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Solar PV: Rate of Return is Still Attractive

Posted by Chloe Bennett on 28th March 2012

Solar PV: Rate of return is still very attractive for consumers

Cuts to the feed-in-tariff have gained more than enough public exposure this year, and a vast majority of this has been quite detrimental to the industry and left a rather unpleasant taste in everyone’s mouth. However the combination of price drops in installation costs and equipment has actually created a similar financial return as before.

Research conducted by the UK’s only solar panel comparison site, CompareMySolar, suggests that installation prices have dropped by 50% since January 2011 and typical 4kWp systems that used to ‘cost £15,000 can now be bought for around £7,500.’ Price drops like these are mostly ‘driven by much lower module prices and increased competition.’

Returns improve to 2011 level

The impact of these price drops provide us with evidence that suggests that the financial return for consumers is currently at similar levels as it used to be in the first half of 2011. ‘The graph shown illustrates this for an example roof in Exeter (south facing, optimal angle, no shading), where a 4kWp solar panel system is expected to generate around 4,000 kWh in the first year. If we assume the property consumes half the electricity generated in house and exports the other half to the grid, the expected year one payback is:

•         (43p FiT) 4,000 x 0.43 = £1,720 from Government feed-in tariff

•         (21p FiT) 4,000 x 0.21 = £840 from Government feed-in tariff

•         2,000 x 0.15 = £300 from electricity savings

•         2,000 x 0.03 = £60 from the export tariff.

The total year one payback used to be £2,080 on the 43p feed-in tariff, and is currently around £1,200 at the 21p rate. While this looks like a very large drop in financial return, please keep in mind prices halved as well. Combining these payback amounts with prices paid for the installation (based on the monthly price index) provides the more relevant perspective. The below graph shows that where year one payback used to be around 14-16 percent of the initial price in the first half of 2011, it currently is back at 16 percent. Therefore, solar panels are currently just as attractive as around June 2011.’

Help raise consumer awareness

Research of this kind suggests that consumers will be able to receive a similar rate of return of their PV installation investment despite the cuts in the feed-in-tariff from 43p to 21p. This news should help to put solar back on the map for a lot of consumers that have previously written it off for being ‘too expensive’ or for those heavily impacted by the negative press of the FiT cuts.

It’s important that we can continue to work together to explore the positives and promote benefits over this type of news. Attractive return rates can help build more consumer awareness and bring back demand for solar pv technology which is much needed for solar installers looking to maintain and build their business during 2012.

Research and image source@solarpowerportal.co.uk

Categories: solar pv, feed-in-tariff