What was once a rich eccentrics’ foible now makes economic sense.
They say every cloud has a silver lining. With the hefty rises in electricity and gas prices over the past year, the lining is that solar power, for most of us, is now a realistic, cost-effective option.
Until recently the expense of putting solar panels on the roof meant only a few eco-warriors with money were doing it. Anyone else concluded that the payback period was too long. But solar power, if you will pardon the phrase, is fast coming in from the cold.
Sure, the payback time is still long, at 15 years or more. But the annual savings on electricity or gas bills – which is, I think, a better way of looking at it – is now at least as good, if not better, than sticking spare cash in a building society.
And that is based on the cash yield on the capital. It does not include the value of carbon dioxide not emitted or the satisfaction of walking the walk, rather than talking the talk, on global warming.
The payback time would matter if a solar system added no value. But evidence suggests solar power can add nearly 9% to a property’s value.
Another misconception is that solar thermal panels, which heat water, are cheaper than photovoltaic (PV) panels, which produce electricity. Though it is true that PV panels are pricey, a 50% government grant roughly equalises the cost to the consumer per unit of energy generated by each type of system.
A typical solar thermal system can often generate all the hot water needed in the summer and 20% in the winter, so 50%-60% year round.
So what you will save? Panels of about 2 sq metres claim to save the equivalent of about 1,100 kilowatt-hours (kWh) a year. The savings depend on what you heat your water with. If you are off the national grid and using oil or liquefied petroleum gas, Department of Trade and Industry (DTI) figures show you could save about £150 a year. For mains gas, which is an efficient way to heat water, the saving is smaller, at about £50 a year.
As a return on the cheapest system I was quoted for (£3,100, fully installed, including the standard £400 grant), the yield ranges from 1.6% to 4.25% – the latter easily beating most savings rates.
You also save from using your boiler less. Many people with thermal panels do not use the boiler between May and October. That means servicing the boiler every two years instead of annually, maybe saving £50 a year. Assuming the boiler will last longer because it is used less and given the cost of new boilers, extending its life could save £50 a year.
Limits
Add that £100 to your saving and you have a yield of 4.25% on mains gas and up to 8% on other fuels, a fine return indeed. You could even add the carbon dioxide saving. This is a difficult one but some economists “value” a tonne of CO2 at about £20. Domestic solar systems save 1-2 tonnes a year of CO2, adding a theoretical £20 to £40 a year of savings.
There are limits to thermal. You can only use so much hot water. You may be on holiday for some of your summer peak-generation time. Modern washing machines and dishwashers tend to have cold water feeds and heat water with an electric element. So hot water is mainly for showers. So you can save only 10-15% of domestic energy use a year. You may also have to fit a new hot tank and intrusive plumbing from the roof panels.
For these reasons, PV is gaining in popularity. An installed 1kW system costs about £3,500 (after a 50% grant), rising to £9,000 for 3kW. They are often guaranteed for 25 years – manufacturers such as Sharp and Sanyo are confident their products could last a century. They also return the energy used in their construction in only two to three years.
PV has no intrusive plumbing, merely a cable to the electricity meter. Currys recently began selling this type. They save about 900kWh a year per kilowatt installed. A 2kW system generates about 1,800 kWh – half what a typical family uses in a year.
This not only saves the current 12p/kWh average electricity price but you can get another 3.3p/kWh via the regulator Ofgem once a year. That means nearly £300 a year in savings – a return on the installation cost of £6,200 (my best quote so far) of 4.7%. Not bad.
Although there are not the boiler cost savings of thermal, PV systems are “fit and forget” with few maintenance costs. And they save money when you are not at home – you can sell the excess generated back to the utility companies. Older electrical meters will actually turn backwards when you are not at home using electricity. How cool is that?
Because of this, bigger systems are possible with PV than thermal. PV is especially worthwhile if your roof is being replaced. There are now PV roof tiles and slates so if you have a builder already replacing your roof, the extra cost of using PV tiles is low.
Many fans of solar energy fit both systems, which together can easily generate 40% of total household energy. One wonders why the government is so keen on boosting nuclear energy again.
Such a project would cost near to £10,000 but the return would be the same as putting money in the bank. Jeremy Leggett, of Britain’s leading PV supplier, Solar Century, argues that as energy prices are certain to rise further, savings will increase. “There is zero chance of energy prices coming down. This is one of the best investments you can make,” he says. If they do fall, your return falls too. But then you can enjoy doing your bit for the environment and that, one might say, is priceless.
So is the solar market about to boom? The experts think so. Richard Cockayne of yourwelcome.co.uk, a retailer of energy-saving technology, says: “You have got to be from Mars if you don’t see there is going to be massive growth.”
Surging
New markets always reach a tipping point when production rises enough to lower costs sufficiently to raise demand. China accounts for 80% of the world thermal market with 65m square metres of panels on roofs. But China’s high volumes and low costs mean a system costs only £200, a 10th of the price here.
As with PV, prices are very high now because of a shortage of silicon but that is likely to be overcome in the next few years. But demand is already surging, as the graph shows.
So why wait? The returns already justify the outlay and, if you are worried about global warming, this is a concrete step you can take with tried and tested technology. Just do it.
ashley.seager@guardian.co.uk
Ashley Seager
Monday September 11, 2006
The Guardian