What About Payback

Solar panels generate electricity during daylight hours. The government has introduced the incentive scheme to make the introduction of solar panels viable for early adopters and to therefore accelerate the progress of the solar industry. There are 3 amounts of payments/savings you benefit from as shown here:

The government incentive scheme is the Feed-In-Tariff (FiT). FiT is a tax-free index-linked (via RPI) payment per unit of electricity (kWh) generated and has two components:

  • 1 :- The Generation Tariff is the part of the FiT paid for all generated electricity whether it is used or sold to the grid. The generation tariff payment makes up the largest part of the financial benefit of solar panels. It is paid for 25 years (index linked) provided the installer is MCS accredited. For systems installed to existing properties (not new build) this is 21 pence/kWh for the first year increasing each year with the RPI.
  • 2 :- The Export Tariff is the part of the FiT paid for all electricity exported to the grid. In addition to the generation tariff you will receive a minimum of 3.1 pence/kwh that you sell to your electricity supplier.

In addition to the payments for electricity generated, you also benefit from free electricity:

  • 3 :- The generated electricity that is used leads to a reduction in the electricity bill. Since the cost of electricity is much greater than the export tariff (3.1p) it is beneficial to make use of free (daylight hours) electricity whenever possible.

The generation and export tariffs are index-linked and will rise in line with inflation. It is expected that the cost of electricity will increase faster than inflation so the free electricity will become more valuable over time.

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