A scheme that offers guaranteed cash payments to households that generate electricity from solar panels could be slashed.
Today energy ministers announced a consultation into proposals that could see the feed-in tariff (FIT) – which guarantees payments for generating electricity using solar photovoltaic (PV) panels for 25 years – cut by half.
Find out full details about FIT and how the cuts will affect earnings in our Q&A guide to the proposed changes to the feed-in tariff.
Solar payments decrease
Currently households that have installed solar PV systems up to 4kW in size can earn 43.3p per kilowatt-hour of energy produced through FIT. But this may be cut to 21p for new installations registered after 12 December 2011.
Under the current tariff, a typical 2.9kWp system installed in central England and costing £11,700, would earn around £1,200 a year from FIT. With the proposed new rate that will drop to about £650 per year.
The time it takes for a solar PV panel system to pay for itself would therefore rise from 9 -10 years to around 17-18 years.
Solar PV might not be such a good financial investment anymore. In comparison to a good cash Isa, the annual rate of return might even be lower. Read our guide to solar PV as an investment for full details.
Consumers pay for FIT
Which? executive director Richard Lloyd said: ‘It’s right that the government properly controls spending on feed-in tariffs as everyone pays for this scheme through their energy bills.
‘But the government should honour the existing rate for everyone who has already signed contracts or paid deposits for solar panels.
‘By setting a deadline that is just over a month away, the government risks creating a surge in demand for FIT that cannot be met in the timeframe, leaving many customers disappointed.’
The government says the changes are in response to the large number of households which have already signed up to the scheme and the decreasing cost of installing a solar PV system.
FIT changes – am I affected?
Under the proposals, eligible solar PV installations completed on or after December 12 will receive the current tariff until 1 April 2012, when the new tariff will start.
The change may also affect those in the process of having panels installed, as certain pieces of paperwork must be completed before 12 December in order for the system to qualify for existing rates.
Those who already have solar panels installed and already receiving the FIT are not affected by these changes.
Getting a new PV system installed and registered before 12 December might not be possible as some installers are already seeing increased orders on their books.
And those who have just signed a contract might be worrying whether they will get it all installed and registered on time to qualify for the current higher rate.