As householders are encouraged by governments and environmentalists to consider reducing the energy they use, renewable sources of domestic energy, such as wind, biomass and in particular solar energy are being considered by more householders. As energy prices increase and grants are made available for capital costs, the solar systems look more financially attractive.
In fact, however, it’s impossible to give a definite answer to the question of how much a system will cost, how much money it will save and how long it will take to pay back the capital costs. This is down to the variability of the key factors to be considered. These include:
- size and location of the system to be installed
- amount of sunlight (which will vary from day to day, hour by hour)
- cost of conventional alternative fuel sources, which will define the savings made
- amount of energy used and the amount fed into the grid (in the case of solar electricity)
- price paid for electricity sold to the National Grid.
Capital Cost of Solar Energy Systems
There are two types of solar energy system used in domestic properties – solar water heating (also known as solar thermal) and solar electricity (also known as photovoltaic energy). The former, as its name suggests, uses sunlight to heat water directly, and the energy can then be supplemented by other energy sources as necessary; the latter is more complex and generates electricity which can be used for general purposes with any surplus being sold to the National Grid)
Obviously the cost will vary according to the capacity of the system, but in general solar water heating is cheaper (the freesource energy website quotes a rough figure of around £3,000, compared with around £10,000 for solar electricity; freesource.co.uk, accessed 23 May 2010); but generates less in terms of both savings and revenue.
Domestic solar thermal systems in the UK qualify for £400 or up to 30% of the total cost of the system (Government Solar Power Grants, uk-energy-saving.com). Solar energy systems do not qualify for a capital grant, but the costs can be offset by the sale of surplus electricity through the Feed-In Tariff (see below).
Potential Savings From Solar Energy
Although solar electricity schemes don’t qualify for capital grants, the introduction of the Feed-In Tariff goes some way to offsetting costs by generating revenue. The tariff applies for each kilowatt hour generated and is currently set at 41.3 pence per kilowatt hour, plus an additional 3 pence for energy exported to the National Grid (Government Solar Power Grants, as above).
Money saved by solar energy will vary according the factors outlined above: each household experience will be different. Many sites offer cashback calculators – including the Energy Saving Trust, which also cites some real life case studies including:
- hot water bills in one household halved
- a saving of £25 per year on hot water in another case
- solar electricity generating a saving of £500 in a single year
- solar electricity generating 70% of annual electricity costs.
With such variation, there is no simple equation to calculate how long it will take to pay off the capital cost. For example, although a solar electricity system costing £10,000 and saving £500 per year would pay back the capital cost in 20 years, a solar hot water system costing £3,000 and saving 25 per year would not pay back capital costs for 120 years. The debate on the costs is complex and ongoing.
In assessing whether to install a solar system, however, the trends in electricity prices should also be considered. Conventional energy prices are continuing to rise (“British Households Risk Unaffordable Energy Bills Ofgem Warns” Daily Telegraph, 3 February 2010, telegraph.co.uk, accessed 23 May 2010); and of course government incentives and grants will go some way to offsetting capital costs.
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