Solar power: What much will it cost you, and how much will you save?

Energy prices in Ireland are still worryingly high for many consumers despite a dramatic fall in wholesale rates over recent months.

The Central Statistics Office reported last month that wholesale electricity prices – the price your supplier pays the electricity generation companies – tumbled just over 50 per cent in the 12 months to March.

And the price of natural gas, which determines generation costs here, is just a fraction of the €340 peak per mega watt hour (MWh) it hit last August, trading at around €37.

But Irish families are still paying around 44 cent a kilowatt hour (kWh) for their electricity – roughly double the wholesale price and well ahead of the 15-18 cent per kWh that they paid before prices started spiking in late 2021.

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So is now the time for families to consider taking the leap into solar power?

Apart from the burnishing of green credentials, a series of recent initiatives mean the investment has become more attractive.

Limits on the number of solar panels you can have on the roof of your home were also eased last October by Minister for Housing Darragh O’Brien.

Up to then, you could only cover 12sq m of roof, or 50 per cent, whichever was the lower, with panels. Now there is no limit and no planning permission is required.

This is useful as householders are also now allowed to sell any excess electricity back into the grid, albeit the rates on offer tend to be a little underwhelming in general.

SSE Airtricity, for instance, pays customers 24 cent per kWh exported back to the grid. It has recently announced an enhanced rate of 34 cent for two years for households that get their panels installed by its partner Activ8 – which says it is the largest provider of solar photovoltaic units in the State and in which SSE has a 40 per cent stake.

That rate is still well below what those same people are paying to purchase power from SSE and as they brand it “market leading”, one assumes the same holds true for other providers.

The downside of the potential for selling power back into the grid – called the Clean Energy Guarantee – is that the grants available from the Sustainable Energy Authority of Ireland (SEAI) to promote the installation of solar panels have fallen.

Up to February of last year, you could get between €1,800 and €3,000 off the cost of installation, depending on the number of panels you were getting and whether you were also acquiring a battery needed to store excess power.

With the right to sell back into the grid at whatever best price you can secure, SEAI stopped paying for the batteries and the maximum grant available fell to €2,400.

On the upside, the SEAI at the same time broadened the scope of homes eligible to apply for grant aid. Until last year, your home had to have been built before 2011, shutting out tens of thousands of homeowners, many of them younger families, who had bought newly-built homes since then.

Now, you can seek grant support as long as the property was built and occupied before 2021.

You need to get grant approval before you have any panels installed and approval, once secured, is valid for only eight months.

The installer will also need to get approval from the ESB to connect your panels to the grid, a process the SEAI says can take up to a month. You’ll also need to get a professional BER assessment done after the solar panels are installed to complete the grant process, though a previous requirement to pass a certain minimum BER threshold post-works has been done away with.

Even then, the SEAI says you could be waiting up to six weeks for your money which is something to consider as you work out cash flow and payment for the work.

Cheaper to install

On the other side of the equation, the cost should be coming down following a decision by the Government to change the VAT rules on solar panel installation.

From the start of this month, VAT on the supply and installation of solar panels has been cut to zero. Previously, it was subject to the standard rate of VAT for construction works – 13.5 per cent – a charge that was inevitably passed on to consumers.

The new zero rate applies only to solar panels put on “or adjacent to” immovable private dwellings.

That includes houses, apartments and mobile homes once they are fixed into a particular location, but not mobile homes that can relocate, or places like holiday homes. “Adjacent to” apparently covers solar panels set on the ground beside a private property.

The other condition is that the supply of the panels and their installation must be the responsibility of the same business. Otherwise, you will continue to pay VAT on both the supply and the separate installation of the panels.

Assuming the zero rate applies, it will also cover ancillary equipment, such as wiring, batteries, combiner boxes etc, if they are installed at the same time.

So how much will it all cost? To secure the maximum grant, you’ll need to install enough panels to deliver 4kWh of renewable energy.

Before the VAT cut, that would have cost in the region of €9,000, a figure that is expected to fall to about €8,000 before grant support assuming your supplier passes on the benefit of the zero VAT. If you qualify for the maximum grant, the figure will come down to about €5,600.

One solar provider – Swyft Energy – says the new VAT regime means switching to solar will pay for itself in a little over five years, 12 months earlier than previously.

A word of caution. This figure is based on today’s exorbitant cost of electricity. Despite suppliers’ ongoing reluctance to reduce prices, it is inevitable that consumer electricity costs will fall over the next 12 months, affecting the time over which the solar installation will pay for itself.

Swyft also suggests a lifetime saving on electricity costs of more than €92,000 for a household installing solar but this clearly depends on a number of factors, including electricity prices, the amount of solar power/panels you install and how long they last. Swyft says you should get 30 years out of the investment: the SEAI suggests a more modest 20 years.

And of course, you’ll want to make sure your roof will stand that test of time before you start. Otherwise you might face additional unnecessary expense.

You can contact us at OnTheMoney@irishtimes.com with personal finance questions you would like to see us address. If you missed last week’s newsletter, you can read it here.