Turn your solar panels into ready money

“Feed-in-tariffs are long. Life is short. Why not make the most of it?” said the flyer from Solar Buyback Solutions (SBS). 

It sounded too good to be true: a classic example of what the EU’s Brexit negotiators call “cake philosophy”. Could the solar panels on my roof really give me a free gift of more than £13,000 while allowing me to benefit from free electricity every sunny day for the next 18 years?

Like thousands of others, my family bought solar panels in the boom year of 2011, the last before the coalition government led by David Cameron began to claw back the incentives to go green. We spent £12,800. In return, we were given 43.3p for each kilowatt hour (kWh) we generated — about £1,600 a year, index-linked until the cut-off date of 2036. In addition, we got free electricity when the sun was shining. We still do. It pays us to time energy-intensive activities such as laundry to coincide with sunny days.

Since installation, the “feed-in-tariff” paid by the government has risen by almost 22 per cent. From this week, it is 52.75p per kWh, enough to earn us more than £12 on a sunny summer’s day. At this rate we expect to have covered our initial investment in a few months’ time. So why should we take up SBS’s offer?

The company, based in St Albans, Hertfordshire, wrote to us out of the blue six weeks ago after obtaining our details from a national database. I was curious. I made contact and asked for a buyback calculation. I was told that SBS could offer us £13,428, conditional on a free survey. It estimated that we would earn £26,992 from the feed-in tariff during the remaining contract. 

Zishan Din at SBS explained that the valuation is based on the installation size, the date of installation and generation performance. This allows SBS to obtain a price to acquire the remaining feed-in tariff for a lump sum on behalf of their chosen investor. He said the company would manage and maintain the system for the remaining term of my feed–in tariff at no additional cost and, should the system break down, become faulty or need key parts replaced, this would be covered under its service offering.

Mr Din said we could still take advantage of reduced electricity bills from the solar panels; over the remaining 18 years, he said, this would provide energy savings of about £8,727 based on the performance of our solar system.

Which? says solar buyback schemes “promise a large upfront payment, while you would otherwise receive your feed-in tariff gradually, over 20 years, as your panels generate electricity”. It advises solar panel owners to “calculate how much you expect to receive from your feed-in tariff payments in total, and compare this with the upfront sum offered by the solar buyback company.

“Although you’ll have to wait longer to receive the total amount, it is likely you’ll be better off this way in the long run. It would not make sense for the companies otherwise.”

I followed its advice and did my own calculations. I reckoned my family would get £27,662 in feed-in-tariff payments over 18 years plus the retail price indexing that is implemented each April based on the inflation rate for December. This could make the rate per kWh about 65p by the end of the 25-year contract, based on current trends. This is a very good deal for anyone who has no plans to move house. However, it is nice to know that if our circumstances changed, the solar buyback option might make sense: £13,000 is a useful sum of money.

David Ring, founder of SBS, told me that in the two years his company has been in business, about 600 solar panel owners had signed up to release the equity from their solar feed-in tariff.

In exchange, solar panel owners agree to a registered charge on their property via what is called an “air-space lease” for the remaining term of their feed-in tariff.

The solar buyback option is likely to be most attractive to those planning to sell their homes, release equity for home improvements, support family members in education or buy property. It is not possible to move your solar panels and their income to another property. Usually the buyer of your home gets the benefit of your investment in the form of a regular income — in our case about £1,600 a year — and cheaper electricity bills.

Curiously, there is no evidence that houses with panels get better prices than those without. With solar buyback, a lease is filed as a registered charge at the Land Registry and stays with the property. Mr Ring advises that from time to time, customers will not want to accept a registered charge on their new home or indeed new buyers will just not like the look of solar panels, regardless of the green credentials they bring.

Solar buyback companies such as SBS offer equity release to people who installed solar panels between 2010 and 2016, with some 700,000 homes being eligible.

If you plan to take up a buyback offer, you should check with your mortgage lender to see if there are likely to be any problems; if you are planning to sell your home you should get independent legal advice.

Mr Din told me that some 80-90 per cent of the people who asked for the no-obligation survey choose to sell their future income for a lump sum. He said: “If you held on to your feed-in tariff payments you will certainly receive a much higher income from your investment . . . we as a company are purely here to give you the option to release equity from your panels now as opposed to waiting 18 years.”

Potential buyers of properties where solar buyback had been accepted should not be put off. They should see the solar panels as a way of reducing their electricity bills. In future, they may also be able to install a solar battery and store energy for night-time use.

My family’s original investment has generated £10,615 from feed-in-tariffs since 2011. We have also had the benefit of reduced electricity bills, especially since we learnt from our early mistakes. In the summer of 2010 we typically used 21 units of electricity a day. This winter we had reduced that to an average of 15 units by being smarter about when we switched on energy-intensive appliances like ovens and washing machines. In the winter of 2010, we used an average of 26 units of electricity a day, peaking at 30-plus units on Sundays (with laundry and Sunday roasts). This winter, we reduced our Sunday consumption to 18 units. 

Before our panels were installed we paid an average of £104 a month for electricity. That has halved. The panels provided the biggest part of the reduction but they have also provided an incentive to regularly monitor our energy usage to get the best value. 

The mailing has reminded us what a good deal those early solar panel contracts were. If we stay put we are likely to get a total return of about £50,000 for our £12,800 investment when we take into consideration our total electrical saving and income from the Feed-in-Tariff. If we decide to sell up, though, we know we can take some of the future revenue with us as a lump sum while still benefiting from the reduced electricity and comfort that our system will be taken care of at no additional cost for the remaining term of its operation.

Lindsay Cook is co-founder of consumer website MoneyFightClub.com and co-author of “Money Fight Club: Saving Money One Punch at a Time”, published by Harriman House. If you have a problem for the Money Mentor to look into, email money.mentor@ft.com