For a richer life

Make money from solar panels

Make money from solar panels Mike Weston/Flickr

How would you like make £750 a year tax-free and save money for the next 20 years just from your roof?

While solar panels have an initial up-front cost, the long-term benefits are undeniable. As well as earning tax-free payments that are backed by the Government, you can also significantly reduce the amount of money you spend on your heating and electricity bills, and on top of all that you’ll be helping the planet reduce its carbon footprint. Read on for the Moneymagpie guide to making money from your roof.

HOW DOES THE SCHEME WORK?

solar panelsSolar panels can make you money through the Government’s Feed-in Tariff (FIT) scheme – also known as ‘Clean Energy Cashback’. The Labour Government introduced it in 2010 to encourage us to produce more clean energy for ourselves and for the National Grid as part of the UK’s target to generate 20 per cent of energy from renewable sources by 2020.

To take advantage of the scheme, you will need between £4,000 and £6,000 of capital for the initial investment (a fairly hefty amount for most of us). However, the tariff rewards are so generous, you should definitely think about the scheme if you can afford the initial outlay.

Furthermore, some installers offer finance and the cost of finance for home improvements is usually generally reasonable.

The scheme promises to reward you if you have photovoltaic solar panels (solar PV) installed on your roof. If you go for it, you’ll profit in three ways:

  • You get paid what is called the ‘generation tariff’; a direct payment from your energy supplier for each unit of electricity you generate. The currently rate for a domestic system is 14.38p per kilowatt-hour (kWh) and this amount will increase in line with the rate of inflation for the next 20 years.
  • You also get what is called the ‘export tariff’; a payment made for energy you send back to the Grid rather than use yourself. This pays you an extra 4.77p per kWh exported.
  • You make savings on your electricity bills as you no longer need to buy all of your electricity from an external supplier – and your savings increase as bills continue to rise.

WHAT ARE THE BENEFITS?

Green-House-PictureAside from the environmental benefits – reducing CO2 emissions and promoting renewable energy generation – there are big financial rewards up for grabs. Not only do you save money on your energy bill, you will also benefit from an annual income for the next 20 years – an income that has been protected by statute. The amount you could get each year is not guaranteed, but if your house is deemed suitable for the panels then you could make up to £750 a year.

Importantly (and even better for your pocket), your income from this system is exempt from income tax. This makes the scheme particularly attractive to those paying higher rate tax and those paying none. It means that you get to keep the full amount each year – earning you money for doing nothing. The returns are index linked (i.e. they go up with inflation) and could add a substantial amount to your retirement income – particularly useful if you are looking to build up your pension or other investments.

ARE THERE ANY DOWNSIDES?

greenThe only downside to installing solar PV is the length of time it takes to pay for itself. In environmental terms solar panels offset themselves after about four years, but financially you’ll have to be living in your home for at least the next six years before you get back your investment and start making a profit.

The money you spend will be invested in the system on your roof and not readily available should you need it, another reason why some buyers would choose to opt for finance.

If you can reasonably expect to be in your home for that length of time then solar panels could be for you. However, if there’s a chance you’ll be moving home in the next few years (say to downsize, or to find more space for a young family) you should tread carefully otherwise its just your potential buyers who will benefit from your investment.

Solar panels can be huge and, depending on where they’re placed, very obvious. Some people really don’t like solar panels and there have been cases where would-be sellers have had to remove their panels to close a sale (although any estate agent worth their salt will view most solar panels as a plus rather than a minus).

So even if you’re considering the free option (see below), you should only do it if you know you won’t need to sell your home for a while.

Then there’s the fact that most electricity production happens during daylight hours. Therefore it will be the appliances running during the day that will benefit most. If you’re out of the house all day you could set a timer for some machines to work during these periods such as water heating, washing machines, dishwashers etc.

WHAT ARE THE REAL COSTS?

solar_panelsFigures from Solar PV installer show that an ‘average’ system – 12 panels, or 3 kilowatt peak (kWp) – costs around £5,000 (including VAT at 5%). Solar systems can cost in the region of between £1,750 to £2,0000 per kWp, although the cost per kWp should reduce as the system size increases due to fixed costs such as scaffolding and EPC and MCS certificates.

