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Is The Future Of The Governments Solar Grants Scheme Safe?

Mon, 10 Oct 2011 12:35:00 GMT

The governments solar grant scheme known as FIT's or Feed-in Tariff was introduced in 2010 to encourage the take up of the green solar photovoltaic technology. You may not be aware but a government review of the scheme has recently finished reviewing the amount of tax free tariff payments that you get if you invest in solar. This review caused much concern and worry that the plug may be pulled on the scheme.

As we all know government reviews take ages so it was a long and worrying wait whilst the Department of Energy and Climate Change published the results. You read more on the DECC feed-in tariff review on the DECC website. The scheme was guaranteed for 25 years and there was no doubt that this timeframe would continue. The doubt was over the rate that homeowners would receive if they invested in solar. The result of the review is that there is a cut in the amount paid for commercial installations. Whilst this is unfortunate the government's aim seems to be to concentrate on solar for residential properties and to continue to encourage people to install solar on their homes.

What about free solar?

The free solar schemes are likely to continue but there has been no official word from the big free solar companies as to whether or not they will continue to offer free solar past March 2012. The rate for new joiners to the FIT scheme is set to be 39.6 pence which covers people who install paid solar after March 2012. If you install solar prior to this point you will currently fix your rate at 43.3 pence. This represents a drop of just over 8% which roughly reflects the rate at which the cost of buying solar has fallen over the same period.

With a relatively small drop in the rates it looks like it will still be financially viable for companies to continue to offer free solar. If you are still making a decision about free solar it may be worth applying before March next year just in case free solar is cut by many of the installers.

How will it affect paid solar?

The feed-in tariff rates for homeowners basically remains the same. Originally the government said that they would gradually reduce the rate that they pay out through the FIT scheme over time. This is to coincide with the predicted fall in the cost of buying a solar PV system. The idea being that as the cost of solar falls there does not need to be as big of an incentive to encourage people to install solar.

It is true that the cost of solar panels has fallen since the introduction of the scheme and the efficiency and reliability of the panels has increased. I think we have seen the largest drop in the cost of solar over such a short period that we are going to see. Prices will no doubt continue to fall but not at such a dramatic rate than we have already seen.

the feed-in tariff rates for homeownersIt can be complicated to understand the FIT rate especially as more factors start to come into play such as the rate for new installations changes every year and the previous rates increase in line with the retail price index every year. The FIT rate at the moment is 43.3 pence per kilowatt generated, if you install solar now (or at least by March 2012) you will lock in that rate. That rate will increase every year based on the retail price index. If you wait to install solar until after March 2012 the rate drops to 39.6 pence but will still increase in line with the RPI. This will continue year after year so the year after that the rate will be 36.3 pence then 33.2 pence the following years and so on. The figures currently available specify the rates up to 2021.

In my opinion the best time to invest in solar would be just before the next rate drop in March 2012. The reason for this is that you will be guaranteed the highest rate at 43.3 pence plus assuming prices for buying solar are going to continue to fall you are going to get the cheapest quotes between now and 2012. If you are considering buying your own solar PV system it may be worth getting quotes now in order to decide for yourself when id the best time to install.

Government FIT scheme here to stay

So it looks like the FIT scheme is here to stay for the long term, at least for the governments guaranteed 25 years and at a rate for homeowners to continue to make it worthwhile investing in solar. The case for free solar looks assured, at least over the next year or so. There are likely to be some free solar providers dropping out of the market, especially if they do not have the buying power of the bigger free solar suppliers. I'd imagine that would also bring with it more stringent criteria from the free suppliers as they look for optimal homes to install their panels on.

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