Are Solar Panels Still a Worthwhile Investment?

With the changes to the FiTS, many people are beginning to wonder if solar panels are still a worthwhile investment for their homes. If the drop in the tariff rate to 21p kWh has you rethinking your decision to install a solar PV system for your use, these are some facts you should know.

The original FiTS rate was based on much higher costs for solar panels and solar PV installation than we are paying today. When the FiTS was developed, the government expected the price of solar panels to come down slowly over the course of several years. The tariff was designed to return approximately 8 percent on investment. The dramatic drop in the cost of solar panels boosted the ROI, brought far more people than expected into the market sooner than expected and endangered the FiTS. The adjusted FiTS brings the expected ROI back to the level at which it was designed to operate – about 8 percent for a 4 kWp solar PV system.

In short, investing in solar panels now, even with the reduced tariffs, will still result in a high ROI.

In addition to the FiTS income, the benefits of solar panels include lower electricity bills starting from the day your solar PV system is hooked up and operational. According to government figures, the typical 3 kWh home installation will see a savings of about £190 annually. That’s over and above the income from the FiTs.

The typical 3 kWh home installation will pay out approximately £500 annually. That income is tax-free, linked to inflation and guaranteed for 25 years.

Using those figures, the total gain for installing a 3 kWh home solar PV system – the most common size installed for a single family residence – is approximately £690 per year. Over 25 years, that amounts to £17,250.

The typical cost of a 3 kWh solar PV system, including VAT and installation, is about £7,500. That means that over the course of 25 years, your solar panels will earn a profit of nearly £10,000, tax-free.

The actual return on your investment will vary according to the actual amount of electricity your panels generate and the amount of electricity you use. The FiTS is designed to pay you for every kWh of electricity that your solar panels generate, with an additional payment for every kWh your solar PV system generates and exports to the grid. Thus, if your panels generate more electricity and you use less, your profit will be greater.

The best way to get an individualized assessment of the ROI for solar panels on your roof is to set up a consultation with a local installer of solar panels, who can survey your property and tell you approximately how much electricity you can expect if you install a solar PV system on your roof.