Solar energy payments are set to be slashed - will getting panels still  be worth it?

Solar energy payments are set to be slashed - will getting panels still be worth it?

The sun is to set on solar energy payments next March, as the Government proposes to end the payment scheme for generating solar energy and exporting it back to the grid. 

In a recent consultation, the Government confirmed its intention to close the feed-in tariff (FIT) scheme from 31 March 2019 - essentially stripping large, financial incentives to get solar panels. 

So, will they still be worth it? From a financial perspective, this is how long it takes to recoup the substantial cost of getting panels fitted - often more than £6,000 - through the savings you make from having them. And we're going to explain why, if you're thinking of getting solar panels fitted, you'd better move fast. 

This blog concentrates on whether the cash incentives are worth it, but for lots more on solar panels, their environmental impact and how to fit them, see our Solar Panels guide.

So what's changing?

Under the FIT scheme as it stands right now, you get paid in two ways for having solar panels - with payments for any electricity you generate, plus payments for everything you don't use and export back to the grid. 

However, back in 2015, the Government announced it wanted to end the generation part of the feed-in tariff in March 2019.

In the latest consultation, published in July, it not only confirmed this intention, it also proposed ending payments for exporting electricity at the same time. A double whammy. 

If this goes ahead, the only benefit of getting solar panels after March 2019 would be the savings on your energy bill. This means it could take upwards of 70 YEARS to claw back your initial investment - nearly three times longer than most panels are expected to last. 

Its reasoning for axing the scheme is that it'll make consumer bills cheaper. The FIT scheme is funded by levies on energy suppliers, which are passed on to all consumers through their bills - whether or not they get payments. Latest estimates put the cost of the scheme at £1.6 billion by 2020.  

If you already have solar panels - don't panic, you'll still get your payments. These changes are only for new installations. But, be warned, if you're thinking of getting them, you'll need to move quick and get them installed and certified before the cut-off date or risk missing out. 

What is the feed-in tariff? 

The FIT scheme was launched in 2010, providing payments for the electricity you generate if you install certain types of renewable energy technology in your home. 

The most popular type is solar photovoltaics - known as solar PV or simply solar panels - with around 800,000 systems installed under the scheme. 

Installing solar panels under FIT provided two extra payments

  • Generation tariff. This pays you a set rate for each kilowatt hour (kWh) of electricity you generate. Under the scheme, the price you get for each kWh is guaranteed for 20 years at the rate you signed up to at the time. 
  • Export tariff. This pays you a further rate for each kWh unit you export back to the electricity grid - though as most homes don't have the technology to measure exactly how much you export, it's assumed that half of what you generate is exported. 

You get these payments for a period of 20 years, or for a total of 25 years if you signed up to the FIT scheme before August 2012. 

Then there are the savings on your bill as you're generating your own electricity, so you don't need to buy as much from energy providers. 

How much do you get on average? 

It depends when your solar panel system was registered with the scheme - the rates you get for both the generation and export tariff change regularly. 

Under the latest rates, from July 2018, you get 3.93p for each kWh you generate - if you get the full payment (it depends on the energy efficiency of your home) - and 5.24p for each kWh you export. It's index-linked so it rises with inflation. 

As what you earn and how much you save depends massively on where you live - and therefore how much sunlight you get - and how much electricity you use, average savings are difficult to calculate. 

However, the Energy Saving Trust (EST) provides information on likely savings across various parts of the UK, which get different amounts of sunlight, for someone working full-time - and so only using electricity in the evenings.

How much you can earn & save on average before March 2019

  ESTIMATED SAVINGS AND/OR EARNINGS PER YEAR
  London Aberystwyth Manchester Stirling
Generation payment (1) £145 £130 £125 £115
Export payment (1)  £105 £95 £95 £85
Electricity bills savings (2) £90 £90 £85 £85
Total/year £340 £315 £305 £285
         
Cost of system £6,500 £6,500 £6,500 £6,500
Years to break even  20 21 22 23
Correct from July 2018. Payment scheme covers England, Scotland and Wales, but not Northern Ireland. (1) Based on a 4 kilowatt solar PV system. (2) Assumes you're only home during evenings. (3) PV systems installed before 2012 qualify for 25 years of payments; after that it's 20 years

So say your system costs £6,500 - around the middle of the EST’s estimate - you’d break even in around 20 years in London, 21 years in Aberystwyth, 22 years in Manchester, and 23 years in Stirling.

However, it’s important to note that you only get the generation and export payments for a period of 20 years, so it could take far longer to break even.

So will it be worth it after payments are cut?

Unless the cost of the panels and installation comes down further, probably not from a financial perspective, though there are of course environmental reasons to get them.

