Feed-in Tariffs Halved, Is Investing in Solar Panels a Good Idea?

There's been much debate in the press recently about the 'feed-in tariff' subsidy which has been paid to home owners installing energy-efficient solar panels, usually in response to ever-increasing electricity prices.

The government is seeking to slash the existing subsidy which was put in place to encourage more of these installations.

It previously sought to impose these cuts last December, after making a surprise announcement in October, but court intervention stopped this and the effective date was changed to this March.

The intervention was led by Friends of the Earth and two large solar-panel firms, who argued that the cut was illegal as it had been announced prior to the end of the proper consultation period to determine the future subsidy.

What Does The Subsidy Offer?

The government is looking for ways to encourage British households to reduce the amount of carbon they emit as waste every year, partially by using non-renewable energy sources within their home.

Solar panels are one of the new breed of technologies that offer non-polluting renewable energy sources with minimal environmental impact and great long-term benefits for both individual households and the wider environment.

To encourage take-up of the technology, which is expensive for most as an upfront cost, the government offered attractive subsidies to encourage households to invest in solar panels.

This means that households would be paid for the energy they produced, both for themselves and any extra that was fed back into the grid. This was an attractive proposition indeed for many forward-thinking people.

The New Subsidy

The government has confirmed that this subsidy will now be halved. The payment has been slashed from the original 43.3p per kilowatts generated to just 21p, effective from 3 March.

This leaves customers only a few weeks if they wish to install solar panels while the higher-paying scheme is still in place and available. The industry expects that there will be a mad rush from consumers desperate to get their orders in before it's too late.

What is more, the government has since also announced that the subsidy will be slashed further by another twenty per cent for households installing solar panels from July and payments will continue to drop at staged intervals, from October and then April next year. These cuts could be imposed even earlier if the targets for solar installations nationwide are achieved before these dates.

Why Has The Government Done This?

Ministers are arguing that the cost of solar technology has fallen rapidly, meaning that the original subsidy is now too generous and ultimately unsustainable in the longer term.

However, critics of the cuts are arguing that thousands of jobs will now be put at risk in the emerging 'clean tech' industry and they also pose an unfair risk to housing-association and community projects which were aimed at tackling fuel poverty.

Are some customers still eligible for the higher feed-in tariff? Some companies still believe that customers may be eligible for the higher-level subsidy if they began an application before the announcement was made. However, those seeking speedy installations may be disappointed, as experts believe speed isn't easy with this technology.

The average installation is taking around four weeks for the physical work and then the registration, so the delays in paperwork and administration alone could push the completion date beyond the higher-rate cut-off point.

How Can the Reduced Tariff Still Save Money on Energy Bills?

After the subsidy is reduced, the annual return for households is likely to fall from an average of around £1100 to £500. So for customers looking at deals which promise to beat this deadline, it will be essential to get a written guarantee that this is possible or that they will get a refund if the date isn't achieved.

Covering The Cost of Installing The Solar Panels?

The answer to this very much lies in when you are looking to install the panels and which supplier you use. It's fair to say that the cost of solar technology has decreased in recent years as it's become more robust and more widely adopted. There are options for self-installation too for those with strong DIY skills.

The best course of action is to approach a range of providers for their quotes and projections against savings and see which will commit to providing written guarantees.

In the mean time, we can but hope that the government reinvests in the clean-tech sector as Britain moves out of its economic doldrums, so that this fledgling industry achieves the aims that environmentalists and conservationists have long been lobbying for.

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