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Why were the Dragons in the Den so surprised by solar PV?

Dragons' Den c/o BBC

Solar PV got an airing on Dragons’ Den last night, but given its growing popularity, I was surprised that the Dragons thought it was a new idea! So here’s a recap for the Dragons on solar and the Feed-in Tariff.

At last! Summer seems to have arrived and some are thinking about whether they can cash in on sunny days. There has been an increase of 400% in solar sales since this time last year as more people decide to invest in this new technology.

Perhaps it could only be a matter of time before a solar entrepreneur walked into the Dragons’ Den – and last night it finally happened. He explained how a fortune can be made by selling panels to homeowners looking to get cheaper bills, earn money via the government Feed-in-Tariff (FIT) scheme, and reduce their carbon footprint.

Deborah Meaden was keen to invest in the business mainly because she’d already invested in another – clearly she can spot a growing market! By the end of the pitch, tha Dragons were doing battle for the opportunity to invest in the idea.

Don’t be blinded by solar promises

No doubt some people will really benefit from it with cheaper bills, a lower carbon footprint, and the chance to earn money back from the FIT scheme. But I’m not sure the business warranted such unqualified love from our Dragons.

There are two types of solar technology – solar hot water or thermal and solar photovoltaic (solar PV). Solar thermal uses the sun’s energy to heat up a home’s hot water. Solar PV transforms energy from the sun into electricity that is used in our homes – this was what the entrepreneur was offering.

The systems are expensive – around £10-12,000 – but the government’s ‘Feed-in Tariff’ (FIT) scheme is helping people make money from solar PV (solar thermal is not eligible). It was this that had our Dragons reaching for the chequebooks. Why? FIT pays money to homeowners for generating electricity, at a premium rate, meaning that many are falling over themselves to have panels installed and get some of this cash.

How fit is the Feed-in Tariff?

This may seem like a win-win scenario but remember that this is not ‘free’ money. Everyone pays for FIT through their electricity bills, and the Government is going to review the level of tariffs from April 2012 onwards – a fact the Dragons would have been wise to ask about. Although panels installed this year won’t be affected, if the level of FIT drops next year then solar PV might not look like such a great investment, and sales of the systems could start to decrease.

A recent change to FIT meant that large-scale solar farms were no longer eligible for such high subsidies. We supported this change partly because the amount of subsidy needs to be kept under control. When many people are already struggling with their energy bills, it’s important that the Government has a clear idea of the impact of schemes such as FIT.

Shiny happy salespeople

You also need to watch out for companies making claims that can’t be backed up. Our undercover investigation into solar panels showed up some clear problems with misselling. Some of the solar PV salespeople offered discounts that were only valid for 24 hours, for example. We were also worried by quotes made by salespeople who were not qualified surveyors.

Of course, that’s not to say all salespeople are unscrupulous, but it is important to highlight that solar PV is a technology that will be relatively new to most people. Not only that, but the returns generated can vary greatly depending on the type of property you have, which way your roof faces, etc. Because of this it is really important to make sure that consumers aren’t blinded by sharp sales patter, ending up stuck in a deal that gives poor returns, or doesn’t live up to their expectations.

Sunday’s Dragons’ Den would have been a great opportunity to highlight the pros and cons of solar PV and encourage people to look around before buying. The fact is that although it looks like a good investment, the returns will vary greatly between households – and this could prove a problem for future sales, if the Dragons haven’t done their research.

We advise anyone who is looking to get solar PV to have a thorough look round and do their homework. Perhaps the next time a solar entrepreneur walks into the Den our Dragons won’t be so surprised by this ‘new idea’ that’s been around for a while…

Comments

If you have the spare cash sitting in a ISA or other savings that you do not require to draw on I cannot see a downside to installation on a suitable property.
I have just ordered a 3.42KW system (under £12k) and using the government website figures I will recover the outlay in 8 years with a return of around 8.5% tax free over 25 years. At my age (57) providing the rules are not reneged on I will at least get some contribution to my pension.
The company has guarranteed the inverter for 10 years so I need to start putting some money aside at about year 8. They consider inverter prices will fall but this could be a salespitch.
In another instance a year or two back an insurance matured and my pension advisor suggested paying into the company pension. This was very tax efficient but unfortunately with the current economic situation I may as well have spent the money down the pub as it appears the more I pay into a pension the more it appears to maintain static growth.
The bottom line is that it will only be suitable for certain people who are fortunate enough to have surplus funds available and willing to spread their capital.
At least there is some tangable asset at the end unlike pensions.

