The pros and cons of solar panels
Solar panels reduce your electricity bill and pay you for generating power. Yet despite the myriad free installation deals available, there can also be substantial costs at the outset - which might increase soon thanks to a recent European Union intervention.
There are many pros and many cons for going solar and it seems more people are showing an interest. According to Solarcentury, the number of domestic solar installations doubled in 2014.
Here's our guide to everything you need to know about solar panels:
How it works
Solar Photovoltaic (PV) panels store energy from the sun and turn it into electricity. You don't need to live somewhere warm and sunny for solar panels to generate electricity; solar needs only daylight, not heat or sunlight.
In the same way that a solar-powered calculator still works on cloudy days, so do solar panels.
Many houses can accommodate the panels, in a range of styles and sizes. Those who can benefit most will have a large, unshaded south-facing roof, using most energy during daylight hours.
The Department of Energy and Climate Change says there are now more than 500,000 solar panel systems installed across the country.
Traditional panels are blue and shiny with silver frames and sit protruding from the roof.
However, there is a new range of Building-Integrated Photovoltaic panels (BIPV) available which replace tiles, without cutting the roof.
Frans van den Heuvel of Solarcentury says: "The new Sunstation design comprises sleek black solar panels that are discreetly fitted into the roof itself."
Upfront costs are the greatest concern to homeowners. According to the Energy Saving Trust (EST), the average cost of a solar panel system for a domestic property in the UK comes to between £6,000 and £8,000.
However, millions of households face paying more for solar panels and home insulation after an EU ruling that could force VAT charges to increase. They are currently at 5%, which is a specially reduced rate.
A VAT hike would add hundreds of pounds to the cost of installing home rooftop solar panels - as well as insulation measures – despite the fact the EU has imposed renewable energy targets on the UK and wants the UK to improve its energy efficiency.
David Weatherall, at the EST says: "This a huge backwards step and we have fully supported the UK's fight to maintain a low rate of VAT on energy saving products. Cold homes is no niche issue. It is a widespread problem. Our research shows that nearly 40% of households are not warm enough in winter. At the same time the UK is going through a solar revolution with millions of homeowners taking advantage of green energy but an increase in VAT could bring our progress in this area to a grinding halt."
How much you could make
While there is a significant outlay, the figures on how much you can save by generating your own electricity are worth considering.
The panels will generate a tax-free income via the government's Feed-in-Tariff (FiT). These tariffs, introduced to replace government grants in 2010, are guaranteed for a 25-year period and are tax-free.
They determine the major part of the return people can get from solar panels, paying them for every kilowatt of energy they produce. Households also make a saving by not having to buy energy from a supplier.
However, when the scheme first started the FIT was a generous 43p per unit; now it has come down to around 12p to 13p per unit – that's just for the amount generated, whether the panel owner uses it or not. This is due to fall again later this year. Once you are receiving FIT payments, the rate you get will increase in line with inflation in accordance with the Retail Price Index (RPI) – but payments will also drop when inflation falls.
The EST estimates that the typical household using a solar electricity system could earn £1,060 a year from the generation tariff. However, this can vary, so it is important to check your household's energy usage before you sign up so that you can do a more realistic estimate. How much each household is paid depends on how many solar panels a roof can take.
The EST has an online calculator that allows you to estimate the profit you can make from installing solar panels – and how long it will take to earn you money. Visit energysavingtrust.org.
The government's Green Deal is a way to pay for energy-saving home improvements. Its finance plan allows eligible homeowners to repay the balance through the savings they make on their electricity.
Free installation deals
Many companies are offering customers who cannot afford the upfront cost of a solar panel system the option to have panels installed free in return for 'renting' out their roof. Companies such as Sainsbury's and British Gas will lease your roof for 25 years and in exchange install and maintain the solar panels on it. In theory this is appealing because you won't need to find any cash up front.
But this means you won't be eligible for the feed-in-tariff and instead, the installation company will take it, so the saving will be solely be on your energy bills.
Whether solar panels can benefit you if and when you come to sell your home is still up for debate. Some argue that properties with solar panels installed can improve re-sale value and increase a home's energy rating and attract buyers due to savings on energy bills.
