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Tariffs slash payback on solar panels to 15 years

The payback time for installing solar photovoltaic panels will be slashed from around 50 years to just 15 when new government feed-in tariffs come into effect on 1 April, according to new research.

Consultancy Faithful+Gould researched the new tariffs and found the 35 year reduction in payback time.

The government will reward households, businesses and communities that install low-carbon electricity generating systems by enabling them to claim payments for the electricity they produce.

It is estimated the changes are likely to cause an explosion in demand for PV panels similar to that seen in Germany after it introduced a feed-in tariff system.

Faithful+Gould sustainability director Sean Lockie said: “Germany has had feed-in tariffs for more than a decade and as a result it has stimulated one of the largest PV markets in the world. The UK now seems set to follow suit.

“Installing a PV roof to an average home costs about £12,000, but until now the long payback time has meant it hasn’t been a viable option for most UK homeowners.

“However, the new tariff will improve return on investment to such an extent that installing PV will become a sensible option for householders and businesses alike.”

Faithful+Gould used one of the company’s “carbon tools” applications to work out the likely
impact of the tariffs.

Under the scheme, homeowners and businesses will be paid 41p per kWh (36.1p for new homes) for electricity from PV panels, while they will buy it back at approximately 10p per kWh,
guaranteeing them an annual tax-free income of about £600 for 25 years, rising with inflation.

An average household will also save around £200 a year in energy costs, which means payback for installing PVs will be realistic within 15 years at current prices.

Mr Lockie said: “This could have a fundamental impact on the energy landscape. While it is important to stress that other factors such as good building design are more important in the journey towards zero carbon, this represents a significant incentive in the drive to make the UK’s energy generation cleaner and greener.”