Solar Financing

Solar Financing

Solar PV – financing
A typical domestic solar PV system will provide a tax free return on investment of 10% – 15% for 20 years and it therefore makes sense to invest in solar. Especially as electricity prices have risen on average by 151% since 2005, and there is every expectation that these increases will continue.

So while there’s every reason to consider solar PV as a means of keeping your energy costs low just how should you go about it?

Buy it outright
The cost of a Solar PV system depends on several factors, including your roof size, installation considerations, and the most cost effective solution appropriate for your property. As an example however, a 4kW system can be installed for £5,500 including Vat.

The benefits from buying a system outright are that all of the benefits are yours to keep.

  • The Feed-in Tariff – this pays you 14.38p/kWh for everything you generate
  • Feed in Tariff Export – this pays an additional 4.77p/kWh on 50% of what you generate
  • Free electricity – this is the benefit you get from reducing the electricity you have to buy

These benefits would typically be worth £850 per year and £17,000 over the life of the scheme.

Finance it – the Green Deal
The Green Deal is a loan which pays for a solar system or other energy efficiency measure, in full, and which you repay through a charge on your electricity bill, over a set number of years.

Whether this is worth it depends upon the interest rate charged and whether this is lower than you could get elsewhere. In many cases, customers find that their own bank will charge a lower interest rate than the Green Deal. One key aspect of the Green Deal is that the savings must be greater than the charge levied on the electricity bill, which can lead to a long charging period and it might be 10 years before you see any benefit.

“Free” Solar
The benefits from solar PV come mainly from the feed in tariff payments; the benefit of free electricity can therefore be very low, especially if you’re not in during the day.

With a free solar scheme the solar company pays for the installation but keeps the feed in tariff payments. The householder gets the benefit of the free electricity…assuming you’re using electricity at the time when the system is producing it. Solar electricity cannot easily be stored; if you don’t use it you lose it.

With “free solar” you have to enter into an agreement to allow the solar company to use your roof. This generally lasts 20 years and may have some very hefty obligations in it. This may also have an effect on your mortgage; whilst many banks have now have experience of sales of buildings with roof leases, you may still find that selling your home is more problematic.

As with any major purchase there are a number of ways to do it, but always take your time to consider the options, the downsides and the benefits before you decide.