UK solar panel subsidy cut: are solar panels still worth it?

Subsidies for solar panels are set to be slashed. So is it still worth having solar panels?

Subsidies for solar panels are to be slashed significantly, raising questions about whether they remain a worthwhile investment.

When you produce more energy than you need via your solar panels, that energy goes into the National Grid, for which you are paid money. From 8 February 2016, installers of rooftop solar panels will be paid just 4.39p per kilowatt hour (kWh) for producing electricity for the National Grid, rather than the current subsidised rate of 12.47p. In other words, in a matter of weeks, solar subsidies for homeowners will be cut by almost two-thirds.

In its defence, the Government claims that it has backtracked on previous plans to cut solar subsidies to just 1.63p per kWh (a reduction of 86.9%). 

The Conservative Government argues that renewable subsidies must be cut, in order to reduce the impact of rising renewable subsidies on household energy bills.

This seems like an absurd argument, given that the UK is the only nation in the G7 group that is actually increasing fossil-fuel subsidies. Incredibly, the UK spends a whopping £27 billion a year subsidising fossils fuels, which works out at £425 a year (or more than £35 a month) for each of the 63.7 million adults and children in Britain.

"Huge, misguided cuts"

Of course, Green and environmental activists were quick to denounce this decision.

Alasdair Cameron, renewable-energy campaigner at Friends of the Earth, warned: "These huge, misguided cuts to UK solar are a massive blow for jobs and the economy and further undermine the Government’s already tarnished credibility on tackling climate change."

Barbara Stoll at environmental pressure group Greenpeace responded to the cuts by saying: "If the Government is as committed as it claims to be to the Paris climate deal, then solar is one of the cheapest and safest ways for the UK to deliver on it."

Furthermore, one Government impact-assessment review of the 65% subsidy cut warned that it could hammer employment in the solar sector, costing up to 18,700 out of the total 32,000 workers currently employed in the industry.

Moreover, the Solar Trade Association has warned that around 6,500 jobs have recently been lost in the solar sector, thanks to installation companies shutting up shop ahead of previously proposed subsidy cuts.

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Is it worth installing solar panels in future?

This latest blow strikes me as incredibly bone-headed.

According to the Solar Trade Association, the new subsidy cut and £100 million cap will halve the number of domestic solar installations here in the UK, almost killing off this blooming market at a stroke.

The total cost of providing generous subsidies to solar-generated electricity amounts to a mere £7 a year for each UK household. The subsidies given to oil and gas, coal and nuclear power are hundreds of times larger. What's more, these are set to increase substantially, thanks to new tax breaks for North Sea oil producers and explorers introduced in the March Budget.

So what should households do? After February, will it no longer be viable to install solar panels on the roof of your home?

Thankfully, one trend in your favour is that the cost of solar-power generation has tumbled, thanks to modern technology. In fact, the expense has fallen by roughly half over the past seven or eight years. As solar panels become ever-more efficient, the cost of producing electricity from them will likely continue to fall.

Nevertheless, industry experts warn that the cost of installing rooftop solar panels may not make financial sense for many. Juliet Davenport, chief executive of renewable-energy utility Good Energy, warned: "The new measures are a slight improvement on the original proposals, but still mean that installing solar panels will no longer be attractive to British homeowners."

Another problem facing UK householders, both before and after the subsidy cut takes effect, is that many more solar-panel installers will surely go out of business over the next 12 months. James Court, head of policy at the Renewable Energy Association, said: "The tariffs are still very challenging and while the changes will help save some [firms] in the industry, it remains the case that many will be exiting."

How can British householders confidently order new solar panels, when they know there is some risk that their supplier or installer could go under at almost any time?

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