Solar panels – should you buy or lease?
As you know, we’re huge fans of solar energy here at Chez Green and in the true style of ‘Happiness Month’ – day 11 is all about free energy!
We have two small solar panels which provide enough energy to light the downstairs of our home with LEDs and we’re planning on getting more solar panels in the future.
A man after our own hearts is Dr Kevin Hard, CEO of EvoEnergy. Kevin set up EvoEnergy with just £30,000 to provide opportunities for people to access the benefits of solar. The company has grown rapidly since 2007 with 200 members of staff and a company turnover of £35 million.
EvoEnergy offers everything from consulting to installing and maintaining solar photovoltaic (PV) systems for its customers who can either buy their solar PV system outright and benefit from the Feed-in Tariff (FIT) or take advantage of free solar installations.
Mr. Green and I have been looking at these options closely because it can be a bit tricky to fully understand. On the face of it, who would buy something when they can get it for free!?
Pros of buying your own solar PV system
If you buy your solar system outright you can benefit from the Feed-in Tariff (FIT) which pays homeowners for all of the electricity their system produces, regardless of whether they use all of the electricity in their own homes.
Under the feed-in tariff scheme, you’re paid a generation tariff for the electricity you make, which is currently 43.3p/kW. Payments are guaranteed for 25 years, tax-free and index-linked.
In addition you receive an export tariff (3.1p/kW) for electricity that is sent to the grid.
You’ll get reduced electricity bills because you’ll be generating your own energy during the daytime.
Both Martin Lewis and the Energy Saving Trust reckon a typical system costing £12,000 could net you around £26,000 over 25 years from feed-in payments.
Cons of buying your own solar PV system
The initial cost can be prohibitive.
If your home is rented you would probably not want to invest the money having solar panels fitted.
There are ongoing maintenance costs, for example the inverter; which transforms the current produced by the solar panels into usable electricity; needs to be replaced roughly every ten years at a cost of around £1,000.
Pros of getting solar panels for free
The way you get ‘free’ solar panels is basically to lease your roof for 25 years to a company who install and maintain solar panels on it. The benefits include:
You do not have to find any cash upfront for the panels.
You benefit from the free electricity produced by the system and will typically save around £70 / year on your bills. This increases if you’re at home during the day or electricity prices rise.
Try before you buy – with a company like EvoEnergy you can try the system for a couple of years, and if you like it, you can buy it then benefit from the FIT yourself.
No maintenance costs; the panels belong to the company so it’s their job to maintain them.
Even if your home is rented you could have a free installation if you get permission from your landlord.
Cons of getting solar panels for free
A few companies do not offer a buy out fee so if you want to save up and buy them over time you can’t.
If the free solar panel firm goes bust, who maintains the panels? Hopefully the rights to collect your feed-in tariff would be sold to another company who would also maintain your panels in the future, but it’s an unknown.
Mortgage companies may charge an admin fee to grant consent for a free-solar-panel lease.
The rent-a-roof company takes all of the generation tariff and the export tariff which is around £1000 per year; so you’re missing out.
Effectively your roof is no longer your own – you’ve rented it out so if you want to take the solar panels down to have some work done on your roof, you might have to compensate the company for the missed feed in tariffs.
The contract is with the house, so if you want to sell your property you need to find a buyer who is willing to take on the lease for the remainder of the contract. This isn’t usually a problem, but SOME people don’t like the look of them or are wary of a 25 year contract with another company.
Some companies are fussy about which homes they will accept for free installations because they want the maximum output. So you may not be eligible to get them anyway.
Verdict
According to Which?, ‘free’ solar schemes are not as economical as installing your own solar panels. They go as far to suggest taking out a loan to cover the costs; although Martin from Money saving expert does not agree that taking out a loan would be worth it.
Which? estimate that on a £16,000 4Kwp PV system over a 25 year period you’ll make a net profit of £28,000 if you buy outright.
