Following the introduction of the generous Feed-in tariff in 2010, many UK households installing solar panels were paid for the electricity they produced. This was great news at a time when fuel costs still made a significant dent in household budgets. Launched in 2010, the scheme, which paid up to a generous 41.3p per kWh, depending on the type and size of system you were using, proved popular and the take-up in households fitting solar panels was high.
In 2012, however, the government cut the FIT rate for the generation tariff, meaning that households who installed PV solar panel systems after 1st November of that year got a markedly reduced payment. Following a more recent review, the government has now decided to cut the Feed-in Tariff even more. From 1st January 2016, the FIT rate will be just 1.63p per kWh, compared with 12.47p at the moment, a total eye-watering cut of 87%.
The cuts have sent shockwaves through the sector but the government insists that the measures are necessary in order to protect consumers. In addition, Energy and Climate Change Secretary Amber Rudd suggests that subsidies are no longer needed as the government support of the past 5 years has now lowered prices. How though, will the cuts affect consumers and the sector as a whole?
Are solar panels still a good investment?
If you are planning to install solar panels to your home, it is certainly worth doing so before January 2016. Based on the current payments, a typical 3.5 kWp system could make you around £586 per year, meaning it would be more of a long-term investment, taking a lot longer to pay off than previously. However, if you want to reduce your carbon footprint and become more self-sufficient, this is certainly worthwhile and, of course, as long as the sun shines, you will continue to receive electricity for free. Once on the scheme, your rate will remain fixed for 20 years.
I’ve got an old system. How do these changes affect me?
If your system is registered under the previous scheme and was installed before November 2012, you will not be affected. The changes coming in January 2016 only relate to new installations.
Does this affect other renewable energy systems such as wind turbines?
Other systems, such as wind turbines and solar thermal panels, which produce hot water, are also eligible under the FIT scheme, however, the cuts are not drastic. For a typical wind turbine, for instance, the rate will decrease by 37%, from 13.73p p/kWh to 4.52 p/kWh.
The Feed-in tariff has certainly been successful in transforming the UK’s energy landscape over the past 5 years, with over 20% of output now coming from renewable sources. Those currently signed up to the scheme will continue to reap substantial financial rewards. It remains to be seen, however, what effect these enormous cuts will have on solar panel installation take-up in the future.