Free Solar Panels? Govt loses appeal, time to get 'em?

Solar panels are not just about group hugs and saving the planet, some have been able to make big bucks from them. Yet government subsidy cuts have firebombed the gain.

The logic is currently in a state of flux. Some may still be able to make decent cash from buying solar panels, though the 'free panels' option may have been killed off. This guide will take you through the logic.

While every effort’s been made to ensure this article’s accuracy, it doesn’t constitute legal advice. If you act on it, you acknowledge you do so at your own risk. We can’t assume responsibility and don’t accept liability for any damage or loss which may arise from your reliance upon it.

LATEST NEWS: MARCH 2011 Solar panel subsidies may fall further

In February the Department for Energy and Climate Change (DECC) confirmed plans to halve the feed-in tariff, which pays people to generate electricity, for anyone who installs and registers from 3 March 2012. (Though if the Government is currently fighting a legal battle to try to change this date to 12 Dec 2011 - see explanation below.)

People who install from 1 April will also have to produce an energy performance certificate of grade D or above to qualify for the full payments. The Government estimates about half of all properties already qualify. (There may be free cash to help - see Home & Energy Grants.)

The Government also proposed almost halving subsidies again by April 2013 in three further stages (see Solar subsidies may fall further news story).

How does the solar subsidy work?

Solar panels save the typical home £90-£180/year in electricity. But the real boon's that the Government guaranteed for 25 years you'd get a high 'feed-in tariff', ie, be PAID to generate energy, even if you use it yourself, at over 3x what we pay. So on £10,000 panels, you could earn £1,000+/year for 25 years.

But in Oct the Government announced the rate would soon be more than halved for new sign-ups.

The Government lost its appeal

Friends of the Earth and the once-rampantly growing solar industry have been locked in a fierce battle with the Government.

The Department for Energy and Climate Change (DECC) planned to halve the feed-in tariff for anyone who installed and registered after 12 Dec 2011, even though the consultation on the plans ran until 23 Dec. The Court of Appeal upheld a High Court ruling that these ‘retrospective’ cuts were unlawful.

This may mean homeowners who get panels up and running before 3 Mar could lock in the higher payments for 25 years. Though the Government is now seeking permission to attempt to overturn the ruling in the Supreme Court.

Here’s a quick Q&A on how things stand ...

How much are the solar payments now?

Can I sign up and get installation before the deadline?

I've ordered panels, but they're not fully fitted?

How do I register my Microgeneration Certification Scheme certificate?

Is it still worth doing once the feed-in rate’s halved?

Can I still sign up for free solar?

What are solar panels?

You put solar panels on the roof to generate energy from the sun. There are two types of panel: solar photovoltaic (PV), which generate electricity and solar thermal, which heat water. This guide focuses on solar PV.

"Hang on, we don't live in California" may be your first thought. Yet solar panels don't need sunshine to work, just daylight, so you can still generate some electricity on gloomy days – important in a country with weather as dull as watching Steve Davis sleep.

PV roof tiles convert the light into electricity, which you can use to power your home during daylight hours. Any energy you don't use is pumped back to the grid. If you use more than the panels generate, the excess comes off the grid, exactly as it did before the panels were fitted.

In the winter, when solar power is less, you'll take more power from the grid. It's a good idea to set appliances to run while it's light outside, staggering them to max the savings. For tons more top tips from solar nerds, read the forum's Make the most of solar panels thread.

What's in it for you?

Done, right solar panels save you cash. You save in two ways:

• Electricity bill savings. The Energy Saving Trust (EST) estimates a typical 2.9kWp system can knock £90 to £180 off a family's bills, depending on system size, electricity use, whether you're at home during the day and other factors.
  
  

  While solar panels can produce 50% of a home's electricity, often much of this gets pumped back to the grid. If energy prices rise significantly over 25 years as they are predicted to, you'll save more.

• Feed-in tariff payments. Back in 2010 the Government ditched grants for solar panels and replaced them with a scheme that pays for all the solar energy you produce, even if you use it yourself.
  
  The amount you earn depends on your system's size - do your sums first. A typical payment could be £550/year under the new tariff or £1,100/year under the old tariff.
  

Should you pay or get 'em free?

Warning! When it comes to installing, in the past you had two clear options: get solar panels fitted for nowt or, if you could stump up a typical £10,000, buy your own system and get payments from a government scheme.

However, currently the free solar industry is currently in a state of flux. Some are still taking applications, but be careful - see latest news.

Route 1. Buy your own panels

If you've £8,000 to £12,000 knocking about, you could get this back in payments for the energy you produce. Some firms will also let you buy solar panels on credit. However, if you don't have the cash upfront, panels aren't for you. The interest on the loan could dwarf the savings.

This is all about the Government's feed-in tariff scheme, which it has slashed this for newbies - see latest news. It means electricity companies must pay people who produce electricity from renewable energy sources such as wind or the sun.

The Energy Saving Trust (EST) says a typical new £10,000 2.9kWp (kilowatts peak, the rate it generates electricity on a sunny day) system could earn £1,100/year in payments under the old feed-in tariff and or £550/year under the new tariff.

These figures are not guaranteed and depends on system size, location etc. Yet the key to this is:

A typical system costs £10,000 but over 25 years, the feed-in payments under the old tariff could be £27,500.

Though it's just £13,750 under the new tariff. The Government says the feed-in tariff payment for solar panels will run for 25 years from the date that a system is installed and registered, and will rise with inflation (linked to the Retail Price Index).

Is it still worth buying solar panels?

