With the introduction of the feed in tariff last April, solar panels can generate a return of around 10% on savings. The paper has advised readers to consider using this as a way of beating interest rates of around 1-3% offered by most highstreet banks.
Despite recently announced spending cuts, the coalition government has confirmed it will maintain funding for the feed in tariff in order to encourage households to switch to generating their own renewable energy.
“Given that the income is tax-free, the return on a £14,000 investment is equivalent to 12.9% for a 50% tax payer and 10.3% for a 40%tax-payer, with the investment recouped in as little as seven years. As the payments are linked to RPI, this equates to a real return of 18.2% and 15.6% respectively at today’s RPI rate of 5.3%” reports The Sunday Times.
How long will it take to get my money back?
One of the most common questions we are asked is “What is the payback?” for solar systems. Well first and foremost it does have a payback. Whether you use electricity gas coal or oil the supplier does not offer you any pay back at all. No matter how much gas, electricity oil or coal you buy and no matter how long you buy it for, you never get your money back. You also have to regularly service, maintain and renew your fuel burning equipment.
Various government bodies define sometimes payback as the annual fuel bill savings divided by the capital cost. This is simply inaccurate and misleading.
If you take a proper view of payback, you have to factor in future energy increases, take account of inflation , look at the savings in boiler servicing and the ability to make a boiler last longer. Doing the sums properly solar systems offer a payback between 4 and 10 years, depending on the fossil fuel displaced and the future inflation factor, and the amount of hot water you use.
Installed correctly your solar system will last for 30 years with minimal maintenance. If the product is built into the home in the course of construction the payback period declines rapidly.
Although payback is one way of looking at the cost it is perhaps more accurate to look at the return on your investment that a solar system offers. Typically the average financial savings on a good solar system will be equivalent to a tax free return on your investment of between 7% and 15% and this figure can increase depending on factors such as application and hot water usage.
The simple answer is “yes there is a payback” with a solar system unlike any of the standard gas, oil, coal or electricity suppliers you are currently using who offer no payback at all.
