An article published in the Financial Times last week has vividly highlighted just what effect the recently introduced feed-in tariff has had on the UK solar industry. The news that record numbers of people have decided to install solar panels is largely due to the feed-in tariff legislation which offers installers a healthy return on investment, off-setting the costs of buying and fitting the kit.

The figures published in the FT last Tuesday taken from Ofgem state that this month alone, more than 2,200 homes have fitted solar panels compared to 1,700 last month and 1,400 in June. Indeed, with figures that more than 6,600 households have installed solar panels since the introduction of the tariff system it is good evidence that this incentive scheme could herald the beginning of a boom in the UK solar industry.

Unsurprisingly, The Financial Times paid particular emphasis to the obvious financial rewards associated with solar installation rather than environmental benefits. With the case example of John Keown, a company director who invested in solar through a scheme offered by British Gas, a good case was made for the long term viability of solar PV projects.

Keown will be set to reap the benefits of solar energy installation with expected returns of £1000 per year through savings on electricity bills and revenue from the tariff. Keown for example has estimated that since he installed his solar panels in April he has made £289 from the feed-in tariff. He stated,

“I haven’t gone into self-produced energy to be green. I’ve gone into it because I think it’s a good financial saving, perhaps even better than having an Isa account.”

Certainly, it seems to be growing in the public consciousness that the installation of solar panels to households is more than just a green fad or something which can bring about negligible carbon footprint reductions. The high rates of return which can be achieved through solar panels is likely to attract investors exponentially in the future as word catches on that sourcing and installing a solar system doesn’t have to be painful process.

A survey carried out by the Solar Trade Association (STA) has reported a massive drop in sales in solar panels in the last few months. The STA, a body which represents photovoltaic installers, manufacturers and suppliers has stated that since the arrival in office of David Cameron’s Conservative government business has dropped off considerably.

Paying particular attention to solar thermal installers, the STA findings have shown that since early May around 50per cent of these installers have reported a 75 per cent reduction in new business, figures which are likely to have resonance across the renewable energy sectors.

Spending cutbacks have been the prominent feature of the new coalition government and these spending cuts have certainly been felt in the solar energy industry according to the STA’s findings. Concepts such as the ‘Green New Deal’ are also being harmed with a sharp fall in green jobs across the country. Indeed, the STA report found that 65 per cent of its members were considering leaving the industry temporarily during these hard times with 7 per cent considering leaving permanently.

Chairman of the STA, Howard Johns said,

“We have a new Government which claims to be the greenest Government ever, yet in its first days it has caused severe setbacks in what is otherwise a buoyant sector. Removing grant support for solar thermal and giving no clarity on new incentives has severely hit a sector that will provide many green jobs and lots of renewable energy with the right support behind it.”

The withdrawal of certain schemes for solar thermal such as Renewable Heat Incentives and the Low Carbon Building program grants have been in stark contrast to solar PV where feed-in tariffs have seen investment and installation go from strength to strength. First introduced under the guise of the Clean Energy Cash back scheme, it highlights exactly how crucial government incentive schemes are in kick starting renewable energy take up in the UK.

You may have seen recent announcements in the press regarding ‘solar panel giveaways’ from new companies offering to install photovoltaic panels on your home completely for free. Solar PV panels are known to be extremely expensive, so how on earth could a company offer them for free, and why would they do it?

The answer is relatively straightforward, the companies involved stand to make a considerable amount of money from the scheme. The key behind it is that installing photovoltaic panels under the feed-in tariff is a very good investment. Installing them on your home is especially good because the feed-in tariff pays the most money for small PV installations. Anyone deciding on where to invest their money should definitely look at getting a solar installation, it’s a tax-free, index linked investment that can be a great help to families and the environment.

Unsurprisingly for the UK economy however, where a good investment is to be found it doesn’t take long for the investment banks to come lurking. All of the free solar schemes offered are actually based on investment funds set-up by a well known UK investment bank. The fund is created to pay for solar installations on suitable UK homes, and then all the revenues from the solar panels go directly back to the bank. Some electricity savings are passed to the resident, but the big majority of returns go straight to the bank.

The second critical ingredient to this arrangement is the network of installers to design and install the installations.  In the UK there are not a huge number of these installer networks.  Behind each of these solar panel schemes is a different network such as the Mark Group and Eaga, firms which have over a thousand installers. They grew by doing boiler replacements and installation fitting for utilities such as British Gas. This arrangement means company who actually sells you the system is in fact a middle man between you, the bank and installer. There isn’t necessarily anything wrong with this, but its important to understand what is going on.

The other way of looking at it is that the investment banks are providing a service. Not everyone is in the position to invest 10k in a solar PV system and the ‘free solar’ schemes allow a wider range of people to experience solar energy and benefit from it. The arrangement means that the feed-in tariff payments go to the investment bank, but the savings in electricity bills at least are retained by the resident.

Overall these financing schemes will help to quickly grow the industry in the UK, but beware of how they work and know that you would make a lot more money if you self-financed. In Germany and other more mature solar energy markets, what you find is that ‘solar loans’ are widely available. This is the cheapest way of financing a solar installation. You just get a loan for however much you need in order to buy your system and pay it off with the feed-in tariff revenue. It means you still get to own the system and receive at least a portion of the feed-in tariff.

So if you would like solar panels but can’t afford to invest 10k over 25 years then getting some sort of financing is a good idea. It might just be worth waiting for better financial products rather than lining the pockets of investment bankers however.

Following their announcement that they would be giving away free solar installations to households across the UK, it is perhaps unsurprising that energy firm, Homesun have received an unprecedented level of inquiries.

The offer will include both a technical survey to ensure that the property is suitable for solar panel installation and of course the actual installation, taking away the initial start up costs which often act as a deterrent to potential renewable installers.

100,000 systems will be given away to homeowners with south-facing roofs meeting the requirements of the survey, allowing them to enjoy all of the benefits of a solar panel system without having to outlay all of the initial costs associated with solar technology.

Solar panels could save homeowners up to 40 per cent on their electricity bills with estimates that a typical 3 bedroom semi could save up to £250 a year, with the added benefit that homes with solar panels installed fetch a higher price on the market than comparative properties without. A spokeswoman for Homesun commented,

“There’s real excitement about what we are doing. This just goes to show the latent demand for solar amongst the British public, they just needed to find a way to access it. Solar now makes perfect sense. I am proud HomeSun is leading the charge to take solar mainstream.”

Homesun have already announced that since the release of their offer, they have received 7,000 calls and have had 10,000 people log onto the Homesun website. Talking about the unprecedented level of interest, Chief Executive of Homesun David Green said,

“The phones have been absolutely mental and it’s put huge pressure on our website. We were not anticipating such enormous demand. It’s clear that for the first time, we have allowed renewable energy for residents to break through.”

Homesun’s offer has been made possible by the introduction of feed-in tariffs, government legislation introduced in April 2010 devised to increase the take up of renewable energy generation. The tariff works by offering premium, guaranteed rates for both the energy used and the units of energy fed-into the national grid from the renewable systems.

Homesun will therefore be able to recoup their initial investment and subsequently make a healthy profit on each installation. Homeowners will be given the opportunity to buy the tariff contracts from Homesun in the future but it is more likely that most will simply opt to make savings on their bills.

With offers such as Homesun’s making an impact in the media and the building of consciousness about the feed-in tariff, it is very likely that before long the market will be jam packed by suppliers offering very similar solutions