Solar panels used to be a no brainer, but Government's feed-in cuts totally changed the maths. For new solar users who install from 3 March, an £10,000 outlay could get back around £13,750 in payments over 25 years, compared with £27,500 for those under the old feed-in tariff. The saving for installations on the new tariff rise to to £17,250 if you include energy savings.

The cost-to-return ratio is much less attractive and it's far from a guaranteed win at this level, though there are, of course, environmental benefits. On the plus side the feed-in payments will rise with inflation (linked to RPI), plus you'll save more if energy prices jump significantly, which they could well do over 25 years.

If free solar companies do survive, the reduced payments for owners mean the free schemes will be an even more attractive option.

Yet this will be a fine balance. You should do your sums very carefully and explore other options, for example Fixed Rate Savings.

New energy efficiency requirement

People who install from 1 April need an energy performance certificate of grade D or above to qualify for full payments. The Government estimates about half of all properties qualify.

The certificates grade homes on energy efficiency. This will be another outlay if you don't already meet requirements (there may be free cash to help - see Home & Energy Grants). Homes on lower grades will get less than half the standard payments.

Route 2. Get 'em free

Warning! 31 Jan 2012. Free solar market in state of flux

The free solar industry is currently in a state of flux and many are not currently taking applications - see latest news.

However, HomeSun, Isis and A Shade Greener say they are still taking new sign-ups for the time being. Though much could change rapidly, so be careful.

If you're in England, Wales or, in a few cases, Scotland, panel firms will fit a state-of-the-art system to your home for free, possibly cutting your leccy bill by £90 to £180 a year.

Why do they do this?

Normally the homeowner grabs the big-money feed-in cash, but, in return for the free solar panels, they keep this. So you get cheaper leccy bills, they get the payments.

The £1,000s in feed-in payments dwarf the electricity savings, so if you have the cash, consider buying the panels outright.

Warning! What to watch out for with free solar

This is a relatively new industry. Your home is your most valuable asset, so think very carefully about what it means to sign up for a 25-year commitment. Don't read this as a "don't do it", instead a "be prepared that if you do, it may not be plain sailing". Read these points to bear in mind.

The free solar panel companies

Here's a comparison of the UK's biggest free solar panel companies. What happens will also depend what's in your contact, so read carefully before signing, preferably seeking legal advice.

The solar panel companies say the buyout fees they gave us are fixed, although, of course, they vary according to system size. Yet always ask it to include a schedule of these fees in your contract, and to confirm the charges will not rise.

This is a relatively new industry, so while we have info from the providers, what we don't have is much feedback from MoneySavers who've been through it. Please add your feedback to the companies' threads if you sign up.

Solar panels: key warnings

This week the Government announced it will cut feed-in payments to just under half for newbies. The new rates completely change the maths - see govt announcement update.

There are some important checks to do before you buy panels or sign up for freebies ...

• Check if you need planning permission
  
  You don't generally need planning permission for solar systems. The big exceptions are if you've a flat roof, the property is listed, or it's a conservation area.
  
  You might need to get approval from your council's building control team though. Check with your local authority. If you get a free system, your provider will normally do this for you - but always check.
• Tell your mortgage provider and insurer
  
  As with any home improvement, you should contact your insurer and mortgage provider. If you go for the free option, check that the company will liaise with lenders and insurers.
• What if the solar company went bust?
  
  

  If the free solar panel firm went bust, it's likely the panels would stay on and be maintained. The rights to collect your feed-in tariff would be creditors' biggest asset, so chances are they'd sell this right on to another company.
  
  Yet this is a totally new business model, and things could change if the Government withdraws the feed-in scheme, so it's impossible to predict all eventualities.
  

• Converting your loft could be tricky
  
  

  If you're planning to convert your loft, ask the installer if you'll still be able to. For example, sometimes inverter equipment is stored in the loft, meaning less space.

Here's a list of commonly asked questions. (Also see the the Solar Panel Q&A forum thread, where efficiency advice body the EST kindly answered users' questions about solar panels and feed-in tariffs.)

Crucial tips to save £100s on energy bills

Obviously there's absolutely no point at all in installing a swanky solar panel system if you haven't tried other ways to save first. Here are our top tips:

• Switch energy

  Switching energy is easy: nothing changes other than who bills you. If you've never switched before you can save £200+/year. While the cheapest online deals for typical users are around £900 a year, those on a standard tariff typically pay around £1,150.
  
  For full info on the top comparison sites and how to get extra cashback, get £40 cashback or a case of wine, see the full Cheap Gas & Elec guide.

• Pay by monthly direct debit

  Set up a monthly direct debit to pay your bill and you'll usually save around 5-10% extra, yet it's crucial to make sure the energy company doesn't set it too low or too high. Either the supplier keeps hold of your cash unnecessarily or you end up with a big bill at the end of the year. Full details in the Energy Direct Debits guide.

• Do a meter reading regularly
  
  Every time you receive a bill, do a meter reading. Don't rely on your energy provider's estimate; these are often way out. If they're under-billing, you'll have a big whack to pay at the end of the year. If they're over-billing, then they've unfairly got your cash.

  If your direct debit is way off kilter, call up and request it's changed. You have a range of rights to ensure it's correct. See the full Energy Direct Debits guide for template letters to help.
  

• Switch to an internet tariff

  Switch to your company's internet billing. It will usually save you up to 10% over the standard tariff, and all it really means is you get your bills emailed.
  

• Grab £1,000s of grants

  There's a vast range of grants available for improving home heating and insulation. Just go to the Energy Saving Trust's Energy grant search. For more grants available for all types of home improvement, see the full Grant Grabbing guide.

  
  

Please feed back on how you find this info and if anything needs improving.