Spiraling gas and energy costs over the past few months have sent shockwaves across Europe’s energy and industrial sectors, particularly in the United Kingdom. For instance, the UK saw inflation increase by 9.0% in the 12 months to April 2022, up from 7.0% in March. This has had stark consequences on the cost of living for households across the country.
On top of the highest inflation rates seen in more than 40 years, Ofgem announced a price cap increase in April 2022 that will see a typical UK household paying an additional £693 a year.
To combat these costs, people have been looking for an alternative, more energy efficient and stable energy sources. One of the most popular solutions has been solar panels in the UK.
Solar panels are an energy efficient way to convert energy from the sun directly into electricity for your house. This means that solar panels can help reduce households’ energy bills by as much as 70%. As solar panels increase in popularity and technological advancements are made, they continue to become more accessible financially and physically. For example, the prices of solar panels has gone down by over 60% in the past decade.
Amidst this energy price crisis, the UK government released their 2022 Spring Statement in March. In this statement, it was announced that there would be a further reduction to the already low VAT on energy saving materials from 5% to 0%. Energy saving materials include technology such as solar panels, heat pumps, and biomass boilers.
This means that households who install solar panels can now save money on the upfront and installation costs by paying 0% on VAT. But this VAT slash is time-limited! Homeowners will only be able to benefit for the next 5 years until March 2027. Afterwhich the VAT will revert back to the original 5% VAT relief.
If the startup costs for solar panels are still too steep, there’s good news. There are various solar panel grants offered by the UK government that you may be eligible to receive. Some incentive schemes include the Energy Company Obligation 4, the Smart Export Guarantee, and the now expired Renewable Heat Incentive.
You can save big by combining the zero VAT and a grant. With just the benefits from the VAT reduction alone, a typical family with solar panels installed on their roof will save more than £1,000 in total on installation, and then £300 annually on their energy bills. You may even earn money for surplus energy sent back to the grid with incentives like the Smart Export Guarantee (SEG)!
There are, now more than ever, a number of financial support options to help homeowners reduce the burden of taking on greener solutions. Transitioning from gas to a renewable energy system is a big home improvement, but it is also one that is better for the environment and your wallet in the long-term.
So, when weighing up whether a solar panel is a worthwhile investment for your house, it is good to consider that even if it demands a substantial initial financial investment, solar panels in the UK may provide a significant long-term return on your energy bill.
