What Solar Panel Funding Options Are There?
Promoting the use of renewable energy sources has been on the UK government’s agenda for many years now. The EU’s Renewable Energy Directive set out for all member countries to reach a 20% renewables target before 2020. The UK has been working towards that goal, but recently approved policies have scrapped or reduced the related incentives.
This tendency was accompanied by a decrease in the cost of solar panels, so new buyers do not need to worry. Though there aren't any grants in the traditional sense, there are opportunities for solar panel funding in the UK. Currently, the only scheme open to new applications is the Smart Export Guarantee (SEG).
Overall, there are four notable incentives for solar panels in the UK that will be covered in this guide:
- Smart Export Guarantee (SEG)
- Reduced VAT on Energy-Saving Products
- Feed-in Tariff (FIT) (no longer open to new applications)
- Renewable Heat Incentive (RHI) - this applies to solar water heating only
Solar PV Not Covered by Green Homes Grant
In July, the government announced the new Green Homes Grant, which provides homeowners and landlords in England with £5,000 - £10,000 vouchers for energy-saving renovations.
Solar PV panels are not covered as part of the scheme, but solar thermal panels (for solar water heating) is part of the primary measures that are covered by this scheme.
You can read more in our Green Homes Grant guide, which we are updating regularly as more information is announced.
Smart Export Guarantee (SEG)
The Smart Export Guarantee (SEG) came into effect on 1 January 2020 and is currently the only type of solar panel funding available in the UK.
The SEG enables small-scale low-carbon electricity generators to receive payments for the surplus energy they export back to the grid.
Although this is not a direct government grant, all licensed suppliers must now offer an export tariff to their customers. Those suppliers with over 150,000 customers are obligated to offer a tariff, while those with fewer can partake on a voluntary basis.
All homeowners with regular solar panel systems (up to 5MW capacity) are eligible under the SEG. In addition, the house must be fitted with a smart meter, in order to measure the exports. Most energy suppliers also offer a tariff for energy exported from solar battery storage systems.
This incentive makes solar panels a great type of green home improvement project.
Reduced VAT for Energy-Saving Products
Solar panels are eligible for a possible 5% tax reduction under the new VAT pricing system for energy-saving products.
If you are over 60 years of age or are receiving income or disability benefits, you may qualify for this tax reduction. There are specific eligibility criteria, and the tax reduction can either apply to the whole product or only the installation costs. You can read the government's website for the full details.
Feed-In Tariff (FIT)
The Feed-in Tariff was implemented in 2010 and ran successfully for many years. The FIT scheme closed for new applications in 2019, however, those that are currently registered will continue to benefit from it.
Under this scheme, those who generate electricity via solar panels or wind turbines receive a certain amount of money for each unit (kilowatt per hour) they produce, and for the extra electricity they sell back to the grid.
The specific amount received varies based on the size of the system, the type of technology and when it was installed. The payments last for a total of 20 years from the date of registration, significantly reducing the payback time of the initial investment.
You had to choose a certified installer, and you were then able to choose between receiving the payments from your energy supplier or from a list of registered suppliers. The payments are divided into two types:
- The Generation Tariff is a set amount of all the energy produced and used that depends on the factors mentioned before. The tariff ranges between 6.38-13.88p per kWh/h depending on the size of the system;
- The Export Tariff relates to the electricity in excess that you sell, for which you will get 4.77p per unit. You will be able to sell half of the total energy you produce.
|System Capacity||Lower Rate||Middle Rate||Higher Rate|
|0-10 kW||0.15 p/kWh||349 p/kWh||3.87 p/kWh|
|10-50 kW||0.15 p/kWh||3.71 p/kWh||4.12 p/kWh|
|50-250 kW||0.15 p/kWh||1.55 p/kWh||1.73 p/kWh|
|250-1,000 kW||1.36 p/kWh||-||-|
|1,000-5,000 kW||0.15 p/kWh||-||-|
Renewable Heat Incentive (RHI)
If you are interested in heating your home using solar thermal panels, you could benefit from the RHI scheme. Initially introduced for the commercial sector, the scheme was extended to domestic use in 2014. It is scheduled to end on 31 March 2022.
Its purpose is to encourage the switch from traditional to renewable heat technologies, such as solar water heating, biomass boilers, pellet stoves and more, to reduce the country’s carbon emissions. It provides 7-year long support for owners of such systems through quarterly cash payments, the amount of which depends on the type of technology and the latest related tariffs.
The property must first obtain an Energy Performance Certificate (EPC) assessing its energy efficiency and how it could improve, which is required for the RHI application.
Free Solar Panel Scheme: What Was It?
Previously, if you could not afford to buy solar panels, you had the option of acquiring them for free from companies that would rent your roof space for up to 25 years. With this scheme, a company would offer to provide the free solar panels, take care of solar panel installation and maintenance for free, and in return receive the Feed-in Tariff (FIT) payments.
Instead, a scheme called 'solar buyback' has become another possibility, where companies offer homeowners a lump sum upfront, and in return collect the FIT payments the homeowner would have received. However, it is important to evaluate an offer like this in relation to the total FIT payments you would receive to determine whether or not this buyback scheme would be worth it.
How to Apply
Each solar panel funding option has its set of eligibility criteria and application process, so it is important that you read the relevant guidelines and instructions.
You can find further information regarding the different energy grants on the Government's website, where you will find all the information you need about the aids related to solar panels, as well as grants for other renewables, such as heat pumps and boilers.
After collecting the information, if you decide to invest in solar power or other sources of clean energy, you can head back to GreenMatch to receive free, non-binding quotes for solar panels, heat pumps and boilers.