Solar Energy

As an investor, I have always looked for strong yields and passive income when investing.

The big attraction with property is you can leverage your available funds - borrowing 3-4 times your deposit, and get a passive income as well as mid term capital growth.

I.e. if you borrow 3 times your deposit, put 25% down, and borrow 75%, then if the property increases by 5% per annum in value, your actual return on your investment is 20% per annum.

However when looking for a passive income we will always, as any good investor should, look at other investments giving a reliable return.

The big attraction with government backed schemes is they can offer tax free returns, which in particular for higher tax payers can make a huge difference to your returns.

However many offer fairly low returns.

One however I have been monitoring for several months has been the Government feed in tariff scheme.

With EU targets to reduce energy bills, and diversify types of energy creation, the FIT scheme became available in April 2010 in Great Britain.

Under this scheme energy suppliers have to (compulsory for big six suppliers) make regular payments to householders and communities who generate their own electricity from renewable or low carbon sources such as solar electricity panels(PV) or wind turbines.

About the Scheme

The FITs scheme guarantees a minimum payment for all electricity generated by the system, as well as a separate payment for the electricity exported to grid. These payments are in addition to the bill savings made by using the electricity generated on-site.

Once you have a microgeneration technology installed ie a solar panel you should experience a monthly reduction in your electricity bill and then receive an income from your Feed-in tariff provider.

The two main types of active solar panel systems are solar water heating and photovoltaic (PV) solar panels.
While they might look similar, and both consist of panels on your roof, solar water heating and solar PV are quite different.

Solar PV or solar electricity uses the energy from the sun to produce electricity which you can then use in your home or export onto the grid. Solar PV is an expensive technology (£12,000 for an average system) but generous financial support is currently available under the feed-in tariff scheme.

Solar water heating, also referred to as solar thermal or solar heating, uses energy from the sun to heat up water. It is mostly used to heat up your domestic hot water system. Solar water heating costs between £3,000 and £5,000, so is cheaper than solar PV. It doesn't, however, currently qualify for any grants or financial incentive but should do so, by October 2012, under the Renewable Heat Incentive (RHI).

So for now I would concentrate on Solar electricity due to the financial incentives.

After speaking to various companies, I am now able to recommend a good option for those interested.

The headline figures are:

• Investment: from £12,995 + VAT

• Return: from £1,300 per annum / 10%

• Period: 25 years contract fixed + increase in RPI added each year (i.e. 4.88% increase next year)

• Capital Repayment: 10 years or less

• Security: Lease on roof where system is fitted along with 25 year manufacturer's warranty of panels. Packages are pre installed which means you get return from day one so no waiting post completion for an installation.

If you are a homeowner in the UK, and would be interested in investing in Solar panels on your property, fill out your details below.

If you would be interested in investing in solar panels but are not currently a UK homeowner, fill out your details & let us know - as there are various options to benefit from this government backed, 25 year opportunity.

Further FAQs

What is the feed-in tariff?

The feed-in tariff (FIT) is a scheme launched in April 2010 to reward households and community groups in England, Scotland and Wales (not including Northern Ireland) who install their own electricity-generating 'microgeneration' technology with regular and guaranteed payments from an energy supplier.

How do feed-in tariffs work?

There are three savings elements to the tariff:

generation tariff (G) is a fixed-rate payable to households for the total amount of electricity generated, calculated per unit. The rate you'll receive is determined by when you first registered to join the FIT scheme and the type and size of installation.

export tariff (E) is payable on the units of electricity you export back to the national grid because you haven't used them in your own property. In the case of most small-scale technologies - or unless you already have a two-way smart meter installed - the level of electricity exported is currently calculated on a 50% assumption (called a 'deemed export').

savings on your electricity bills (S) because you'll be generating a portion of your household electricity yourself, your energy bills will be lower.

How much will I actually save on my energy bills?

So what does this look like in a real-life example? We calculated what an average solar PV panel installation (2.7kWp) positioned on an optimum roof (south-facing and with a 30 degree tilt) in Birmingham could receive and save:

• annual generation tariff income: £1,015

• annual export tariff: £36 (based on a deemed export rate of 50%)

• annual fuel bill savings: £147

• total: £1,198 a year. These figures are based on an existing building with a system installed between now and March 2012. In April 2012, the rates are due to change, and are likely to be reduced every year.

Assuming the system costs £12,000 and was bought upfront, the system would take 10 years to pay for itself - and generate £17,953 net profit over 25 years.

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