Financing Solar PV Installations

The typical cost of a domestic solar PV installation can run from £5,000 to £7,500. There are many ways to finance the purchase of a solar system in the UK including Feed-In-Tariffs and general finance from leasing companies.

Twelve months ago, some utility providers and PV installation companies were offering free installation in exchange for the benefits of being tied into the Feed-in Tariff (FITs) Scheme (for more on FITs, see below). In essence, the owner would be able to utilise electricity generated by the system so would therefore benefit from cheaper energy bills, but the utility or installer would receive the export tariff for any electricity sent to the grid.

Ideally, investing the money yourself (if you are in a position to do so) is the best solar finance scheme available because it enables you to immediately begin reaping the rewards from FITs, enjoy cheaper energy bills and receive payback on your investment. Banks and building societies may be willing to lend part of the capital cost, if not all, but any financial benefits you get from it will be offset by high interest charges until the loan is cleared.

Some manufacturers and installers are also offering finance schemes that carry cheaper interest rates and they may also be tied in with extended warranty, maintenance and service schemes. Depending upon the type of finance scheme it is (operating lease, finance lease, capital lease, hire purchase or another type of finance scheme) there is usually a small upfront payment and then fixed, on-going monthly payments either for the life of the product or for a specified duration. There may also be other costs involved so you need to make sure you are clear about all terms before agreeing or signing the deal. However, some of your monthly payment may be offset by cheaper energy bills and income from FITs if your system performs well.

The UK Government introduced a Feed in Tariff scheme for solar PV installations in April 2010. It enabled users to get paid for the electricity they generate from their solar PV array. It is for all solar users (private residential and light commercial, small businesses) other than those profiting commercially from reselling energy to other energy users. The scheme guarantees a minimum payment for all electricity generated by the system (termed the ‘generation tariff’), alongside an additional payment for the electricity it exports to the grid (termed the ‘export tariff’). These payments are additional to the bill savings made by using the electricity generated on-site. Payments vary, depending upon system size and when it is installed. They are index linked and guaranteed for 25 years and are listed in our Feed-In-Tariff table for easy reference.

Generators are also paid for every unit of electricity they export and can save on their energy bills for every generated unit used in home. An approved generation meter, supplied by an MCS installer as part of the package, will measure the amount of energy generated. Until ‘Smart’ meters are rolled out countrywide, any export payments through the Feed in Tariff scheme will be deemed at 50%. So, you will get paid for exporting 50% of the electricity you generate regardless of how much you actually do export.

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