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This web page provides a description of the financial benefits of photovoltaic (PV) solar panels.
References are detailed at the bottom of the page.
The data on this web page comes from Reference 1 (see bottom of page for full details) – a UK Government report of February 2010.
York Solar Energy believe that an average real rate of return of 6.16% is a good rate of return – compare that with a rough return of 2.8% from a savings account (April 2012).
Ask yourself:
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York Solar Energy solar panel long term financial returns comparisons web page.
York Solar Energy stabilising the effect of future energy price rises web page.
Financial Benefits Example
The example uses the same household electrical usage data as in reference 1, pages 33 and 34.
An example 2.5 KW PV solar panel system produces 2000KWh a year for 25 years.
An example house uses 4500 KWh electricity a year.
The house uses 1000 KWh from the PV solar panel, 3500 KWh from the national grid.
1000 KWh is exported to the National Grid from the PV solar panel.
The image below summarises example 1.
The table below details the financial benefits calculations for a 2.5KW solar panel system:
| Factor | Number | Comments |
| KWh Generated | 2000 | 2000 KWh generated per year |
| KWh Used On Site | 1000 | 1000 KWh used as it is generated (50% of 2000 KWh) |
| KWh Exported | 1000 | 1000 KWh not used and exported to the National Grid |
| FITs Rate (Pence) | 21 | 2012 FITs rate (applies from April 1st) 2012 |
| Export Tariff (Pence) | 3.2 | 2012 export tariff |
| Current Electricity Price | 14 | Pence per KWh (approximate) |
| Average Consumption | 4500 | Average electricity usage in KWh per year |
| Current Annual Bill (£’s) | 640 | = Current Electricity Price x Average Consumption = 14 pence x 4500 |
| Annual FITs Payment (£’s) | 420 | = KWh Generated x FITs Rate = 2000 x 21 pence |
| FITs Export Payment (£’s) | 32 | = KWh Exported x Export Tariff = 1000 x 3.2 pence |
| Saved On Current Bill (£’s) | 140 | = Amount saved on current electricity bill by using PV generated electricity = KWh Used On Site x Current Electricity Price = 1000 x 14 pence |
| Amount Earned (£’s) Per Year | 592 | Per year 2012 prices = Annual FITs Payment + FITs Export Payment + Saved On Current Bill = 420 + 32 + 140 |
| Earnings over 25 years (£’s) | 14800 | Over 25 years 2012 prices = 25 x 592 |
| Cost of replacing an Inverter (£'s) | 1500 | Assume failure of 1 inverter in 25 years (the inverter converts electricity from panels to type needed by electrical appliances – converts DC to AC). |
| Total Earned (£'S) | 13300 | 2011 prices =14800 – 1500 |
| Cost Of Installation (2.5KW) | 5500 | Typical York Solar Energy price |
| Total Profit (£’s) | 7800 | Over 25 years 2012 prices = Total Earned – cost to install = 13300 – 5500 |
| Profit Per Year (£’s) | 312 | = Total Profit divided by 25 years = 7800/25 = 312 |
| % Annual Real Rate Of Return | 6.16 | Simplistic calculation 2012 prices = (Profit Per Year divided by cost to install) x 100% = (312/7500) x 100% = 4.16% Add 2% for rate of return being index linked (see Reference 3) = 4.16 + 2 = 6.16% |
References
1 – UK Government, Department of Energy and Climate Change, Feed-in Tariffs, Government’s Response to the Summer 2009 Consultation (February 2010). Downloaded 13 November 2010
2 – Credit Suisse Global Investment Returns Yearbook 2009. Page 9, Figure 5, UK ‘Real Equity Return’. Downloaded 17 November 2010
3 – Paragraph 63, page 21, of Reference 1 (see above). 2% added to rate of return as the ‘tariffs are linked to inflation’.
