Loan for solar panels on house

maarten

Sorry if this has been asked before but I wanted to see if anyone has taken out a loan for solar panels and how it worked out.  My thinking is to take a loan for £10-15k and what I would have paid for the electric bill would partially pay the loan instead. This time of year my electric bill is approximately £85 per month. I am also due to change cars in the near future so there is potential to charge the car from the panels. I’m still not entirely sold on the idea of an electric car due to a few long distance trips per year but could be convinced.

MorningcoffeeIV

You'll need to compare the cost of the loan against the savings.  

Also factor in the term, to know what you'll be paying each month, compared to your monthly saving.

lopsyfa

If you ask me, I will say it is not worth it. A loan of £10k - £15k at 8% over 3 years will result in total payback of £11219 - £16829. 

Assuming you generate and use 4000 kwh of electric every year (not very realistic but for best case calculation, let's assume this) and using a rough price cap of 27.35p/kwh, that will save you about £1094 a year. This will result in payback of between 10.25 - 15.38 years. So it will be a long time before you feel better off or you may not reap the benefit if you move house before the payback period.

This is the absolute best case assuming you don't have to import any electric, so the payment time will likely be more. You can improve the payback a bit if you have battery so can improve the % of your solar used and import at cheap off-peak rate to use late. But I doubt you can do better than the 100% calculation. 

Also, the higher the loan rate, the higher the payback period and vice versa so if the loan is 0%(*it won't be truly 0%, the  interest will be hidden in the cost of the solar) the payback will be lower.

That is not to say solar is not good, you just need to understand it is not something that will save you money immediately. In fact, the initial monthly interest on £10,000 at 7.9% (replace with whatever value you are offered) is £65.83 per month and not too far from your current electric bill and that doesn't even include the capital repayment. It is not dissimilar to buying a 50k electric car to save £200 pm fuel bill.

If you want to reduce your co2 emissions and have the cash, then do it but not take a loan as a mean to save money.


A slightly better option is possibly to install a battery only install and import off-peak to use during the peak hours. From February, battery only install will be 0% VAT rated. This can be done much more cheaply and with some modular batteries, you can start small to test it and reduce cost and then add more capacity. This also allows the option to add solar in the future.

retiredbanker1

The question I would ask myself is : Will I repay the loan before having to replace the solar panels?

Also is there any chance that you will want to move house anytime soon - if you do you will have to repay the loan beforehand.

Coffeekup

Someone who is knowledgeable in the energy forums could help you answer your question... I summon thee  @QrizB

QrizB

Thnanks @Coffeekup for tagging me!

maarten said:

My thinking is to take a loan for £10-15k ...

£10k will buy you a lot of solar PV. On a typical home, it would buy you 8-10kWp of panels, fully installed with inverter etc.

Taking the lower estimate, 8kWp might be 20 400-watt panels each of 2 sq.m.  Do you have 40 sq.m. of south-facing roof to put them on?

maarten said:

... and what I would have paid for the electric bill would partially pay the loan instead.

8kWp of panels on a good south-facing roof in the south of the UK should generate about 8000kWh per year. I have no idea how much electricity your house uses, but worst-case you could sell all that back to the grid for (at current electricity prices) 15p/kWh. That would yield you £1200 a year.

MSE's best buys sugest you could borrow £10k for 6.1%. If you took that over 12 years (and I dont know if you'd be offered those terms) the monthly payment would be £98. For 12 years, the returns from the panels would cover the loan payments - unless energy prices fall, and export payments go back to paying 5p/kWh, which would leave you in a hole.

After 12 years the panels are paid for and you can enjoy the returns for maybe another 10-20 years (the useful life of solar panels is a bit vague, since most of them are still quite young).

Note that you'd still have to pay the electricity bill for these 12 years; there isn't any "spare money" after making the loan repayments.

lopsyfa said:

A slightly better option is possibly to install a battery only install and import off-peak to use during the peak hours. From February, battery only install will be 0% VAT rated. This can be done much more cheaply and with some modular batteries, you can start small to test it and reduce cost and then add more capacity. This also allows the option to add solar in the future.

The economics on home batteries are still marginal. A lot depends on how many cycles you think you'll get from a battery, but even the best claimed battery life is far less than the service life of a solar panel.

And you have the same risk as with solar that energy prices will fall, making the differential between "cheap rate" and "peak rate" narrower. Currently, for example, a typical E7 tariff might charge 16p/kWh off-peak vs. a single-rate tariff of 27p - an 11p/kWh saving. A couple of years ago, however, it was more like 14p and 21p - only a 7p/kWh saving.