Many people see the installation of solar panels as an ethical or environmental decision, but it is true that it can also be a financial choice and one which shows great returns and is a good place to put your savings. In fact, it may even be worthwhile getting special finance to make this investment for a long term return.

An article in The Telegraph earlier this year suggested that installing solar panels on your home could actually outperform many investments and in particular pensions, where returns on annuities have been less than 5% for many years. The government have estimated that the return on solar panels are on average between 5% and 8% – an excellent return when compared to bank accounts and certainly well ahead of inflation.

Income and savings

The government pays homeowners who have solar panels on their roofs a set amount for the electricity they generate. This is currently around 13p per kW/h, but is regularly reviewed and often reduced. You also receive a small amount for any electricity you sell back to the grid and your electricity bills will be reduced. At certain times of the year you can be getting your electricity for free and making money from the excess.

It is estimated that most people will make around £750 a year from an average domestic solar installation.

Can I afford it?

For most people the thought of investing in solar panels is a good one, but quickly put aside when the reality of the installation costs hits home. An average solar array on your home will cost around £7,000 to £10,000 and if you don’t have savings of this amount ready to invest, you might think that there are no other options available to you.

In fact, there are a number of special schemes for solar and in particular, the Green Deal which can help you to pay for the work. The Green Deal offers a loan which will cost around 7%, but only until it is paid off, which could take around 5 years. However, the feed-in-tariff, which is the income you receive on your panels, will run for 20 years.

Alternatively, you can get a personal loan or an extension on your mortgage to cover the cost. As long as the overall long term return is better than the cost of the loan, you are making a wise investment.

What should I bear in mind?

  • The feed-in-tariff is regularly reviewed by the government and is reset dependent on inflation and the cost of installation. However the rate you get when you install is set until the end of the 20 year contract. It is, however, inflation linked.
  • As general electricity bills increase, your overall savings will as well.
  • Solar panels may affect the saleability or value of your home. In most cases the value will increase, but it depends entirely on the buyer and what they are looking for.