What does this mean for investors in Solar Thermal?
After 4 years of deliberation, the domestic RHI is here at last! It was announced in July that solar thermal will receive (at least) 19.2p/kWh. Furthermore the method for estimating (deeming) the energy output from solar thermal has been updated to more accurately reflect the contribution from solar thermal in a domestic home. The method for estimating output incorporates:
What this all means in plain english is that Government recognises solar thermal makes a larger contribution to generating hot water in homes without electric showers, and with a larger number of occupants, than was previously recognised.
based on the number of occupants in a home
The assumptions in our model to produce these figures are:
RHI is paid over 7 years, linked to RPI, guaranteed by government and tax free
Cylinder (storage) is considered over 15 years at 833kWh/y. Must be replacing an old cylinder and not a well-insulated newer cylinder
Own usage is over 25 years, assuming summer boiler efficiencies of 77%
Maintenance includes running small pump, glycol replacement, servicing and new pump over 25 years
Calculations based on oil usage at 8p/kWh
All numbers are in real terms with zero inflation
Fuel costs are increased at 2.6% per year in real terms, in line with DECC’s modelling
Based on a ‘right size’ solar thermal installation, flat plate solar panels, twin coil cylinder, south facing, 30 degrees roof pitch, average UK location, no shading
As can be seen from the graph, DECC’s target of 7.5% ‘return’ is sufficiently achieved by a typical 4 person home who is currently using oil. With oil estimated at 8p/kWh and gas at 5p/kWh, there is a big difference in returns, but this may change as the scheme matures.
The decision to have a seven-year payment period is very attractive, meaning that householders get their money back much faster than under the Feed in Tariff. With £600 RHPP grants available in the run up to the start of the scheme, there’s every reason for customers to install right now!