This £5k investment gives £25,000 profit and slashes your energy bills too – ‘Do the sums’ | Personal Finance | Finance
One way to stop your energy bills going through the roof is to generate your own electricity, rather than simply consuming it. Around a million households are already converting sunlight into electricity, by installing solar photovoltaic (solar PV) panels. Could this work for you?
Green campaigners and solar power specialists will tell you that harnessing the power of the sun can net you a huge profit over the longer run.
It allows you to cut your bills and even allow you to profit by selling surplus energy back to the grid.
However, there is also a large upfront cost.
Installing a solar panel system will set you back between £2,900 and £6,700, according to the Energy Saving Trust (EST). The average cost is £5,420 for a three-bedroom home.
In return, it will slash your energy bills by between £165 and £405 a year, depending on the size of your home and current usage.
Savings should rise as energy bills rocket, said Ollie Gibbs, head of domestic solar and storage at Devon-based SunGift Solar. “Our 5.2kWh system cost £6,500 which cuts £742 a year off the average home’s energy bills. Homeowners get their money back in around nine years.”
Over the typical 25-year lifetime of solar panels households should generate a profit of £24,178, Gibbs added. “They will also save 2,597kg of carbon emissions every single year.”
With a standard system, you consume energy as you generate it. Most of the energy is generated during the day, when the sun is out, but electricity demand typically peaks in the evening, when we are indoors making dinner or watching telly.
So the benefits may be greater for pensioners and homeworkers, rather than those who are out all day.
They could get round this issue by investing in a battery storage system, but this adds between £2,000 and £5,000 to the installation bill.
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You may get some of this back by selling your surplus electricity under from the Smart Export Guarantee (SEG), which makes electricity suppliers pay domestic solar panel users who send excess power back to the grid.
According to Josh Jackman, senior writer at theecoexperts.co.uk, consumers are getting a poor deal.
Electricity currently costs 28.3p per kWh, which will hit 40.3p per kWh when the price cap climbs in October.
Yet producers pay on average just 3.9p per kWh, seven times below today’s price, Jackman said. ScottishPower is one of the more generous, but it only pays 5.5p per kWh.
The average solar user makes £112 a year from selling energy but it should be hundreds of pounds more.
Solar panels make more sense for those who plan to stay in their home for life, although it could add £1,800 to the sale price if you move, according to Solar Energy UK.
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Sadly, the Green Homes Grant, which paid up to £5,000 towards solar panels and other energy efficient improvements, was axed on March 31.
At least there is no VAT to pay on installation panels, due to energy efficiency incentives announced early this year.
Banks offer home improvement loans that can go towards funding the work, while solar companies offer funding schemes, said Paul Stringer, director at Norton Finance. “Check the terms as finance costs could wipe out your solar savings.”
Planning permission is no longer necessary, said Phil Foster, owner of Energy Helpline. “If your house is listed or in a conservation area, it is at the discretion of the local council.”
Panels do not need direct sunlight to work but it helps if you can mount them on a south facing, pitched roof that isn’t shaded by trees or other buildings during the day.
As demand grows, waiting lists for solar panels batteries are lengthy, so they may not be ready for this winter.
There is another downside. You still have your gas bill to pay.