UK Gov launches Clean Energy Cash Back scheme

Last month, the government launched a new “feed-in tariff” subsidy scheme for renewable energy installations that will see them pay up to 36.5p per KWh of energy produced.

At current prices, an installed 2 KW PV system costs around £12,000 (£6 per installed watt), and it’s estimated you would save / earn around £830 a year with the new subsidy (15 year pay back, 6.9% return). There is also currently a £2,500 grant available (expiring April 2010) which would bring the overall cost down to £9,500 (12 year pay back, 8.7% return).

This estimates are based on electricity costs of 13.95p / KWh (which is also roughly what I am currently paying with EON on their online saver tariff once you’ve averaged out the various rates and daily fees).

It’s very likely that over time electricity prices will rise, especially in the UK where we have not built enough capacity to replace our Nuclear plants as they shut down. As prices rise, the effective ROI will increase, but for this to become really popular I think we need to see returns of closer to 20%.

The government is also considering green mortgages, where you would be lent up to £10,000 to make energy efficiency improvements to your house (such as double glazing, energy efficient white goods, insulation), and then this would be paid back via your electricity bills – the cost of which should be covered by the savings you make. The charge would be against the property rather than the owner, and so would be transferrable if you move house in the future.