Solar Panels: Is the promised 12pc return realistic? Article by Teresa Hunter (Telegraph)

A bright summer has driven up the returns households can make from solar panels on their roofs. And despite cuts in the amounts paid for the electricity generated, which is paid through a levy on all energy bills, the industry claims returns of more than 12pc are still possible.

But the bold promises from salesman have also led to a rise in complaints from those who feel let down.  So far around 450,000 households have installed solar panel electricity systems, known as solar photovoltaics (PVs), which capture the sun’s energy and convert it into electricity. A further 2,000 systems are currently being installed each week.  Some opt for solar because they believe in supporting renewable energy. But many are attracted by the hope of waving goodbye to electricity bills, and earning a bit extra on the side.

The row triggered by Labour leader Ed Miliband’s promise of a 20-month utilities price freeze, with threats of blackouts, could prompt more households to reach for the solar brochures.

Graham Ayling, a spokesman for the Energy Saving Trust (EST), said: “Solar can offer an insulation against some of the fluctuations in energy prices, so your bills and supply are no longer at the whim of politicians, energy companies and global markets.”

An independent advice charity, EST estimates a typical cost-saving of £785 annually, in return for a £7,000 average investment in panels. This more than wipes out your annual electricity bill of £479, paying an additional 63pc on top. The Solar Trade Association puts the annual savings slightly higher at £823, largely because it has a higher estimate of how much you will use yourself. On this basis, the STA estimates a system will give a 12.5pc tax-free annual return over 25 years. The EST does not estimate returns but also does not dispute STA’s claim.

But all these savings come at a cost. You need to make an initial investment of around £7,000 to reap the benefit, remembering the lost opportunity cost of investing that cash elsewhere. It can take a decade to break even, so you must be confident of not moving. The EST admits its figures are based on optimum assumptions, a London postcode, where the sun shines more than elsewhere.

The calculator on its website shows the highest savings were in Cornwall, where they reached £739 annually. This dropped to £669 in South Warwickshire and £651 in Middlesbrough.

Here we answer your questions about buying solar panels.
Why invest in solar panels?
You can benefit in three ways. First, you are paid a set fee for every unit of electricity you generate, known as the “feed-in” tariff, regardless of whether you use it. You then get to use for free as much of your generation as you can. This is only possible during sunlight hours. What you cannot use, you can export back to the grid, for which you are paid an export tariff. When launched, the feed-in tariff was more than 40p per unit or kilowatt per hour, and you could lock into that rate for 25 years.

However, the tariff is adjusted according to take-up and is currently 14.9p, fixed for 20 years, although the cost of panels installation has also come down. The export tariff is currently 4.64p. Whichever tariff you fix at, it is guaranteed to rise annually in line with inflation.

How much will I save?
That depends on how much you generate, the direction in which your house is facing, the pitch of the roof, the system you opt for and whether you are at home during daylight hours.

A smaller, cheaper system may not provide capacity to make substantial impact on your bills. The power of a PV cell is measured in kilowatts peak (kWp) and a domestic unit should be a 16-panel 3.5-4kWp.
According to the EST, its average annual cost savings of £785 is made up of £556 paid via the feed-in tariff for the electricity you generate, £143 for the money you save on electricity by using power you generate and £87 for units exported back to the grid. The Solar Trade Association cuts the numbers slightly differently. It suggests you might, on average, earn £507 from the feed-in tariff, £283 from domestic use and £79 from the export tariff. It also allows £46 towards the cost of annual maintenance.

How much does it cost?

Panels can cost anything from £5,500 to £9,000, averaging £7,000, EST says. The STA puts the average at £6,500. Depending on generation, you might break even after 9-11 years. After that you can keep the extra cash you generate.
Where do I start?

A good place is the EST calculator at est.org.uk/solar which will help you establish what sort of system you might require and what your generation and savings might be. After that, always get quotes from at least three installers who are registered with the Microgeneration Certification Scheme, which guarantees certain standards.

The Renewable Energy Consumer Code also carries a list of companies which have signed up to its standards and higher practices. If all three are giving you the same advice, then you should feel confident about proceeding. But always check contracts carefully. For example, the length of warranties may vary.

Am I guaranteed to save money?

Unfortunately not, and complaints under the Renewable Energy Consumer Code have mushroomed because householders were promised savings, which did not subsequently materialise.

For example, for maximum generation, you need a south-facing roof, with a perfect 45 degree pitch, with no shading from chimney pots, overhanging trees or nearby buildings. The generation from a north-facing poor pitch could be so weak, you might never recoup your investment. Mr Ayling said: “South facing is best, but west or east facing are OK, too, although they will cut generation by about 15pc. North is the least useful.”

Systems are most valuable to those who are at home during the day and can use more of what they generate themselves.
Are bright summers the key?

The panels do not require full sunshine, but the sort of light which can penetrate clouds.

Some households might have seen a fillip this year, but for most this would have been wiped out by the poor spring. Mr Ayling believes generation on his own domestic system could be up about 12pc over the year.

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