If you look at solar PV panels as a way of getting cheap electricity, doing your bit for the environment and getting a return on your money at the same time, then solar panels are undoubtedly a good investment. If you invest in panels for your house at the moment you will be guaranteed a rate of 43.3 pence per kilowatt hour for the next twenty five years under the government’s Feed in Tariff system, which means you will pay back the cost of the solar installation at least three times over.
The government’s feed in tariff system is also index linked, so it will keep pace with inflation and any proceeds you receive from the FIT are also tax free. However you do need to be aware that the current rates you can receive will be dropping quite a lot after April 2012 (thanks to the ‘greenest’ conservative government ever) and the deal will be less appealing.
Are solar panels a good investment then? Many companies project growth rates of 8% to 10% for your investment but this needs to be broken down a bit – that 8% will be if you do not factor in the cost of installing the system in the first place, something you would not need to do if you put your money into a shares ISA. Put your money into a savings account and your annual interest will come on top of the initial capital investment, which will still be yours. With a solar panel system, you will be spending something like £12000 up front for the panels and their installation, and it is £12000 you wont get back. 25 years later and you could make yourself £29,950 through the FIT and through savings to your bills. But you need to remember that the first £12000 will simply be paying for the system – in the end your profit will only be £17,950. Consequently that growth rate of 8% would have been a lot lower in the first few years. One way you can boost these earnings is by taking the money you make from the FIT and put it into a high rate ISA. Doing this means you could get some interest on your FIT earnings and build yourself a nice nest egg. Doing this would increase your earnings to a much better £35000 after the cost of installation.
The Feed in Tariff is a great scheme that we love here at Solar Powered People. If you look at it in terms of the return on your investment combined with its benefits to your property and to the environment then it cant be beaten. If you are looking at it in comparison to putting your money into a regular financial package then it is not as good – but this can balanced out by funneling your investments into an ISA.
I would also agree with your post that it is really a good investment.