UK solar PV returns up to 6.5% – but only until FIT closes


Research released by energy website Green Business Watch analyzes the domestic solar panel costs, savings and returns seen from the launch of the U.K. feed-in tariff in 2010 up to this year. The report outlines the solar panel returns available today and after the FIT closes, on April 1.

Key findings:

Domestic solar panel returns up to 6.5% as electricity prices rise

Rising electricity prices have continued to drive up returns from domestic solar panels over the last three years.

Despite the FIT falling from £0.414/kWh in 2010 to £0.0379/kWh today, cheaper installation costs and increased savings on electricity mean homeowners can still achieve comparable returns.

Solar panel returns to drop sharply after FIT expiry

The government has announced the closure of the FIT from April 1 and that is clearly bad news for solar. How bad will depend on the level of export payments available through the government’s new Smart Export Guarantee. The report compares returns today with two post-FIT scenarios: one with an export payment at the same value as the current export tariff (£0.0524/kWh) and a second with no payment. With the former, predicted returns came in at 4.85% but the authors point out the bulk of those are caused by electricity price inflation and are expected in the second half of a system’s lifetime. System payback time stretches from 13 years for a 4kW system installed today and receiving a FIT, to 17 years for a system installed after the FIT regime expires. With a zero export payment, payback time stretches to 21 years.

Government figures show installation costs have stopped falling

The median cost of a 4kW installation has reduced from £20,000 in 2010 to £6,856 – a 66% drop, but since 2016 costs have stayed pretty much static.

Deals on price are available and will impact returns

This year’s Solar Panel Costs and Returns report is the first to include primary research with installers on costs. Green Business Watch’s survey of installers indicates deals on price are available, and it found a median quoted price for a 4 kW system of £5,657.

The takeaway here is that deals are available on price and getting the right system at the right price will affect payback time and rate of return.

“An installation at the current median cost of £6,856 that receives FIT payments, is looking at paying for itself in its 13th year,” states the report. “With panels having an expected lifetime as high as 35 years, that still leaves plenty of years of profitable generation. With an installation cost of £5,000, however, that system can pay for itself as early as year 10.”

After the FIT expires, a system installed for £6,856 will take until year 17 to pay off. At an installation cost of £5,000, payback time is reduced to a much more reasonable 13 years.

Green Business Watch editor Alastair Kay said: “With the impending closure of the feed-in tariff scheme, investing in domestic solar PV is about to become a much more marginal call. A year or two ago, solar without FIT would have been unimaginable, but rising electricity prices mean better savings from solar. The announcement of the Smart Export Guarantee is positive news, but future return will depend heavily on purchase price coming down and on making the most of the energy from your system.”