Payback from Solar Thermal

Thinking of Investing in Solar?

Solar technology has become more widespread in the United Kingdom in the last 5 years. A greater understanding of the environmental benefits of the technology is one of reasons why there has been a greater uptake of solar energy systems. However, another major reason for their uptake is largely due to the payback reward systems launched by the British government. Up until March 2012, when the rates were lowered, solar panel owners, in particular, were heavily rewarded for the installation of these systems through Feed In Tariff payments. An average domestic 2kW system could then earn its owner over £1,000 a year find out the latest annual return for solar panels and how much the Feed in Tariff will financially benefit for you.

How does Solar Thermal Work?

In layman's terms, solar thermal systems use heat from the sun to heat water which can then be used around the home. Panels, known as collectors, are installed on the roof of a property and these, as the name suggests, collect heat emitted from the sun. This energy is then used to heat water which is stored in a water cylinder. The water can then be used around the home as it would with conventional hot water systems. An immersion heater is used as back up to heat the water at night or when the sun is not powerful enough to heat the water alone.

How much Money can Solar Thermal Systems Save?

Average solar thermal systems cost just under £5,000 to install but the savings are modest to say the least. It is estimated that a solar thermal system will save between £60 and £90 a year. This means it would take over 50 years for the solar thermal system to pay for itself. The main problem is that, whilst the thermal system may be able to provide all of your hot water in summer, it is unlikely to provide you very much in the winter. Indeed, solar thermal systems are estimated to provide at most 60% of your hot water annually. Some estimates claim the more realistic figure is nearer 40%. It seems that while solar thermal systems may have environmental benefits, their financial ones are not nearly so advantageous.

Government Payback Schemes - The Renewable Heat Incentive

In contrast to solar thermal systems, solar panel installation has seen a sharp increase in the last few years. Solar panels themselves actually save around the same amount of money a year as solar thermal systems, so why have the panels taken off so well? The answer is simple - The Feed In Tariff Scheme. As stated earlier, this scheme allowed for solar panel owners to make in excess of £1,000 a year tax free profit from the panels. This meant the initial financial outlay of the panels could be paid off within a decade.

Although the payments have been cut by half in recent months, a substantial profit can still be made over the 25 years that the scheme is due to run for. Solar thermal systems do not qualify for the tariff. However, there is some hope for the future with the Renewable Heat Incentive Scheme. Launched in 2011, this scheme offered help with installation cost of renewable heat systems. Solar thermal owners could apply for £300 towards their installation costs. However, whilst this is no doubt a help, it is dwarfed by the payments offered by the Feed In Tariff scheme.

Solar Thermal - The Future

There is hope of more financial help from the Renewable Heat Incentive Scheme in the near future. The Department for Energy and Climate Change has confirmed that a second phase of the scheme will be launched in the summer of 2013. It is widely believed that this phase will reward solar thermal system owners with quarterly payments based on the amount of energy they generate. Like the Feed In Tariff scheme, it appears that the payments will depend on the type and size of the system. At this point it has not been announced how much these payments will be.

It seems the success of solar thermal technology in this country will depend on how generous the Renewable Heat Incentive will be. A disappointing outcome may mean the solar thermal energy system is deemed as expensive and unnecessary even to those who are sympathetic towards environmentalist views.

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