Solar panels have been available to homeowners for decades yet many people still shy away from buying them for their homes. The main reason for this is the initial cost of installing solar panels, which for the average UK home is Â£12,000 for a 2.7 kWp capable system. However, there is a lot of evidence to show that solar panels are a great way of earning return on your money. So are solar panels a good investment? How does it compare to savings in an ISA?
The Top Line Figures
If you invested £12,000 into a cash ISA with a fixed interest rate of 3%, compound interest and the tax rebate you would, at the end of 25 years, have £25,380.23 in your ISA account. So you would have made a profit of £13,380 from your 25 year investment.
If you were to invest the same amount of money into solar panels you would make far more. The major saving comes in the form of the cash you make from the feed in and generation tariffs that your power company pay you. For a 2.7 kWp system that works at about £25,750 over 25 years, so with the feed in tariff alone you have already turned a net profit of £13,750 on your investment (i.e. £25,750 paid to you tax free minus your £12,000 initial investment). You will have already made a profit of £13,750.
Add to that an average saving of £70 a year on your electric bills, which over 25 years is £1,750 and you could make a total profit of £15,500 on your initial investment. By investing in solar panels rather than a cash ISA, over 25 years, you make Â£2,120 more profit. If the price of electric continues to rise, which it is likely to, you will save far more than £70 a year on your electric bills, so will make and even bigger profit from investing in solar panels.
If you are lucky enough not to need the cash you are paid and save on your bill you could invest that into an ISA on a monthly basis netting yourself an even bigger profit from investing in solar panels. You would have spent £12,000 and after 25 years ended up with a full solar power system and have £40,750 in a cash ISA account meaning you make a profit of £28,750 from investing in solar power.
The Bottom Line
The new government regulations on feed in tariffs have turned solar panels into one of the most important investments a home owner can make. Not only can a home owner improve their carbon footprint they can also save a remarkable amount of money in the long term. Installing solar panels under the current feed in tariff scheme outstrips most other forms of investment a home owner can make.