Maintenance isn’t an issue. Other than washing them once a year, you don’t need to do much to maintain your solar panels. You may need to replace the ‘inverter’ after about ten years at a cost of roughly £300-400, that’s all. Solar PV has been available for many years and is a reliable system – all panels should come with a 25-year guarantee.

SHOULD I GO FOR THE ‘FREE’ OPTION?

Free-Sign1With the free option there are no upfront costs to you and you will benefit from cheaper electricity thanks to the energy generated from your panels. However, you won’t benefit from the regular annual income from the electricity for the next 20 years.

It comes down to whether you can afford to invest in solar panels or whether annual savings on your electricity bill will be enough for you. The free option still saves you money but won’t make you any. A typical homeowner is likely to save in the region of 50 per cent of their energy bill, but this entirely depends on a lot of factors, including level of energy usage, and when the energy is used, as well as the type of house and it’s energy efficiency.

Not receiving the feed-in tariff is a big downside as the index-linked, tax-free income could be very useful. However, if you don’t have the money to invest now this free option may be better for you. Consumer Focus has a good section on things you should ask before getting ‘free’ panels if you’re thinking of choosing this option.

HOW DO I KNOW WHICH IS BEST FOR ME?

greendealDeciding whether to buy or ‘rent’ solar panels depends very much on your own circumstances – whether you can raise enough to buy the panels, whether you’ll be moving home in the short to mid-term and how important renewable energy is to you. If you’re planning to buy solar panels you’ll need to factor in the cost – it represents an investment as much as buying shares does.

Panels perform best on south-facing roofs at an angle of between 30-40 degrees to the sun. Even if your roof doesn’t match this ideal you could still have solar panels fitted and make a profit – it’s best to talk to an individual company (or companies) for more information.

Each provider has a different way of working but in general you can expect:

  • An upfront estimate as to the expected ongoing performance of your installation
  • An in-home display that will enable you to see how your installation is performing and when it’s generating power. This means you can decide to use your electrical appliances at this time to take advantage of the ‘free’ energy
  • Help with applying for the FIT benefits and ensuring you have all the required elements for a successful application to the scheme.

Whichever scheme you choose, opting to generate your own electricity from solar panels is a good long-term plan for making a bit of extra money while doing your bit for the environment. Solar panels make sense even if you’re just looking to save on your electricity bills – something we will all be forced to do as energy prices look set to continue rising.

USEFUL LINKS

 

  • Terry Tanner

    Anyone interested in solar panels contact me at terryandshaz@hotmail.co.uk
    Much more options to choose from than published on here and much cheaper

  • http://forums.saltwaterfish.com/u/303568/natanravn718 zodiac kd plus

    I have been absent for a while, but now I remember why I used to love this site. Thank you, I’ll try and check back more often. How frequently you update your website?

    • Carl Brennand

      Us Moneymagpies add fresh money makers, money savers and bargains every day, so keep checking the site to avoid missing out!

  • http://www.iconvey.co.uk Lavon Kohls

    Keep seeing ad’s totally free solar powered panels?- are they really 100 % free?

  • Kelvin Hughes

    check with your mortgage company first to see if they will allow you to place panels on your roof as i have just been knocked back by mine as most will allow there still a few dinosaurs out there with heir heads stuck where the sun dont shine

  • J CRABTREE

    is 1000 a year fully guaranteed payable for 25 years. Is it a good idea for a pensioner to put his limited savings on to such a plan. is tis amount taxable.

  • janice Tiua

    I would be interested in the free solar panels please.
    Thank you.

  • sue

    I have contacted ISIS several times as yet not heard anything! Anyone had any luck?

  • carole m young

    if icarolec buy part of the panels andpart free.would i still make money?

  • Brychan Jenkins

    I am interested in the free solar panel offer, please send me details.

  • francis

    homesun were contacted twice but have had no reply other than their auto reply. reference the free contract. when you sale your property the new owners have to take on the contract no buts.

    • http://www.jasminebirtles.com Jasmine Birtles

      Hmm, that’s useful to know. Thanks.

  • george ridge

    intrested in solar panels ,please send information

    • Terry Tanner

      You still interested

  • Susan C Crawley

    I am very interest solar panels, would you send me information