Solar panel subsidies could drop by 87%Government proposes slashing green subsidies

28 August 2015

Solar panels Aug 2015

The government is proposing cuts to the feed-in-tariff

The government is proposing a big cut to the subsidies that householders receive for having solar panels.

Currently, households receive a subsidy (known as the feed-in tariff) of 12.92p per kWh for the electricity they generate and 4.85p for the electricity they export. 

The government is proposing to slash this to 1.63p for generated electricity from January. Those already on the feed-in tariff (FiT) will keep the rate they signed up for. 

Our energy expert Sylvia Baron said: 'If you're considering buying solar panels, get them now as both the proposal to cut FiT rates next year and the threat of an increase in VAT could mean a much lower return if you wait.'

Discover more about solar panel pros and cons in our guide to buying solar panels.

What is the feed-in tariff?

The feed-in tariff scheme gives cash payments to homes that generate their own electricity from clean sources, such as solar photovoltaic (PV) panels.

Generators submit meter readings to an electricity supplier who then pays the household for electricity generated.

You can find out more in our guide to the feed-in-tariff scheme.

Solar panels and the feed-in-tariff

The proposed change comes as the government tries to stop a projected £1.5 billion overspend on renewable energy. Solar panel installations have gone up 26% in the months until June this year, according to The Department of Energy and Climate Change, so more people are receiving the feed-in-tariff.

Energy Minister, Amber Rudd said that government support had lowered the cost of renewable energy, but the Energy Saving Trust warned that the proposed new rates meant that solar panels would no longer be cost effective.

Solar panels and VAT

The proposed funding cuts come soon after news that an EU ruling is likely to push the cost of panels up by 15%. 

Currently, solar panels are only subject to 5% VAT, but the EU has ruled that this violates the EU VAT Directive. The new rate of VAT on solar panels could increase to 20%.

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