Solar panels use the sun’s energy to provide either hot water or electricity in the home There are two different types of solar panels with very different costs and benefits:
- Solar water heating panels
- Solar PV (photovoltaic) panels
Both types of panel need to be mounted on a roof, ideally facing due south.
Solar water heating panels
This system uses the sun’s energy to provide hot water. The panels heat water protected with anti-freeze which is pumped around a circuit between the panel and a coil in the hot water storage cylinder, heating the water in the cylinder. During the summer, the energy from the sun should be sufficient for most people’s hot water needs, providing 80-90% of household demands. In the winter a gas boiler is normally used to make sure the water temperature is hot enough, as the solar heating only contributes 20-30%. Assuming you have an existing gas central heating boiler then the additional solar panels cost would include:
- Dual coil hot water cylinder (210 litres) circa £900 (£750 ex VAT) – a single coil cylinder is not suitable. See twin coil hot water cylinder.
- Roof kit for solar panels (2 panel) circa £1,440-£1,680 (£1,200-£1,400 ex VAT) depending on whether panel is mounted on roof or replaces tiles.
- Plumb kit (pump and controller) circa £600-£720 depending on heating capacity ( £500 – £600 ex VAT)
- Installation circa £800 for 2 days work.
There are incentives for those installing solar water heating panels (solar thermal). Currently under the governments RHPP (Renewable Heat Premium Payment) scheme, a suitably installed system will get a grant of £600. This scheme end on 31 March 2014 after which the Renewable Heat Incentive (RHI) scheme should come into effect (subject to being approved by parliament). Under the RHI scheme payments of 19.2p/Kwh will be paid on domestic properties, subject to having a Green Deal Assessment and having minimum levels of loft and cavity wall insulation. The payments will be made for 7 years and will be updated in line with inflation. See Renewable Heat Incentive (RHI) Announced For Solar Water Heating Panels for more information.
Note: A combi boiler is not generally recommended for use with a solar water heating panel.
See an explanation of how these systems work (courtesy of Worcester Bosch).
Solar PV (photovoltaic) panels
These use the sun’s energy to generate electricity which can then be used to power lights and appliances around the home. Surplus energy can be sold back to the electricity grid.
These systems are described in terms of kWp or kilowatts peak. So a 4kWp system would generate 4kW at peak performance (direct sunlight in the summer). Of course when the sun goes down then this drops to zero. These types of systems are gradually coming down in price but a solar panels cost for a typical 4kWp system is around £6,500 (£6,200 ex VAT at 5%). Payment for any electricity generated and supplied to the grid, known as a Feed in Tariff (FIT), does vary according to circumstances. For new installations the house EPC (Energy Performance Certificate) has to be in band D or better to get the best FIT.
Solar PV savings Example
Let’s assume a 4 bedroom family house using 7,000 kWh per year with a current electricity spend of circa £1,140 per year (16.2p kWh) which has an EPC in band D and a south facing roof.
A 4kWp system, which costs £6,500 to install would produce around 2,745kWh per year if it was reasonably located.
The Feed In Tariff payment would be 2745 x 14.38p per kWh (compared with 6.61p/kWh if the property is worse than band D) so your income from electricity generation would be £394.73. In addition, due to the nature of the generation and your demand there will be some surplus electricity which you can export to the grid and receive payment for at a current rate of 4.77p kWh. This would generate further income of £65 based on 50% of the generated electricity being exported to the grid. In addition you would save an estimated £105 on your annual electricity bill by not having to pay the electricity company for the electricity you generated and used yourself.
Feed In Tariff’s for new installations do come down from time to time, based on a formula from Ofgem which includes the total volume of all installations. The last change was in April 2014 when the rate for new installations fell from 14.90p kWh to 14,38p kWh. Th next possible date for reduction is January 2015. For existing installations the rate is frozen at the level in place when the system was installed, with an increase to allow for inflation as measured by RPI (Retail Price Index). So old installations from 2011 will be receiving a rate of 46.81p kWh plus an inflation adjustment until 2031, although the cost of installation was much higher then.
- Generation Income: £395/year
- Export Tariff Income: £65/year
- Saving on electricity bill: £105/year
- Total income and savings: £565/year.
Now if you had to borrow the £6,500 at 6% interest then it would take circa 20 years to get your investment back. With a service life of 25 years for the solar PV panels this still gives a return but it does show the length of time it may take to get your original investment back. Of course you also have the re-assurance that you can get some electricity during daylight hours if there was a grid powercut. Also electricity prices are likely to rise over the next decade.
Now if your cost of borrowing money was only 4% and the solar pv panel installation cost fell to £5,000 then the payback would be closer to 11 years. Better but still a long term investment rather than a quick return.
See further example on Solar PV panels