You may have seen recent announcements in the press regarding ‘solar panel giveaways’ from new companies offering to install photovoltaic panels on your home completely for free. Solar PV panels are known to be extremely expensive, so how on earth could a company offer them for free, and why would they do it?
The answer is relatively straightforward, the companies involved stand to make a considerable amount of money from the scheme. The key behind it is that installing photovoltaic panels under the feed-in tariff is a very good investment. Installing them on your home is especially good because the feed-in tariff pays the most money for small PV installations. Anyone deciding on where to invest their money should definitely look at getting a solar installation, it’s a tax-free, index linked investment that can be a great help to families and the environment.
Unsurprisingly for the UK economy however, where a good investment is to be found it doesn’t take long for the investment banks to come lurking. All of the free solar schemes offered are actually based on investment funds set-up by a well known UK investment bank. The fund is created to pay for solar installations on suitable UK homes, and then all the revenues from the solar panels go directly back to the bank. Some electricity savings are passed to the resident, but the big majority of returns go straight to the bank.
The second critical ingredient to this arrangement is the network of installers to design and install the installations. In the UK there are not a huge number of these installer networks. Behind each of these solar panel schemes is a different network such as the Mark Group and Eaga, firms which have over a thousand installers. They grew by doing boiler replacements and installation fitting for utilities such as British Gas. This arrangement means company who actually sells you the system is in fact a middle man between you, the bank and installer. There isn’t necessarily anything wrong with this, but its important to understand what is going on.
The other way of looking at it is that the investment banks are providing a service. Not everyone is in the position to invest 10k in a solar PV system and the ‘free solar’ schemes allow a wider range of people to experience solar energy and benefit from it. The arrangement means that the feed-in tariff payments go to the investment bank, but the savings in electricity bills at least are retained by the resident.
Overall these financing schemes will help to quickly grow the industry in the UK, but beware of how they work and know that you would make a lot more money if you self-financed. In Germany and other more mature solar energy markets, what you find is that ‘solar loans’ are widely available. This is the cheapest way of financing a solar installation. You just get a loan for however much you need in order to buy your system and pay it off with the feed-in tariff revenue. It means you still get to own the system and receive at least a portion of the feed-in tariff.
So if you would like solar panels but can’t afford to invest 10k over 25 years then getting some sort of financing is a good idea. It might just be worth waiting for better financial products rather than lining the pockets of investment bankers however.