Recently there are has much publicity, for example on Radio 4, discussing the financial benefits of solar panels. The latest addition to this discussion is the advent of ‘free’ solar panels. Sounds like a great idea!
For many people a ‘free’ solar panel installation is certainly the right decision. However surprising as it may sound, they are not for everyone. Individuals who either plan to sell their house or have future financial prospects may find a better more financially rewarding solution by actually buying a solar panel installation.
You could be forgiven for wonder why anyone would want to pay for an installation of solar panels if ‘free’ installations are available? The answer is simple, the solar energy that falls on your roof everyday is a fantastic resource that can give you massive financial returns. ‘Free’ installations require the home owner to give up all their rights to harness the true value of this energy, the installer takes all of the benefit (government’s Feed In Tariff) for themselves and the home owner gets the relatively small benefit of some free electricity.
To makes things clearer we can provide some figures. An Intelligent Energy Solutions solar PV installation can start from around £6500 (inc VAT). This system would generate about 850kWh per year. With the governments ‘Feed In Tariffs’ this equates to a total revenue and savings of about £460 per year with a 7% tax free return on investment. This means that to receive the same return on investment as leaving the money in the bank you would require 11.5% bank account (for a high rate tax payer). For larger systems IES can provide a return on investment equivalent to a 16% bank account paying the home owner in the order of £1700 per year. It is for this reason that large investment groups are so keen to use your roof for the realistic saving for you of about £150-200 per year.
To sign up we also expect that homeowners will need to provide a long term legal commitment that the panels will remain on the roof for probably 30 or more years. This can impact significantly on simple things such as maintenance, but could also have more significant implications if you come to sell your home. In 10 years time, solar panels will have reduced in cost and outputs increased, who would buy a house that had an antiquated system that they were legally forced to live with for a further 20 years while another company took all the benefit?
In short you may better off buying a system now that will provide you with an excellent return on investment and have no legal future complications for your property. If you do not have the funds available at present you would be best advised to wait until a time comes when fund are available or even consider borrowing the money as this still makes financial sense.
If you plan on staying in the same property for the next 30 years and you can see no possibility that you will ever have a few thousand pounds to invest then a ‘free’ installation could then be the right decision for you. Frustratingly, many people are entering into these complex legal agreements with no knowledge of the value of the energy on their roof or the possible future complications that this could cause.
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Intelligent Energy Solutions is a leading UK provider of solar panels and heat pumps.