Are Solar Panels Still Worth It?
March 18, 2021
Another question we are asked with regularity is –
are solar panels still worth it?
With regularity our answer is –
In order to understand if solar is still worth it, it’s probably a good idea to give some background and explain why the questions in phrased this way.
In April 2010 the then-Labour government introduced the Feed-in Tariff scheme.
The initiative – designed to stimulate investment in clean energy by bridging the gap between the upfront cost and the long-term savings of the technology – was an instant hit. Homeowners and businesses rushed to put panels on their roof/land, and a brand new industry sprung up almost overnight.
The mechanism was simple –
- Investors were paid – via OFGEM, the energy regulator – for each unit of solar energy (kWh) that they generated. This payment – known as the Generation Tariff – was index-linked and guaranteed for 25-years.
- This power could then be used on site for free.
- Any power not consumed at the point of generation was automatically sold to the grid; this ‘Export Tariff’ was on top of the Generation Tariff, and again was index-linked and guaranteed for 25 years.
The scheme, however, was a victim of its own success.
The cost of the subsidy steadily grew as up and down the country more systems were switched on. Eventually, in an effort to control the cost of the initiative the Generation Tariff was reduced to 20 years for all new investors, and the amount on offer was reduced to reflect the falling cost of the technology.
Eventually, in 2015, the Generation Tariff subsidy was cut to virtually nothing, and then stopped altogether for new investors a few years later.
It was time for solar to stand up on its own two feet.
So, is it still worth it?
The answer to this depends on several variables, and even then, it’s entirely subjective.
Firstly, it’s important to identify why you might wish to install a solar PV system in the first place – is it as an investment or is it to reduce your carbon emissions?
If it’s the latter, then the answer is almost always yes. Solar is now a mature technology and a great way of reducing your carbon footprint. That said, this assumes you have an appropriate location in mind that can suitably support the system and won’t leave the panels in shade for most of the time.
If it’s the former then things get a little bit more complicated.
Whilst there is no longer a Generation Tariff, there is still an Export Tariff, and the cost of solar technology has fallen dramatically over the past 10 years.
The first step to understanding whether or not solar is worth it, is to understand the likely cost of the installation; for a development to stack up financially we need the installation to be as straightforward as possible.
Next up is understanding where the power will go once it is generated. If you have a steady on-site electricity demand then the solar array will help offset that; the ideal scenario is that you don’t export anything so heavy users of power are well placed to take advantage of a solar PV system. That said, having somewhere for the power to go is only half the battle – if you buy your power particularly competitively this will only serve to reduce the financial viability of the scheme.
If you have no/little electricity usage, and you are wholly reliant on selling your power to the grid, unless the installation is particularly straightforward or particularly large, you will struggle to make the economics work. Our System Size and Energy Storage blogs explore this dynamic in greater detail.
So…….is it worth it?
In summary, it depends what return you consider ‘worth it’.
For systems that are exporting 100% of their power to the grid, return on investment floats around the 6% mark. For systems that are consuming all of their power, return on investment floats around the 14% mark. Of course, this can change dramatically when localised variables such as the cost of the project and energy price are taken into account, but these figures are fairly average.
If you are borrowing the money to invest in a system that will export to the grid it’s unlikely it will stack up for you. If, however, you have cash to invest, and interest will not dilute your return, solar is a very stable investment. Conversely, if you are installing a system where on-site usage will be high, solar is almost a no-brainer.
If you would like to take a look at your options, call BeBa Energy today.
BeBa Energy UK Ltd do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.’