How Does A Solar Feed In Tariff Work

If you’ve considered installing a photovoltaic solar power system in the past then you’re likely familiar with the ratio for the return on investment that typically applies.

If you happen to live somewhere that is reliably sunny most of the time then the figures pan out quite well in favor of installing solar panels. If however you live, let’s say North Europe, where there is reduced daylight during the winter months and even the summer months don’t guarantee plentiful unobscured sunlight, then the amount you get back means that the payback period can exceed forty years.

This is not only too long for most people to wait, but the panels themselves typically claim a useful life span of only twenty years or so. However, a Feed In Tariff can change all this quite dramatically. Put simply this ensures that you get paid a heavily subsidized rate for electricity that your solar panels generate. This is often much more than the price you would normally have to pay for electricity, so it suddenly changes the game to favor solar power in even normally unpromising circumstances.

The UK currently operate a scheme whereby you get paid well over four times the normal price of electricity just to generate it. In other words you earn very good money from your solar panels even if you keep all the electricity for yourself. If you do send some back to the main grid, then you get even more via an additional Export Tariff that ensures you get paid almost five times the going rate!

At this level of subsidy you can expect to generate revenues of about £1,500 GBP annually from a 4 kilowatt solar power installation, which means that you can now completely recoup the investment costs in roughly ten years and thereafter you’re coining it for as long as your panels last. The UK government are currently offering to support this scheme (including index linking the payments) for twenty five years, which would give anyone installing solar power now a profit of over £20,000 GBP.

A great deal for anyone who is able to invest in this scheme, but not so great for everyone else because the underlying fact is that solar power is still not able to stand on its own feet economically in northern latitudes, and hence ordinary consumers will simply pay for the subsidy with higher energy costs.