Most of us would love to install a renewable energy technology – after all, it will save us money on our bills, possibly earn us an income and it will improve the environment. But what about solar panels as an investment? Is it really everything the salesman will tell you – or have recent changes in government rules on feed-in-tariffs left solar panels out in the cold in terms of investment potential?

How much will solar panels cost?

You can expect a typical array of solar panels on the average home to cost anywhere from £6,000 to £9,000 to install. This includes VAT at just 5%. Solar panels have fallen in cost over the last few years due to an influx of cheaper imports from China and the fact that the manufacturing processes have been streamlined. Also, the panels are more effective than ever.

Other costs may include maintenance, which is minimal and the fact you may need to have some measures carried out on your home to make sure it is energy efficient. This could include double glazing or insulation. To qualify for the Feed-in-tariff you will need to have your home assessed to ensure it meets minimum standards.

How much will I save?

A typical family home solar PV array will generate around 4kWp or 3,700 kilowatts of electricity hours per year. This is about how much electricity most homes would use per year. So the electricity element of your energy bill could be more or less removed. Of course this does depend on the position of your panels, how sunny it is and if there is shading from nearby trees.

How much will I earn?

Your solar panels will be eligible for the feed-in-tariff from the time they were installed. This is where it starts to get a little more complicated. The feed-in-tariff will be calculated from the time you register your installation and it will be fixed from that time. At one point (at the beginning of the scheme) home owners were receiving 43p per Kw. This has now reduced to around 13p. This reduction has been based on the reducing costs of buying and installing the panels and the improved efficiency. This government regularly reviews this figure and will reduce it as and when things change.

You are also able to sell the extra energy you create back to the grid if you do not use it.

Overall the savings and earning you can expect from installing a solar panel system will be around £750 per year (based on current FIT levels as of April 2014)

Overall investment return

The government have suggested that most investors will see a return on their solar panel installation of between 5% and 8%. In fact the government recently stated that this beats pension investments. While this may be true in the short term, it is worth pointing out that the feed-in-tariff is only offered for 20 years.

Regardless of whether bank interest rates start to rise – this level of investment return is still excellent and well worth the initial investment if you are in it for the long haul.