Solar PV or Photovoltaic panels make electricity, that can be used or sold.
But at this stage of their development and adoption, incentives are used to promote their usage. In the UK a system of capital grants was replaced on 1st April 2010 with a system of Feed-In Tariffs.
How do Feed-In Tariffs work?
- You receive a payment for every Unit (kWh) of electricity you produce. For standard home systems this will normally be 21.1p per unit – see the chart below. These rates have been recently changed due to the enormous initial response to FITs by consumers which created far more Solar PV installations than predicted.
- Some of this electricity you will use yourself (if you are using electricity at that moment) – this replaces electricity you would buy – so saving you, for instance, 12p per unit.
- And some of the electricity (excess to your requirements at that moment) will be sold seamlessly to your electricity supplier – who will then pay you a minimum of 3p per unit.
And how is this guaranteed?
- Once you install your system, the generation element (the main bit) is guaranteed to be paid for the next 25 years.
- It is also index linked to the Retail Price Index
- It is also tax-free
Other factors
- A system called digression is used – this means that periodically the FiT payments for new installations reduce – NOT for existing systems, just for new systems installed from the date the revised FIT applies. So when you install a system, the FIT structure is set for the next 25 years – but if you delay, the amount you will receive over your 25 years reduces.
- It is likely that competition will develop around the ‘export’ price – so 3.1p is just the baseline.
What main factors affect your payments?
- The size of your system is the main factor. This is determined by how much you want to spend, and how much roofspace you have. Typically 8-9 sq metres is needed per kWp.
- Your location in the UK affects how much solar radiation you will receive. So a 1 kWp system will produce 1kW of power in perfect conditions – and typically in central UK this will end up producing 850 Units (kWhs) of electricity over any given year. In the far south of the UK, this may increase to around 1,000 units per kWp, and reduce to 750 in the far north of the UK.
- The direction, inclination and shading of your roof. So due South, inclined at 35 degrees and never shaded will produce the figures above.
Some domestic examples
Householder - PV Examples
System (see System Size) Small Small Medium Medium Medium Large Large
House (see Electricity Used) Small Medium Small Medium Large Medium Large
System Size (kWp) 1.5 1.5 2.5 2.5 2.5 4 4
Systems Space (sq m) 13.5 13.5 22.5 22.5 22.5 36.0 36.0
System Cost £8,400 £8,400 £13,750 £13,750 £13,750 £20,000 £20,000
kWHs produced 1275 1275 2125 2125 2125 3400 3400
Average Export % 50% 50% 50% 50% 50% 50% 50%
FIT £0.433 £0.433 £0.433 £0.433 £0.433 £0.433 £0.433
Export Price £0.03 £0.03 £0.03 £0.03 £0.03 £0.03 £0.03
Buy Price £0.12 £0.12 £0.12 £0.12 £0.12 £0.12 £0.12
Electricity Used pa (kWhs) 3500 5000 3500 5000 7500 5000 7500
Electricity Purchased (kWhs) - after PV install 2863 4363 2438 3938 6438 3300 5800
Original Bill pa -£420 -£600 -£420 -£600 -£900 -£600 -£900
New Bill - buy -£344 -£524 -£293 -£473 -£773 -£396 -£696
New Bill - sell £19 £19 £32 £32 £32 £51 £51
New Bill - FIT £552 £552 £920 £920 £920 £1,472 £1,472
New Bill (PAID to customer) pa £227 £47 £659 £479 £179 £1,127 £827
Net Position pa £647 £647 £1,079 £1,079 £1,079 £1,727 £1,727
Payback (Years) 12.1 12.1 11.9 11.9 11.9 10.9 10.9
1st Yr Return on Investment (tax free) 7.5% 7.4% 7.5% 7.5% 7.5% 8.3% 8.3%
Feed-In Tariff Rate table
System Size Generation Tariff Min Export Tariff Duration
<=4kWp New Build 37.8p 3p 25 years
<=4kWp Retrofit 43.3p 3p 25 years
>4kWp to 10kWp 37.8p 3p 25 years
>10kWp to 100kWp 32.9p 3p 25 years