Thinking of Waiting for Solar Panel Prices to Fall?

Thinking of Waiting for Solar Panel Prices to Fall

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Copyright (c) 2010 Paul SherringtonFirst things first: There are two types of solar panel:- Solar Thermal (hot water)- Solar Photovoltaic (PV).Put quite simply, Solar Thermal panels produce hot water and Solar PV panels produce electricity.Which type of solar panel is best for you?There are many factors you'll need to consider when deciding which type to go for. For example, if you don't use much hot water, or if you have a brand new combi boiler, then you should probably stay away from Solar Thermal and choose a Solar PV system. Equally, if you have a small roof or one that is shaded at any point during the day, you should avoid Solar PV.But assuming you have a large unshaded roof (facing West, SW, South, SE or East) and you are thinking about the costs and what you'd get back, then the headline facts are:- Solar Thermal is cheaper to install but does not save you much money. However, it will start paying for itself when new incentives come out in June 2011 and systems fitted now will qualify.- Solar PV is more expensive to install but it saves you more money and currently earns you an even larger amount tax free.Assuming that you are looking for a good return on your investment, Solar PV is most likely to be the best option for you.Installation costs and the return on your investment from Solar PV.Thanks to the Clean Energy Cashback Scheme (also known as Feed in Tariffs) which came into effect in April 2010, you can earn money for every unit of electricity you produce from a Solar PV system. Not surprisingly, the number of Solar PV systems installed has risen dramatically since April 2010, and solar panel prices have also fallen.Two years ago, you would have expected to pay around 13,000 to 17,000 for a typical Solar PV system. Such has been the drop in solar panel prices since then, you would now look to pay between 10,000 and 14,000.Are PV solar panel prices going to continue to fall as the UK market grows?It is difficult to predict exactly where solar panel prices in the UK are heading for two reasons:1. The UK market is just one, relatively small market in the global PV market. As a result, the UK's influence on the manufacturing costs of Chinese made Solar PV cells (the main component in Solar PV panels) is extremely limited.2. Currency fluctuations between the Pound, the Euro, the Dollar and the Chinese Yuan play a key part in solar panel prices in the UK - and it is difficult to predict where they will go.Should I buy now or should I wait?Currently, the UK Feed in Tariff offers domestic households up to 41.3p per kilowatt hour generated. That means for every kWh of electricity produced by a Solar PV system, a utility company will pay you 41.3p.To illustrate what this means, a 2.4kWp solar PV system installed in Newcastle upon Tyne, would:- Cost in the region of 10,000 to install- Generate an income of around 826 per household.But the household would also benefit from not having to buy as much electricity from the Grid - which assuming you pay around 13p per kilowatt hour will save you roughly 100 per year.Add to this, around 30 per year from exporting 50% of the electricity produced, and a Solar PV system will mean a total household saving/income total of over 900 per year. In addition, Feed in Tariff payments are TAX FREE and will rise in line with inflation.But this rate of 41.3p per kilowatt hour is only available until March 2012. If you install your Solar PV system after that date, the expected rate is 37.8p per kilowatt hour - a fall of 9%. This is a scheduled drop to take into account the fact that solar panel prices will fall and thus maintain the same return on investment.So, when considering whether to install your Solar PV system now or later, you need to consider whether solar panel prices are likely to fall by more than 9%.Given the limited impact of the UK market on world prices and fluctuating exchange rates, it might be better to go for it now whilst solar panel prices are comparatively low and Feed in Tariff rates are generous.

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