Paying the price for 'Free Electricity'

There's no such thing as a free lunch. Anyone heard that one before? It's a terrible cliche we know, but it's so applicable to the 'free solar' companies working on domestic premises that it's use can't be avoided.

Let us be clear, we do not question the integrity of the companies offering these installations - far from it. In order to succeed in that market the installations have to be high grade quality, surveys have to be very accurate and installers very speedy.

What we do question is that the installations, and subsequent electricity, are 'free'.  Just because those whose roof's are used do not fork out payment at installation, does not make it 'free'.  Allow us to explain.

The overall cost of supplying and installing the type of 'free' systems being installed is approximately £4,000 - this is due to bulk buying discounts and low labour rates.  This 2kW system on a South Facing roof will generate three potential revenue streams;  two in cash - in terms of generation and export tariffs for the system provider and owner - and one in energy savings for the roof owner.  The values of which are summarised below.

Assuming RPI @ 2.5% and energy inflation @ 4.5%

 
So far so good.  You have rented the roof to your solar supplier, or their financial backer/partner and they have effectively allowed you to gain £3,500 worth of electricity over 25 years.  This represents about 10% of your electricity bills, without any up front costs. You even get the solar energy generated after the 25 year agreement is complete - not bad eh?

As with so many deals however, the true costs are in the small print.

Opportunity Cost
Having your roof filled with somebody else's solar panels mean that you cannot fill your own roof with solar panels, and neither can anyone else.  This would cost a little more to procure, say £5,600 for a decent kit, so immediately you've lost out to the tune of £20,500.

Maintenance and Home Improvements
Should you wish to undertake any maintenance to your property, perhaps the electrical system or the roof, and you have to turn off the solar system, then you must pay the supplier for his lost income and seek his permission.  What if you want a loft extension?  Good luck.  Written permission from the solar system owner will have to be sought and the final choice will always be theirs whilst the 'rent-a-roof' agreement is in place.

Selling Your Home and Redemption Penalties
Picture this; you are about to sell your home, your potential buyer likes the thought of solar panels on his new roof but he wants to own them himself and later he wants to realise the property's best value with a loft extension.  It is 20 years since the solar system was installed.  You refer to the system owner's contract to see what the penalty is for leaving the agreement five years early, it can't be much can it?  Wrong. It's £10,000 please, and that's one of the better contracts - they might not even grant you permission to sell.  Suddenly the potential buyer wants that value straight off the asking price, and who can blame him?

So like any transaction you have to weigh the real benefits against the true costs, and in most circumstances we don't think this stacks up in the home-owner's favour.


Have you had a 'free' solar system, or considered it for your home?  Perhaps it has suited your circumstances, perhaps it's exactly what you wanted, perhaps you didn't read the contract.  Let us know your experiences by commenting below, we'd love to hear from you.


Look out for our upcoming blog where we'll be looking at how taking a loan or extending your mortgage can make Solar PV an affordable and profitable opportunity for you.