One survey by GoCompare.com found when looking for a new home, around 14% of buyers have added solar panels to their wish lists.
Yet estate agents say positioning of the panels is crucial. Ed Meyer at Savills estate agency says: "Try not to place panels on the front of a property to retain its original appearance."
If you are a home buyer interested in a home with solar panels, it may pose extra work when you come to apply for a mortgage.
A spokesman for the Council of Mortgage Lenders says: "Where the solar panels are owned outright by the seller of the property, the only effect they will have on a lending decision will be the extent to which valuers assess them as adding value."
Yet brokers warn about those who opt for the free panels. David Hollingworth at London & Country says: "In the cases where panels are fitted for free and the panel provider is effectively renting your roof space. It's unlikely to cause a major problem but lenders will want to understand the terms of that lease to ensure that it meets their minimum requirements and protects their interests.
"As a result many lenders will require that the terms of the lease are checked to make sure that it will comply, although there will be many areas such as maintenance of the panels that will also be aligned with the owner's interests.
"While it means that consent is required, reputable firms should be aware of the expectations of mortgage lenders."
Case study: Avoid the hard sell
As in any industry there are people on the make who are likely to give you the hard sell. Experts are urging homeowners to be extremely careful when buying solar panels to ensure that they are not duped by one of the multiple dodgy companies springing up to take advantage of consumer interest in clean energy.
Some companies cold call door-to-door, which often affects older, more vulnerable people, who are more likely to be home during the day.
Moneywise reader Mike Hill was approached by solar panel firm My Planet UK earlier this year by a sales person on the phone – a cold call to his landline at home. Mike, a retired IT consultant and business analyst, agreed to let a sales representative visit in person to make a pitch for having solar panels installed.
He says: "The chap who called was perfectly pleasant and polite. He talked me through my options and it was interesting to learn about how it all works. What struck me was the heavy-handed sales pitch. On one hand he was telling me that nothing needed to be signed today and I could take my time.
"But then he was plugging a discount deal they were running, which could only be taken up then and there. I was also told that these panels will add value to my home – but that's not proven, if you ask me. I spoke to a local estate agent who confessed that they try to delay telling potential buyers of the fact there are solar panels on a property for as long as possible."
Mike, 70, told the sales rep that he wasn't interested in signing up. "I object to pressure selling and so told the guy I wasn't interested – and he went on his way," he says. "What worries me is that it felt like these deals are being sold seemingly under the guise of being government approved. I worry that other more vulnerable people will be duped into signing up when they don't really want to."
A spokesperson for My Planet declined to comment.
Remember, even if you, or someone you know, sign up there will be a cooling off period during which you can cancel.
Invented by a Frenchman in 1954 and ironically introduced in the UK on 1 April 1973, VAT is an indirect tax levied on the value added in the production of goods and services, from primary production to final consumption and is paid by the buyer. Its levying is complex, with a number of exemptions and exclusions. For example, in the UK, VAT is payable on chocolate-covered biscuits, but not on chocolate-covered cakes and the non-VAT status of McVitie’s Jaffa Cakes was challenged in a UK court case to determine whether Jaffa Cake was a cake or a biscuit. The judge ruled that the Jaffa Cake is a cake, McVitie’s won the case and VAT is not paid on Jaffa Cakes in the UK.
Replaced as the official measure of inflation by the consumer prices index (CPI) in December 2003. Both the Retail Price Index and CPI are attempts to estimate inflation in the UK, but they come up with different values because there are slight differences in what goods and services they cover, and how they are calculated. Unlike the CPI, the RPI includes a measure of housing costs, such as mortgage interest payments, council tax, house depreciation and buildings insurance, so changes in the interest rates affect the RPI. If interest rates are cut, it will reduce mortgage interest payments, so the RPI will fall but not the CPI. The RPI is sometimes referred to as the “headline” rate of inflation and the CPI as the “underlying” rate.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
Everything you own: all your assets (property, cars, investments, savings, insurance payouts, artwork, furniture etc) minus any liabilities (debts, current bills, payments still owed on assets like cars and houses, credit card balances and other outstanding loans). When you’re alive this is called your wealth; when you’re dead, it becomes your estate.