Solar Panel Feed in Tariff to be Reduced!

Are solar panel kits worth it?

Back in October 2014 Ofgem announced that the solar feed in tariff for domestic and small commercial (<50kW systems) will be getting reduced, again!

This of course is a further wake up call to those that still have not bothered to take advantage of the feed in tariff while it still exists. What the average homeowner seems to be failing to realise is that through the government financial incentive of the feed in tariff they would gain a return over 20 years that far out-weighs their initial investment.

So what I’m sure you want to know is how much will it be reduced by? and how does the reduction affect the return?
Well as it happens the reduction is not as severe as some of the reductions have been in the past, the first in January is only a reduction of 3.5%, followed by a further reduction of 3.5% in April 2015. For the domestic market this only means a loss of around £1,000 from an expected return over 20 years, however for larger commercial installations investors would be almost £10,000 out of pocket after the 20 years.

future feed in tariff rates

One important point to note is that; the feed in tariff IS NOT reduced for those already benefitting from the scheme! Whatever the FIT rate is when your system is installed that is the rate you receive for the full 20 years despite how much it is reduced for the new applicants.

For those that signed up to the scheme back in 2010, they are enjoying payments each quarter for the full term of 25 years at a rate of 45.4p/kWh!

As shown in the chart below the feed in tariff rate has seen significant reductions since being introduced in 2010, if you think it will stay at its current rate for long you are only deluding yourself. Once the government has hit their target for renewable energy it will be done away with entirely, in the meantime we can expect to see continued degradations.

feed in tariff chart

When you compare the falling feed in tariff with the ever increasing household costs of electricity and gas it seems as though getting solar panels fitted sooner rather than later would be a very sensible idea.

It seems like a good idea because it is, but why are more homeowners and landlords not taking the opportunity to grab this opportunity while it is here?

uk energy price rises chart

So what about you?

From what we can tell by the people that we speak to each week it appears that the average person on the street is completely unaware that this amazing government financial incentive exists, or if they have heard of it they have made an incorrect assumption it will be around for a long time such as job seekers allowance or the NHS for example.
So what are your thoughts on the feed in tariff?

Are you a homeowner, business owner or fellow installer? Do you have solar already installed?

Where do you see the feed in tariff going in the future? Do you think it will still be available post 2020?