Solar Panel Subsidies to be Cut Again – 29 May 2012

Subsidies for homeowners who install solar panels to generate electricity will be reduced from 1 August 2012. The subsidy, known as Feed In Tariff, will fall to 16 pence per unit of generated electricity from the current level of 21 pence. It will then fall every three months, depending on market conditions. The tariff dropped just recently in April from 43 pence.

Under the Feed In Tariff (FIT) scheme, if you install an eligible electricity generating technology from a renewable source, such as solar panels, your energy supplier will pay you for the electricity you generate, even if you use it yourself, and for any surplus electricity you export to the grid. The rate you get for selling electricity back to your supplier will increase to 4.5 pence per unit in August from the current rate of 3.2 pence.

"To get FITs at the standard rate for solar panels your property needs to have an Energy Performance Certificate (EPC) rating of band D or above," said Grimsby Energy Performance Certificate provider Colin Childs from "If your home achieves an EPC rating of E, F or G, you will only be eligible for the lower FIT rate of 9 pence per unit of generated electricity. From 1 August 2012, the lower tariff will also drop to 7.1 pence."

Under the current FIT rates, The Energy Saving Trust estimates that a typical domestic solar electricity installation would earn FIT payments of £570 a year. Using your own free electricity is estimated to reduce the electricity you buy from your energy supplier by about £100 a year, giving total savings of around £670 a year. These savings will reduce from August 2012.

The Government is reducing the FIT rates because it says solar technology costs have come down swiftly over the past two years and it does not want to over subsidise the installations. The Government says the new tariffs should give a return on investment of over 6% for most typical, well sited installations.

"We have produced a number of EPCs for Lincolnshire homeowners over the past 2 months who were very annoyed at just missing out on the previous FIT rate of 43 pence," said Mr Childs. "Whatever rate you get at installation is then guaranteed for the life of the tariff, currently 25 years, and index linked. So even as the tariffs reduce for new installations from August, any eligible installations completed before that date will not see their tariffs reduce for the next 25 years."