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Investment returns on solar PV

In light of the recent upheavals to the solar power industry following the government’s attempt to reduce the Feed-in Tariff (the amount paid to homeowners for every kilowatt of power they generate from their domestic solar panel system), there has been a lot of confusion amongst potential investors and solar companies alike.

Spirit Solar’s MD, Erica Robb

However, Spirit Solar, a solar installation company, is offering returns of 10% for systems installed before 31st March 2012, with potential returns of up to 18%.

Following a legal dispute against the government regarding the cuts and the public debate between the Prime Minister and Spirit Solar’s own MD, Erica Robb, the DECC (Department of Energy and Climate Change) has announced: ‘The tariff rate for PV installations less than or equal to 4kW will not fall below 21p for installations with an eligibility date between 12 December 2011 and 31 March 2012.’

Using this information, Spirit Solar has calculated that solar systems receiving these rates have the potential to earn 10% returns on investment.

Following the recent news that the government lost their appeal against the court decision that ruled that the tariff cuts were unlawful, hopes are now high that the tariff will revert back to the original rate of 43.3p per kWh.

A statement released by Renewable Energy Assurance Limited (REAL) announced: “There is still uncertainty about FIT rates paid on installations fitted and registered between 12 December and 2 March as it is not yet clear whether the Government will be allowed to appeal. However, for <4kw systems the minimum tariff that consumers installing in this period will receive is 21p. If the Government's appeal is unsuccessful, or should they decide to withdraw it, consumers will receive 43.3p.”

Spirit Solar has worked out that if the tariff does revert to 43.3p per kWh until 3rd March 2012, installing solar panels before this cut off date could earn investors a return of up to 18%, stating: “If the government does lose [the appeal], then in order to cut the rate from 43.3p, they will have to put fresh proposals before Parliament, which will take 40 days. Therefore any installation made between 12 December 2011 and the end of this new 40 day period will attract the original higher rates. So anything under 4kWp (i.e. a standard domestic install) will attract a subsidy of 43.3p for 25 years.

Anyone installing between 12 December and the end of the 40 day period gets the double bonanza of the cost savings from drops in technology costs coupled with the higher tariff. This gives a return of 18%, tax free and inflation linked.”

After 31 March 2012
Spirit Solar say that the government are continuing to make it more difficult to be eligible for the Feed-in Tariff. In addition to the government’s attempts to decrease the tariff to 21p per kWh, from 1 April 2012 all homes will need to have an energy rating (EPC) of C or higher in order to qualify for the tariff.

To anyone whose house is below this rating or who is unsure what their rating is, Spirit Solar recommend installing prior to the end of March before the more stringent criteria are introduced.

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