Energy-saving measures such as solar, heat pumps and roof insulation will have their current 5% VAT reduced to 0% for the next five years.
With the alarmingly increasing energy prices and the new incentive of the government, 2022 is the year to install solar panels on your property. While many UK families are still sceptical about the efficiency of solar energy in the UK, in reality, once fitted, the average family could save on average £230 on installation and £360 every year on energy costs.
Solar Panel Prices Over Time
Before 2020, solar PV panel prices have been decreasing linearly for 15 years as the photovoltaic technology was improving and production quantity was increasing.
The global pandemic and supply chain shortages have gravely affected the solar PV market. The current 2022 prices are back at 2018 levels which shows a 23% price increase since 2020.
So, should homeowners wait until solar prices drop back to pre-pandemic levels? No, even with the slightly elevated cost, solar energy stays a good investment in 2022 because of its huge savings potential.
PV panels are still at a reasonable price, and the reduction of VAT on solar system installations from 5% to 0% is still a significant help for families wanting to install residential panels.
And just as nobody could predict covid-19, we cannot say for certain that solar panel prices are going to keep decreasing in the following years, even if the predictions say so.
Moreover, UK households’ electricity consumption is on the rise, and with current energy prices through the roof (and unlikely to decrease in the foreseeable future), harnessing the sun’s energy for free still sounds like the perfect solution.
The energy price cap has increased by 54% since last year. Compared to this, a 23% increase in solar installation cost in 2 years seems a lot less dramatic, and the overall payback time of an average solar system is more likely to shorten.
How Much Can Homeowners Save with Solar Energy?
First of all, the 5% VAT reduced to 0% can save you £230 on an average 3.5kW system installation right away.
After that initial price reduction, there are many factors that affect the yearly energy savings of your solar system:
- Geographic location
- The angle and orientation of your roof
- Shading
- The size of the system
- Your energy consumption
Moneysavingexpert.com estimates that an average household with a 3.5 kW solar system can save anywhere between £170 and £440 per year. In addition to that, households could get paid on average £110 yearly for selling the electricity they don’t use back to the grid.
People who are working from home and/or consume the most electricity during the day can take the biggest advantage of solar energy and economise the most. But those living in the South, having a South facing roof without any trees or buildings in its proximity, can also expect their solar panels to be highly profitable.
How to Increase Solar Energy Savings Even More?
The return on investment of each photovoltaic system is going to be different, and the above figures are just estimates. However, there are a few ways to maximise the energy output and ROI when designing your system.
Choosing the Best Solar Panel:
A highly efficient solar panel can help you yield more energy because it can harvest more of the sun’s energy on the same surface area.
In 2012 the highest module efficiency ever achieved was 17.8% by Solar Frontier, but most commercially available products provided a much lower power output than that. In comparison, in 2022 the average efficiency of a residential mono PERC panel is around 20%, and researchers are already pushing the 50% mark in the laboratory so the gradual increase in efficiency is likely to continue.
The Perlight Delta 400W has a 21.3% module efficiency and it is currently one of the most efficient PV panels on the market.
However, if you’re planning solar for a new build, you might want to consider an integrated roof tile (IRT). IRTs can usually cover a bigger area of your roof, and they might be able to produce more energy (depending on each roof). The other benefit of the integrated panels is that you can significantly reduce the cost of roofing materials.
Adding Solar Battery:
A solar battery is a bigger investment, and its ROI depends on each household’s energy usage. Adding a solar battery to your system might be worth it if you use the most energy during the evening. With a battery, you can store your solar power generated throughout the day and use it whenever you need to.
Reduce The Effect of Shading with Tigo Optimisers:
In many cases, some shading of the panels at different times of day is almost unavoidable. Tigo optimisers are a technology that can have an enormous impact on the efficiency of a solar system. They reduce the effect of shading, giving you a higher energy yield. Tigo modules also let you monitor your panels in real-time and detect damages in your system which can result in additional savings on maintenance cost.
Solar vs Heat Pumps: Which is the Better Investment?
Heat pumps also benefit from the 0% VAT under the new government scheme, so are they also good for energy-efficient homes? The answer is complicated.
Heat pumps are more efficient and more environmentally friendly than traditional heating systems, but they use a lot of electricity.
With the current gas price of £0.07 per kWh, the cost of heating an average 4-bedroom house (19,000kWh) is £1,330. And with the current electricity price of £0.28 per kWh, you will pay £1,520 to heat the same house with an air sourced heat pump (with a coefficient of heat pump performance of 3.5).
Heat pumps will likely increase your overall energy consumption and charges. On the other hand, solar continues to be a good investment in 2022, helping you reduce your electricity bill.