If you sign up for a freebie you’ll net £5425 and the company will get £23,000.
You will, of course, benefit more from solar panels if you are at home during the day and / or can adjust your lifestyle to make most of the sun. For example you might use a timer switch to run your electric appliances, such as a washing machine, during the day.
EvoEnergy is upfront and honest about the payback time on your investment. They say an average installation will cost around eleven thousand pounds and the panels will have paid for themselves within ten years. After that it’s all profit!
What I love about EvoEnergy is that you have the option to buy the panels from them after the second year; so you can effectively try before you buy. Plus the company has ethical business practices in place to lower their impact on the environment. As well as recycling in their offices, the company operates a fleet of ten hybrid cars. In addition they do important work with educating people: EvoEnergy work with farms and schools where a solar PV system can serve as a means of educating children about the benefits of solar.
What about you – would you opt for a free installation or would you prefer to buy your own solar PV system?
There is a crucial problem of buying these panels with the expectation of making a profit after 10 years or so. That being, technology will progress so fast that NO-ONE will have this kind of solar panel installed in 10 years time. We will have all ripped them off the roof in favour of something much better.
Remember that Solar PVs are only 10-15% efficient at converting sun to electricity and that’s in optimum conditions! This technology is still very young and undeveloped. Think back 10 years ago, what did your mobile phone look like? how large was your computer? Where was your ipad then? Now look ahaed 10 years with an accelerating technology base that is already developing fuel cells an other exotic methods of power … Good-bye Solar PV investment
@11-59:
You are thinking all wrong. Only 10 to 15 percent is not that small number as you think. And that number didn’t change for about 30 years till now. We are still using silicone cells and we will have to spend plenty more time to finally invent some better substance to replace silicone.
Current technology is paper thin solar panels, but the main component is still silicone. The only difference is the production process and usability. The efficiency has actually lowered. So don’t expect that solar panels will continue with the trend of computers.
Remember, computers have the same architecture and componentes as they did before.
So now the best solution is to find a way to take advantage of more solar beams, like infrarred and ultra violet energy. There is more about new technology at http://how-solar-panels-work.com
Very good article and easy to understand.
Thanks for such an informative article, I’ve been wondering about how to decide between buying and a free installation but it’s been such a minefield because I didn’t really understand it – until now! This company sound really good because they offer both – I’d not come across that before
It’s clear that the decision between buying and a free installation must come after thorough consideration and the calculation of the initial costs but I wouldn’t hesitate to pay more in the beginning because I think that solar panels are a worthy investment and the more efficient your panels are, the sooner your initial installation expenses will return.
@11-59: You make an interesting point 11-59 and it will be interesting to look back in 10 years to see where we are at with solar technology … I wonder if hydro and wind will be the way forward or maybe even free energy; now there’s a thought!
@How solar panels work: thanks for sharing the article and your thoughts on this; it’s an interesting debate
@Jennie: Glad it helped you Jennie!
@Peter: Great Peter; sounds like your mind is made up. Thanks for sharing your thoughts
My simple reasoning on this question is that if it’s worth while for companies to offer free panels, then it’s worth while buying them yourself, if you have the money available. I did suspect that it would even be worth taking out a loan, but I’ll defer to Martin the Money Saving Expert on that one.
Waiting for the technology to get better is an argument against ever buying any technical device, ever!
@Rachel: Thanks Rachel; I think I agree – if companies are offering freebies then it’s got to be a good investment otherwise they wouldn’t do it 😉
It’s like any other Green idea, unless there is ample of cash to be made it won’t happen which is why many housing associations are all clambering to get solar PV fitted to every property they can put them on. Without the FIT scheme solar PV would be nowhere near the scale it is at now and it’s a shame that to get this country to meet the standards set by the EU, we have to throw buckets of money at people.
@Matthew: I hate to admit it, but I agree with you! Wouldn’t it be great if people were motivated by something other than money …
@Mrs Green:
There is another way… Education! 🙂