Monday, 11 May 2009

The rewards of solar panels

The initial cost is high, but don't let that put you off. Two key developments in recent months have made it worth considering solar PV panels.

One is that a government incentive for PV doubled on 1 April and the other is that interest rates on many savings accounts have dropped to about 0.1%, meaning it is time your money worked harder.

And don't be deterred by the idea Britain doesn't get enough sunshine. In fact, solar radiation here is remarkably consistent and only around one third less than southern Italy or Spain. I have just come to the end of my second year with a solar PV system on my roof and it has been a great success.

We have a 3kW peak system (about 4m by 3m) on the roof. It produced 2,703kW hours (kWh) in its second full year (to 5 April), only 1% lower than the 2,730 kWh it produced in the first year, and that in spite of a lousy 2008 summer.

That was about 80% of the 3,500 kWh we used, and our usage was up because we had builders do some underpinning, which meant lots of kettles and cement mixers on.

The previous year we – a family of four – used 3,000 kWh, so the solar system produced 92% of our needs, a figure we expect to return to in the coming 12 months.

The panels, made by Kyocera of Japan, come with a 25-year guarantee and should last a lot longer than that. What you effectively do when you buy a solar PV system is pre-buy decades of electricity at today's price, thus shielding you from price rises. One great thing about a PV system is that it is "fit and forget" with little or no maintenance or noise. And they don't have to go on a directly south-facing roof – ours points south-east and works very well.

So how do the figures work out? Well, buying 3,000 kWh of electricity normally would cost around £420, based on 14 pence/kWh with npower, our supplier. We end up saving almost £400 of that by producing nearly all our own.

On top of that, we were getting payments under the government's Renewable Obligation Certification (ROC) scheme of around £35 per megawatt/hour, rounded to the nearest whole one. So that is £105, putting us about £70 in the black for the year.

Since 1 April, that ROC payment has doubled to £210, putting us about £175 in the black. That compares with £420 in the red without the panels – a gain of almost £600 a year.

Indeed, the system means that, with a condensing boiler, we are now down to only about £30 a month to heat and light our property while our carbon emissions are very low. So what about the investment yield? The system cost £17,000, for which we got a 50% grant, making £8,500. With a return of £600, that's around 7%. It's not taxed, so is equivalent of about 9% for a basic-rate taxpayer and 11% for a higher-rate taxpayer. You'd struggle to do better buying junk bonds and this stuff is certainly not junk!
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