Sunday, 27 May 2012

Solar panel payments slashed

Solar panel returns will be slashed again from August, with a cut to payments, their lifespan reduced by five years and plans to regularly cut back on subsidies revealed.

The major part of the Feed-in Tariff solar panel subsidies will be cut by almost a quarter, for new installations, the Government confirmed. Meanwhile, the period that they are paid over will fall from 25 to 20 years.

The move to cut solar subsidies under the Feed-in Tariffs scheme means homeowners hoping to take advantage of current generous rates must act swiftly - but they have been given an extra month to join.

In an announcement today, the Department of Energy and Climate Change (DECC) said changes to the Feed-in Tariffs solar subsidies scheme would arrive for all new installations after 1 August - a month after the planned 1 July date.

The amount homeowners are paid for generating energy on an average-sized installation will fall from 21p to 16p per kilowatt hour (Kwh).

However, the tax-free element and valuable Retail Prices Index inflation-linking of returns will stay and homeowners will see what they are paid for the small amount of energy they export back to the grid rise from 3.2p to 4.5p per Kwh.

Rolling cuts to returns will also be brought in, with average reductions of 3.5 per cent every three months. This will be based on take up of panels and if it is high returns could fall faster, while if it is low cuts could be delayed.

The DECC claimed that the new tariffs would give a tax-free, inflation-linked return on investment of more than six per cent for most typical, well sited solar panels.

This a is a far cry, however, from the 10 per cent-plus returns some homeowners with panels installed are currently getting.

Tax-free returns of more than 10 per cent a year

The Government took the axe to the Feed-in Tariff in late 2011 – hacking the amount that householders get paid for generating electricity from 43.3p per unit down to 21p – dramatically reducing the potential rewards.

This triggered a big decline in the take-up of panels, but the solar industry says that a rapid fall in the cost of installations has now bumped up overall returns again.

Tax-free returns nearing 10 per cent a year from solar panel subsidies can be achieved again, they say. And even supermarket giant Tesco has got in on the act - offering 20 per cent of its panels this summer.

When This is Money crunched the numbers on Tesco's £6,799 3.92KWp system, using official figures from the Energy Saving Trust, we found that this could deliver homeowners with optimally placed roofs potential returns starting at 12.5 per cent a year.

In a piece of good news for those considering panels, the Government extended the deadline for new installations to keep the old 21p tariff by one month - previously cuts had been scheduled for 1 July.

Those interested must act swiftly, however, as installation lead times of a month to six weeks mean that they may need to book solar panels by mid-June.

The Government claimed that by laying out its future plans for solar panels and the rolling three-month cuts, it would bring 'certainty' to the industry and installations prospects.

Energy and Climate Change Minister Greg Barker said: 'We can now look with confidence to a future for solar which will see it go from a small cottage industry, anticipated under the previous scheme, to playing a significant part in Britain's clean energy economy.

'I want to send a very clear message today. UK solar continues to be an attractive proposition for many consumers considering microgeneration technologies and that having placed the subsidy support for this technology on a long-term, sustainable footing, industry can plan for growth with confidence.'

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