Even with the Government’s feed-in-tariff beginning in April, solar energy will take time to develop in the UK. However Solar’s long term growth prospects appear strong, says Toby Ferenczi. 

 ‘Solar energy in the UK? But we don’t have any sun?’ is the most common reaction to the suggestion of solar energy. Its true that the amount of solar irradiation we get in the UK is approximately half to two thirds the amount you get in southern Europe. Therefore for the same solar energy system, you can get twice as much juice if you put it in the Cote d’azur as opposed to Bracknell. So why bother putting an expensive bit of kit in Essex?

 As far as I can tell there are two reasons why we British residents, may bother – principles or money, and the latter of those two has historically been shown to be the more effective.  

 To those in the principled camp, you may like to know that despite having less sun in the UK, we still get a fair amount of solar energy hitting our island. To be precise, in London and across the south of England you get an average of 1000 kWh of energy per square metre of land (or roof) over the course of 1 year and with an average photovoltaic system you can capture about 150 kWh (or 15%) of that as electricity. Therefore, by covering a 10m2 portion of roof or garden you can get enough energy to cover 50% of your domestic need and save about 400kg of CO2 (and help save the world).

 To those of us burdened with the need to consider their finances, a few words of the costs of such an endeavor. Announced this summer the Government have agreed to give you between 30 – 40p/kWh for solar energy from next April. We don’t know exactly how much it is yet but it should be in that price range. That means that the energy you produce per year would earn you 500-600 quid a year for at least 20 years.

 Now for the key question: how much does it cost? At today’s prices such a system may cost on the order up to 7500 (5 pounds per watt peak for 1.5kWp system). That means that you would stand to benefit 2000 over the lifetime of the system, or an annual return of about 2.5% per annum. This is not a great return on investment. Most savings banks would undoubtedly serve you better, however it is a positive number. Previously those who wanted to help the world with a photovoltaic system would have to pay out a fortune for the privilege.

 A further critical point is that the price of solar energy systems is falling. During the first half of 2009, the cost of solar modules fell by as much as 50%. Couple this with the range of subsidies available and the initial cost of installing a system should fall significantly. As these cost reductions get passed on to the customer, the return on investment will increase.

 It is possible to envision that as costs reduce a 5-7% annual return on investment should become possible. For savers, such a system will become a credible alternative to an ISA, and for those with no capital but who have the willpower it should mean that a bank loan can be used to cover all the initial costs.

 Right now, solar power in the UK is only for those with time, spare cash and strong wills. From April, the economic benefits of solar will make it easier for those with principles to get involved. The decision to invest in solar energy from your home will always be based on a combination of financial interest and environmental concern. Overtime, financial benefits should become the primary motivator, with environmental benefits an additional.