Solar panels payments to drop todaySolar panels will get lower subsidies from today

01 August 2012

Solar panels

Homeowners who install solar panels will be paid less for the electricity they generate from today - 16p/kWh down from 21p/kWh.

The Feed-in tariff pays homeowners who have solar panels, hydroelectric systems, micro combined heat and power systems, anaerobic digesters or wind turbines. 

These changes only affect solar panels and also include:

  • the length of time consumers will get the FIT for is being reduced from 25 years to 20 years
  • the export tariff, for every unit of electricity generated by the system and sent to the grid, will increase from 3.2p/kWh to 4.5p/kWh
  • for houses with an energy performance certificate lower than band D (see our guide to guide to energy performance certificates), the FIT generation rate drops even further to 7.1p/kWh.

These changes will not affect existing installations, only those installed after 1 August 2012.

Are solar panels a good investment?

Whilst the FIT is being reduced, the cost of solar panels has also dropped considerably. An average-sized 3kWp photovoltaic system now costs about £7,700. 

With the new rates of FIT, solar panels can still be worth investing in. Find out more in our guide to Feed-in tariffs.

Payment for solar panels

The FIT is made of three elements: 

  • the generation tariff – paid for each unit of electricity produced, whether it's used in the home or not
  • the export tariff – paid for each unit of electricity exported to the grid
  • the savings made on your electricity bills – because you'll be generating some of your own household electricity, your bills will be lower

Feed-in tariff fiasco

The drop in FIT payments follows a long story of fiascos with the Feed-in tariff. When first launched, the FIT generation tariff for solar panels was very generous at 43.3p/kWh, guaranteed for 25 years. A victim of its own success, the FIT saw too many people installing solar panels on their roofs, with more than 240,000 installations in Great Britain by March 2012. 

In October 2011, the government announced plans to change FIT payments to reduce the amount of money that was being given through the scheme. However, the government encountered legal problems with its proposals for FIT, which has delayed the reduction in payments. 

Consumers pay for the FIT scheme through their electricity bills, and Which? thinks the scheme must be cost effective and put as little burden on bills as possible. Which? has called for a stronger cost-benefit analysis of the FIT scheme.

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