand-new applicants, leaving a really different landscape to the heady days of 2010, when the Feed-in Tariff plan was very first launched and the subsidy was around 43p per kWh. In October, solar tax rates also got a shakeup, meaning not every setup is qualified for 5% VAT. So, are photovoltaic panels worth it today?
Speaking simply from a monetary perspective, the response is a definite yes. Of course beyond the financial, there are lots of other ecological advantages to be acquired from setting up solar, installing residential battery storage, driving an electrical automobile and so on. Not least since they all contribute directly or indirectly to dealing with air pollution and the climate crisis.
The solar subsidy may have fallen, however so has the expense of the innovation. Overall the expense of domestic solar electrical energy is now around 8p per kWh.
The economics of solar in 2020
A typical 4 kWp solar system (10-13 panels) now costs around ₤ 5,500 inc 5% VAT. There will be some upkeep costs over the life, and a probable inverter replacement needed, total cost around ₤ 1,750 in todays cash. The true all-in cost of the system is around ₤ 7,250.
Usually a system will create an average of around 3,500 kWh a year, enabling for a modest deterioration gradually. In its 25 year life, it is anticipated to create about 88,000 kWh of electrical power.
The unsubsidised cost of solar
Ignoring export tariff payments in the meantime, that means each kWh produced costs 8p:
kWh from 4kWp system over 25 years:
Cost per kWh:.
Overall system expense:.
System cost consisting of 5% VAT:.
Lifetime maintenance expense (present value):.
Obviously to get optimal take advantage of electricity that costs only 8p per kWh, you require to be utilizing as much of it as possible on site, displacing imported electrical energy which might cost as much as 18p per kWh (on a time-of-use tariff), or 20p per kWh on a normal Economy 7 tariff. These time-of-use tariffs will then enable you to purchase low-cost electricity in the evening (at 8p per kWh, say).
If you do not utilize the solar electricity (or shop it), it will not deserve that much to you – it will only deserve the export tariff, around 5p per kWh.
So with a time-of-use tariff, you will acquire around 10p per kWh by displacing pricey daytime electrical energy, and lose around 3p per kWh on anything you export. Without a battery, as long as you use a minimum of 50% on website you are going to be quids in.
Solar plus domestic battery storage.
With a battery and a time-of-use tariff, you will quickly use 70-80% on site, and open the potential to top up your battery (and your cars and truck) with inexpensive over night electrical energy, whilst avoiding altogether the high daytime tariff intrinsic in a time-of-use tariff.
The saved electrical energy will cost you a bit more than 8p per kWh (more like 20p per kWh all-in), since of the expense of storage, however you will minimise export, still advantage from the cheap over night rate of the time-of-use tariff to charge your car and top up your battery, and, with Powerwall 2 for instance, you have actually the added bonus that your lights will still be on in a power cut.
Conclusion: solar is still an excellent investment!
As long as you use at least 50% of your power on website, then, with a sensible choice of import tariff, solar will make sense. The more you utilize on website, the greater the savings. Using whatever on site provides an expense well below the average houses grid electricity expense of around 16p per kWh, and even further listed below a typical peak time-of-use tariff of 18p per kWh..
Whats more the cost of grid electricity is rising. According to page 11 of the Governments newest “Quarterly Energy Prices” publication, domestic electrical energy expenses increased by 6% when comparing 2019 with 2018 ….
On a financial return basis, the internal rate of return (IRR%) from a financial investment in a planetary system is typically 9% over the life, non-taxable and connected to inflation. The number of other investments yield 9%, dependent only on the sun continuing to shine?
Last year saw the Feed-in Tariff closed to new candidates, leaving a very different landscape to the heady days of 2010, when the Feed-in Tariff plan was first released and the subsidy was around 43p per kWh. The solar aid may have fallen, but so has the expense of the technology. Overall the cost of domestic solar electrical energy is now around 8p per kWh. A normal 4 kWp solar system (10-13 panels) now costs around ₤ 5,500 inc 5% VAT. There will be some maintenance costs over the life, and a probable inverter replacement needed, overall cost around ₤ 1,750 in todays money.