Consuming Issues: How to cash in on sunshine

Until now, householders have lavished large sums on solar panels to help the planet rather than themselves. Scientists are concerned that climate change will plunge hundreds of millions of people into hunger, provoke mass migrations, and cause increased storminess, flooding and extreme heat in the UK.

Putting that aside for the moment (this is the Your Money section, after all) are solar panels also a good investment? The answer is that they are now, if you apply for a £2,500 grant before April, because of a sharp change in government policy.

When the Energy Secretary, Ed Miliband, unveiled the UK Low-Carbon Transition Plan in July, the headlines screeched about the impact on most customers: higher bills and "smart meters". Lurking in the accompanying Consultation on Renewable Electricity Financial Incentives 2009 was a significant shift.

From next year, it proposed, owners of solar panels and wind turbines should be paid for all the electricity generated, regardless of whether they used it at home or sent it back to the national grid. These payments are worth hundreds of pounds a year and transform the financial case for installing solar power.

At present, householders installing solar panels can receive £2,500 from the Government under the Low Carbon Buildings Programme. Electricity companies pay them for whatever power they sent back into the grid, though the tariff varies by company and is often low. The Government is expected to end its grant regime next April, replacing it with more generous annual payments.

From next year, its new "feed-in tariff" will give every household with photo-voltaic (PV) panels 36p for every unit generated, funded by a small levy on all energy bill payers. PV systems will also earn 6p for every unit sent back into the grid. What's more, the feed-in tariff will apply for 25 years.

Unfortunately, there is a lack of official information about how these proposals will change the affordability of solar power. The Government's Energy Saving Trust explains how the panels work, and how much power they generate, but its website is bereft of meaningful figures; it refers only briefly to the seismic government proposals.

Similarly, the Royal Institute of Chartered Surveyors (Rics) has a dismal record on renewal energy. Last September, it claimed that solar panels would take up to 171 years to pay their installation costs. Rics ignored any grants available, and the likelihood of rising electricity prices, and also got its generation sums wrong. Despite asking, it declined to give me its latest calculations. I have done my own. The key question is: would you be better off by leaving your capital in a bank earning interest or investing in solar panels? Over 30 years, my calculations suggest solar is better. They rely on some assumptions. First, although manufacturers guarantee solar panels for 20 years, industry figures say they should last well beyond their warranty period and I have assumed they will last for 30 years.

I have also assumed annual inflation of 4 per cent and annual electricity price inflation of 10 per cent, which is reasonable, given diminishing oil and gas reserves; energy prices rose 40 per cent last year.

Now, the costs of installing a system. A modest but well-sited 2kWh PV system, suitable for an average, preferably not north-facing home, costs about £11,500. Deduct £2,500 from the £10m in the grant kitty before April, if you are lucky, and the cost is £8,000.

You can expect to earn £657 for the feed-in tariff and an extra £45 from electricity sent back to the grid and save £118 on your annual electricity bills. The panels would pay for their costs in 10 years, though you would not have your capital. If you did have £8,000 in the bank, as the years tick by, solar slowly catches up, and overtakes the bank deposit by year 26.

After 30 years, compound interest would turn the £8,000 in a savings account to £27,568. Assuming the money from solar (the feed-in tariff and electricity savings, etc) is deposited in a bank after the installation costs have been paid off at year 10, harnessing the power of the sun would be worth £40,654 after 30 years.

Heroes & Villians

Villain: Lloyds TSB

The high street bank has the heaviest charges for mortgage customers who fall into arrears. After three months' arrears it charges £206, compared with Abbey's £40, NatWest's £35 and £30 at RBS. Hannah Skenfield, of moneysupermarket.com, which published the figures, said: "It's outrageous that borrowers who are clearly already struggling are being hit with such high fees. This risks exacerbating their problems."

Heroes: M&S, Co-op, Sainsbury's

They are in the running for the People's Choice Award for increasing animal welfare, and you can decide which wins. Many of Britain's 926 million farm animals endure poor conditions, but some retailers are acting, after campaigns by the likes of Hugh Fearnley-Whittingstall and Jamie Oliver, left.

The Co-op has given more space, ventilation and a more stimulating environment to 20 million chickens; Marks & Spencer has banned continental white veal in favour of higher-welfare British rose veal; Sainsbury's has banned cage eggs and moved its Scottish salmon to the RSPCA's Freedom Foods scheme. The winner of the award, sponsored by The Independent, will be announced at Good Business Awards on Wednesday, 7 October.

You can vote online via the Independent (www.independent.co.uk/voterspca) or by texting either MANDS, SAIN or COOP to 60022.