Free v Buy

Overview

As the Solar Photovoltaic or PV market is developing, some companies, including the large utilities are offering “Free” or “Discounted” Solar Panel installations.

The upfront claims and headlines look good – savings of £200 - £ 300 per year can be achieved by installing PV solar panels – and this open-ended saving can be achieved by simply allowing companies to install their system “Free of Charge” on the basis of no or low-cost; but you sign over your home’s future income from generating surplus electricity.

The upside of these deals is that you get PV panels installed which will save you cash and of course there is the added benefit of helping the country save its CO2 emissions – a worthy contribution!

However, these companies tend to stop short of vital information which could not only seriously damage your wealth but may cause real problems when your home is sold.

The Profit Motive

These companies are commercially astute and profit-oriented. By getting home owners to sign over their Feed-In-Tariff (FIT) rights means a minimum 25 year income of around £1800 for a property with a typical 4KW system

Example

FIT Income £1400

Import Saving £380

Export Income £26

Total Income £1806

This is an accurate assessment using SAP 2005 figures, 850 KwH per KW installed with a 75% personal usage of electricity generated.

It must also be noted that as grid-sourced energy costs increase, so do your “Import” savings. FIT income is guaranteed by the Government for 25 years and will rise in line with inflation.

A £35650 income on a two day installation of a PV system of their choice.

Selling your Home

When you are asked to sign over your FIT rights, you are actually signing over your home rights as the FIT scheme is based on the property rather than the owners living in it.

When the house is sold, the FIT income rights remain in place with the company who have installed the “free” panels.

You will need to find a buyer who is willing to legally take on the contract you signed. This at least will complicate a potential sale and cost more and at worst, could simply put off a potential buyer because they do not have control of the energy generation from the panels.

You should also consider what happens if the installer of the panels goes into liquidation. If you are in contract with a legal entity to have them collect and retain your homes FIT income and they go bust, what happens to the income and how does this affect the maintenance and legal position?

What do independent experts say?

Which? Research has published an account of “Free” Solar Panel Deals which demonstrates that you would be far better off taking out a loan and having control of your own system.

Some companies claim that they provide you with “Free” systems to the value of £19000 but this is based on their full “retail” price, with no “fictitious” discount rather than the actual wholesale cost plus fitting.

A Guardian Newspapers investigation found that it makes financial sense to install your own system. Current re-mortgaging loans are no more than 5%-6% and even if they rise to double, you will still make a huge profit.

Most calculations show that buyers are able to re-coup their investment after nine years, depending on how they finance and that the majority of households will make a risk-free and tax-free profit of £20,000 over the 25 years AND enjoy lower annual electricity bills.

Mipower’s Richard Drinkwater has warned against home owners taking out what he describes as “Superficially Generous Deals” and adds:

“Effectively, customers using companies offering a “free” solar photovoltaic system may be getting around £ 230 free electricity per year, but may not appreciate they are giving away a cash income of more than £ 35,000 over 25 years from a system that would cost around £ 15,000”

A recent customer had a 2.6kW system fitted at a cost of just over £11,000. He paid a small deposit and borrowed £9,000 from his Building Society. His five-year deal cost just over £170 per month and he knows that after 5 years the system is his.