How much you can save on average after March 2019

  ESTIMATED SAVINGS PER YEAR
  London Aberystwyth Manchester Stirling
Electricity bill savings (1) £90 £90 £85 £85
         
Cost of system £6,500 £6,500 £6,500 £6,500
Years to break even 73 73 77 77
Correct from July 2018.  (1) Assumes you're only home during evenings.

Without the FIT, solar panels really don't seem to make much financial sense for most working families, as the cost of the panels would take almost an entire lifetime to recoup - possibly as much as THREE TIMES as long as some solar panels will actually last (estimated to be around 25 years).

Of course, if you use more electricity - for example, you have a large house and/or you're at home during the day - then the savings MIGHT just about pay for the panels. According to the EST, someone in this situation, living in London, could make savings of £5,500 over a 25 year period (while in Aberystwyth and Manchester it could be £5,250, in Stirling £5,125). 

This is on the very low end of the EST’s estimate on how much solar panels cost - of between £5,000 and £8,000. 

I’m thinking of getting solar panels, what should I do? 

Well, the first thing to say is "hurry up". Ofgem says you need to have the panels certified on or before 31 March 2019 to get the feed-in tariff. This means you both need the panels installed, and certified under the Microgeneration Certification Scheme (MCS).

You must use an MCS-certified installer using MCS-certified equipment. Once you've decided on which contractor will fit them, allow 1-3 days for installation. The contractor will register your installation on the MCS database.

You then have until 31 January 2020 to make an application to a supplier that pays the FIT - you can find a list on Ofgem’s website.

You’ll also need to be wary of what’s known as deployment caps. These were introduced in February 2016 to limit the amount of new FIT payments given in a ‘tariff period’ - which is usually every three months.

Unfortunately, there's no simple way to check this - apart from referring to Ofgem's weekly updates for the current 'tariff period'. Currently, for domestic solar panels, we're well below the caps. 

It's important to stress that if you do install panels before next spring, it’s typically 20+ years to break even - but wait until after March 2019, you're looking at 70+ years.

How long does it take to get solar panels?  

The process of getting solar panels, from start to finish, can take a while – to be safe we recommend allowing around two to three months to get it all sorted.

First of all, you’ll need to get some quotes – it’s best to get at least two or three. You’ll need the installer to visit and check your roof to get a proper quote. Arranging this with two or three installers could take time, so it's best allow a month or two for this.

Once you’ve chosen the installer, you’ll need to get a date for the installation. Again, this is subject to how much other work they have on, but it could easily add another month on to the waiting time.

Once you have a date, the actual installation should only take a maximum of two days. When it’s done, your installer has 10 working days to get the system certified with the Microgeneration Certification Scheme – if they don’t, you could face a lengthy process to get this resolved. So if you’ve not got your certificate from your installer within five days, start badgering them.

It's also important to remember you need Energy Performance Certificate (EPC) –  which rates a building on its energy efficiency – of Grade D or above to get the full FIT payments (anything below Grade D and you’ll get paid a reduced rate).

You can check if your home has one, but if not you’ll need to get an EPC certificate BEFORE you get solar panels installed, so allow extra time to get this sorted as well.

When you take everything here into consideration, if you’re seriously interested in getting solar panels, it’s best to leave it no later than January 2019 to get started.

'Look into it as soon as possible'

Advice from the EST is to look into it as soon as possible. The EST's home renewables manager Tessa Clark said: "The UK Government is proposing to close the FITs scheme to new applicants at the end of March 2019.

"So if you’re planning to install an electricity generating system - like solar PV - and receiving FITs payments is critical to this decision, we’d encourage you to look into it as soon as possible.

"You now have limited time to research options, install panels and register for the scheme before its potential closure.

"However, it’s really important not to rush into a decision without doing your research. To apply for FITs you would need a Microgeneration Certification Scheme certificate, so both the installer and the system you install would need to be MCS accredited.

"All MCS installers must be members of a consumer code (such as RECC or HIES) and work must adhere to their code’s standards. We’d recommend getting three quotes to allow you to compare services and costs and find the best option for you. You can find more information about solar panels and the Feed-In Tariffs scheme on our website.

"For residents living in Scotland you can get free, independent and local energy saving advice by calling Home Energy Scotland on 0808 808 2282. For residents in England or Wales, please visit www.eachhomecountsadvice.org.uk or for residents living on the Isle of Man visit www.gov.im/brightideas."

I have solar panels and get FIT payments - will I lose this?

No - for most, the payments are guaranteed to last 20 years, or 25 years if your solar panels were installed and certified before August 2012.

So how else can I save?

If the proposals go through and you miss the deadline, the best way to save is still switching your energy supplier - many can save £350/yr or more. Do a full comparison to see what you can save.

Even if you already have solar panels, you’re still free to switch supplier - and you don’t need to change your FIT provider, it’s completely separate. Simply do a comparison as normal.

For more info see our Solar Panels guide or ask our Green & Ethical MoneySavers for tips.