Make money by going green, but you'd better be quick
With inflation going up again, to record highs, it is the poor old savers who are losing out again. All that lovely money in the bank and it’s just sitting there losing money. But for the savvy, there is a way of not only generating a return of almost 10% on your savings, but also allowing you to look like a Responsible Person as well. But you may have to get your skates on…
Of course, this money making wheeze isn’t a new savings account, or a risky stock market dabble. It is Government supported, though, and is almost as safe as houses, literally. We are talking about renewable energy, particularly solar panels on your roof. Most renewable energy installations at the domestic level are covered by so-called 'permitted development' (so they don't need planning permissions), except in conservation areas or on listed buildings.
The cash benefits of installing solar panels are threefold, you get paid for generating electricity, you get paid for ‘selling’ your surplus electricity back to the grid and you save money on your electricity bills that would otherwise have gone to line the pocket of *.
To put numbers in, www.fitariffs.co.uk calculates the average benefits for an average household.
Based on an average use of 4,500kWh of electricity per year and the installation of 2.5kW of solar PV panels, an average household, for example a three or four bedroom house,could expect:
the electricity generated to pay the homeowner £836 a year tax-free
other electricity costs (eg at night) would be reduced from £450 to £300: saving £150
giving a total benefit of £986 per year
If you think that solar panels cost approximately £10,000-£15,000 to install, that’s a return on investment of up to 9.86% a year. The feed in tariff rates are guaranteed for 25 years, so after you make back your initial outlay cost in years 10 to 15, the rest is pure profit. Over the whole 25 years, then, the average return including the cost of recouping your capital could be as high as 5.9%. Even assuming the higher cost of installation, an average return of 3.86% after deducting the cost of capital is still higher than most savings accounts. And you get to claim Green credentials.
But if you are thinking of joining the green** revolution you may need to get your skates on. Owing to the financial case for going Eco, the take up of solar panels has surprised everyone, including the Government, and it could be that the three year budgeted figures for feed in tariff costs will be surpassed, on current take-up, sometime in 2012. Add to that the disgruntled claims of a certain Middle England newspaper that green taxes are a leading cause of increases in energy bills, owing to the fact that subsidies are paid for, not by Government, but by small increases to everyone’s energy bill, and it looks like the days of the very generous feed in tariff could be numbered.
Currently, the feed in tariff for smaller domestic installations of solar panels on homes that are not new is 43.3p/kWh of electricity and these payments are guaranteed for 25 years. Chris Huhne, the energy and climate change secretary, appeared to confirm tariff-slashing fears when he said last week "It is absolutely right that the department goes on looking at the appropriate levels of subsidies to bring on these important technologies, and that is obviously what we will do."
Naturally, the fledgling solar power industry is less than impressed at the thought of cuts to the subsidy. Jeremy Leggett, founder of Solarcentury, said: "[This is] the ridiculous spectacle of a government destroying jobs it had only just created to save next to nothing, given the tax paid by those jobholders and the unemployment benefit avoided, merely to pander to a Daily Mail lie machine that has green measures detracting from the national economy rather than adding." He told the Guardian that he was accusing the nuclear and gas industries of conducting a propaganda war against green energy. No strong feelings then.
But the Government has a difficult line to tightrope across now. Clearly the scheme is benefitting the middle classes (who are going to be the only ones with £10 grand plus in the bank) more than those with lower incomes, but to scrap or reduce the scheme could end up putting solar industry scheme workers back on the dole. Not to mention the environmental shame of mothballing a successful Green scheme. The Government are due to review the scheme, and the tariff rates, in April 2012.
* Insert name of energy supplier here