Family Man says:
19 August 2011

Hi JohnC,
Try feeding in the numbers for your system into this caculator: http://www.solarguide.co.uk/solar-pv-calculator?sc_form_type=3#factors
I think you will be pleasantly surprised with the impact of energy price rises and the effect of RPI increases. Here are the results I got for my system which was installed this week. Payback Time: 7y 5m
Total Profit Over 25 years: £ 48,818.32 14.46 % per year (6.12% AER)

john_at_gen says:
19 August 2011

We would suggest some caution using the default settings of http://www.solarguide.co.uk to calculate your returns. While we like this calculator (compared with others out there) but we would suggest tweaking its parameters as follows:
(1) A more conservative 3% annual increase in electricity prices (which is still higher than UK government projections) – if you leave it at 9% then price per unit gets to 110p in 25 years time which we believe is highly unlikely.
(2) A 13 year lifespan for your inverter – this means you are factoring in a replacement over the 25 year period.
This will significantly change your anticipated returns.
You should also bear in mind that your output will vary depending on your location so Glasgow will typically generate 13% less than Bristol according to estimates on http://re.jrc.ec.europa.eu/pvgis/apps4/pvest.php.

John (www.greenenergynet.com)

There seems to be a lot of misinformation and misunderstanding of the FIT scheme in the threads on this site. For clarity, on a solar PV system of up to 4kW you will receive 43.3p per unit of electricity generated regardless of whether you are going to feed the elctricity into the grid or use it in your home.. You will receive a further payment 3.1 pence for every unit of electricity you decide to sell to the grid. You can choose to declare that you will use all or a proportion of the electricity you generate in your own home and in this instance you will not receive the 3.1p per unit but instead save on average 13p.(based on the average cost aid by UK consumers).
A 4kW system in a fully south facing aspect can generate 3420 units of electricity per annum at peak. Therefore the maximum generation payment would be 3420 x 43.4 pence = £1480.86 per annum. The sale of this electricty would generate 3400 x 3.1 pence = £106.02 or alternatively if you use all of the electricty yourself you would save 3420 x 13 pence £444.60 off your annual electricity bill. The decision is whether you sell all the electricity or a proportion of it and you can really only decide this once you establish how much electricity you use during the day ie when the system is generating. You can adjust your usage accordingly to ensure all high drain equiment like washing machines, tumble driers, dishwashers etc are used during the day. The critical thing to remember is that the figures are expressed for a system operating at peak. No system will operate at peak all the time.
Hope that clarifies the basis of the FIT scheme.
Maintenance costs for a solar PV system of 4kW are around £100 pa.

Family Man says:
4 September 2011

Phil,
In practice you do not get to choose if you sell the electricity to the grid or not. In most cases you do not get an export meter installed so there is no way of measuring it. Typically the energy company assumes by default that 50% is exported and pays you accordingly. Best option is (as you say) to use as much of the electricity during the day as you can by running appliances/ garden tools etc. If you can use more than 50% (Difficult in practice) you can in theory even get money twice for anything over the 50% that you use. My system is 3.92 WKp. Been installed now for 19 days and has generated 217KWh in mostly cloudy conditions according to the generation meter. Income so far should be £97.32 but I have also used a good proportion of the electricity (I work from home and have been using the domestic appliances as well during daylight hours) so I have also saved on my electricity bill (Too early to say how much yet). Please can you explain what are the £100 pa maintenance costs you refer to? I cannot understand where you get this figure from?

