Consuming Issues: How to cash in on sunshine
Saturday 29 August 2009
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.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
Sony hack: Angelina Jolie branded 'seriously out of her mind' in further embarrassing leaked email saga
Panic Saturday: 13 million Britons spend £1.2bn – while 13 million others across the country live in poverty unable to afford food
iJobs Money & Business
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...
$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...
Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Day In a Page
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens