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When feed-in tariffs were first introduced for domestic panels we told you to be wary. We worried that if you allowed a rent-a-roof solar company to put panels on your roof, the payback would be pretty minimal. Sure, you’d save an average of £70 a year or so on your energy bill. But in return for that you’d have to put up with the hassle of having the panels fitted and having equipment owned by someone else on your roof for as long as 25 years, which could reduce the resale value of your house and irritate your neighbours. You’d also have to look on as the solar panel company in control of your roof grew rich selling your excess energy back to the grid. Not worth it.
Things looked better for those who could afford to pay the £12,000-odd cost of the panels upfront. They would not only see the fall in their bills, but also be able to sell any energy they weren’t around to use back to the grid under the feed-in tariff scheme (FITS). That was forecast to earn the typical solar-panel-fitted house around £1,100 a year (money that goes to the rent-a-roof company if they pay for the panels). Better still, that money was to be tax-free and to rise in line with inflation.
But even then there was a problem with the deal: it was offered by a cash-strapped government – and you can’t trust anyone with a fiscal deficit. So it should have come as no surprise to anyone when the government cut solar FITs by more than 50%. Anyone completing the installation of panels after 12 December will get not 43.3p per kWh of electricity, but 21p. That will cut the estimated average returns down to about £500 a year. There will be an even heftier cut in the returns to the rent-a-roof crowd: they will now get only 80% of the rate of an individual homeowner. That makes sense: FITs were never supposed to feed into outsize profits for private companies.
So what does this mean? If your panels are operational, or if they will be by the 12th, nothing. You still get the ludicrously generous return previously promised and should continue to be grateful to your fellow energy users for it: the subsidies are financed by charging them more for their electricity. If they aren’t, or won’t be, your returns will drop. The cost of installing panels has fallen to about £9,000, but that still means the 10% tax-free inflation-linked return early adopters got has now fallen to more like 5%. You might think that makes it no longer worth the bother (you can keep your £9,000 and get 4.4% in a savings account instead) and we’d probably agree – particularly given just how cash-strapped our government remains. They haven’t cut tariffs retrospectively yet. But they could.
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Merryn Somerset Webb
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