@Familyman

I suspect that the £100/year maintenance covers a sinking fund for inverter replacement during the life of the system. I have included this cost in my calculations on the recommendation of my installer. I’ve not been advised of any operational maintenance requirement.

Tony Orchard says:
18 September 2011

I am 90 years old and fortunately foresaw that to invest in solar electricity would be stupid for me as I would never live long enough to enjoy the ultimate 25 year long benefit. Furthermore as my electricity bill is only about £400 p.a. I would only save about £150 p.a. at the most out of a £15000 cost for a 15 panel 3+kw installation. All my capital would go to the people who bought my house and they would be laughing all the way to the bank.
Had my Capital been credited to my estate instead of the freehold house, I would have had it fitted six months ago.
End

Pete england says:
18 September 2011

You are right, the pay back for a pv solar uk system is between 7 and 10 years depending on the direction of your roof and where it is situated in the uk. However, you could rent you home out but still receive the fit payment. It could pay something towards the cost of your retirement home place for the next 25 years. Enjoy the future years ahead.

Before anyone gets suspicious, yes we do install solar pv panels!

There are a lot of benefits with solar pv – there are also a lot of crazy claims by some firms. There is some free electricity – but only if you’re using it in the day when the panels are producing power.

The major benefit is through the Feed In Tariff. On systems we have installed and checked later, we find they are over-performing very slightly based on SAP 2009 calculations. This real-life evidence seems to be supported by numerous posts above – the only doubters left seem to be people who have not studied the evidence now coming back.

If you intend to move house soon or you have an unsuitable building, don’t install a pv system (although it may help your house sell quicker?).

If you still don’t trust the evidence from thousands of installations, don’t have a system installed.

If it’s right for you, then do it – all the evidence suggests the claims made by reputable companies operating within the REA code are correct.

I am very concerned about the Government slashing FIT for solar PV, and with an implementation date of 12 December 2011, when the consultation on the changes doesn’t end until 23 December 2011. And all the indications had been that this would not come until Q2 2012.
Whilst I agree the incentive needs reviewing, the lead time they are giving the implementation, and the fact that they will implemented before the consultation has finished, I think is an extremely concerning precedent to set.
The details of the proposal are here:
http://www.decc.gov.uk/en/content/cms/meeting_energy/renewable_ener/feedin_tariff/fits_review/fits_review.aspx
Which also links to a consultation response page.
It would seem the move is being introduced to at least try to stop rent-a-roof companies profiteering. However it is also penalising the home owner that is looking to improve energy efficiency. And I would say to the dissenters that say it is only the rich that are profiting, and doing so from taxpayers coffers, that if the UK Government does not meet its CO2 reduction and renewable energy targets by the relevant dates, then the penalties of these failures will cost all taxpayers far more than the incentives from this scheme are/will cost.
A petition to only make changes to reduce FIT for new rent-a-roof schemes has been set up:
http://epetitions.direct.gov.uk/petitions/20672
But I’m not sure if this is the answer, nor if based on the implementation prior close of consultation and legal ratification, any petition will have any impact on these changes.
Cheers,

Nik.

Family Man says:
3 January 2012

Had the panels for almost 5 months now so here are some additional comments:
Performance is at least 10% above expectations (SAP) for August-Dec. This may just be due to unusually good weather conditions but my calculated payback period is definately on track and even looks like it could come in sooner than expected. Had some heavy winds too with no problems. No rainwater coming in the loft either. Been using the large white goods during the day whenever possible and have measured the electricity. Our bill is down 30-38% each month. Very happy with the decision to invest in Solar PV.

Family Man says:
14 May 2012

Had the panels for almost 9 months now. I have monitored the performance and can say that it is more than just on track. Electricity savings are in the range of @38% per month. So far I they have generated over 2.3MW with effective revenue over £1000 and the summer is just around the corner.
No problems so far with high winds and rain does seem to more or less keep the panels clean of bird droppings. Still happy with the decision!