Cheap solar panel loans can save big households from debt – thinktanks | Solar energy

Millions of UK households could save hundreds of pounds a year on their energy bills if the government approved low-cost loans to install solar panels, research has found.

Solar panels with batteries are one of the cheapest ways to generate electricity and reduce energy bills, but with an upfront cost of around £6,000 they are still beyond the reach of many cash-strapped UK families while other countries move ahead with installations.

But if the Bank of England were to support a low-interest mortgage scheme, they could be put into around 8m homes at no direct cost to the government. Households will save around £250 a year on average, according to thinktanks the New Economics Foundation and the Finance Innovation Lab.

The scheme will work by allowing the Bank of England to give commercial banks access to their capital at low or no interest, on the condition that they use these properties to provide loans to households to install solar panels. Loans will be available to households at around 2% interest, which will give street banks an incentive to participate and cover the cost of the scheme.

Partnerships with energy companies can allow loans to be repaid with debt; otherwise, the fees – which can be around £45 a month on average, offset by bill savings of around £66 – can be collected by banks. Even with the cost of the loan, families will save money on their energy bills for 15 years of repayment, and more over the remaining life of the panels.

Adopting the proposals could also help the government out of the financial crisis: the budget for the Department of Energy Security and Net Zero includes almost £15bn for the Warm Homes Programme, a program to equip low-income households with green energy and gas installations. That money is now at risk as the incoming prime minister, Andy Burnham, wants to increase defense spending.

Jesse Griffiths, chief executive of the Finance Innovation Lab, said funding solar development through the Bank of England would free up funding for the Warm Homes Plan. “You can use it for anything you want,” he said.

“The government program (warm homes) relies on government spending to finance cheap loans, but our research shows that, with solar roofs, cheap loans can be delivered without direct costs to the government. This makes the take-up of this program much greater than what could be financed by the limited public budget, which means that anyone with a suitable roof can benefit – more than 8 million families,” said Griffi.

Previous government-backed plans for green housing development, such as the scrapped “green deal” delivered by the Conservative/Liberal Democrat coalition, have failed because they burdened the government with costs, Griffiths added. By using the Bank of England’s ability to offer preferential interest rates, this can be avoided. He pointed out the success of similar programs in countries such as Japan and China.

Ed Miliband, the energy secretary, who has been savaged by the Tories and sections of the media since rumors spread that he might become a Burnham councillor, has long championed rooftop solar as a bright solution to the cost of living crisis.

Heatwaves and the war in Iran, which has raised fuel prices, have encouraged an increasing number of people to seek solar: in March, there were 25,000 small solar installations registered with MCS, the standards organization, which was the most one month in 11 years. So far this year, about 125,000 have been installed, with that number likely to double by the end of the year. Last year, 258,000 homes, small businesses or buildings were fitted with panels, bringing the total number of installations in the UK to over 2m.

While the UK’s domestic solar market boomed again amid the oil crisis, the stagnation of previous government incentive schemes has stifled uptake over the past decade. The highest installation of more than 203,000 reached in 2011, when the “food payments” that rewarded families for sending energy to the grid were in place, was not exceeded until last year, and from 2016 to 2021 only an estimated 50,000 per year, according to MCS.

Other countries have gone further: almost a third of households in Pakistan now use solar systems, mostly DIY installations; and rooftop solar in the Philippines doubled. Modern panels can generate energy even on overcast days in overcast countries like the UK, and Griffiths is quoted as estimating that around two-thirds of UK homes could benefit: at least half are “very suitable” for panels, and another 17% have east- or west-facing roofs where the installation would still work.

Chris Hewett, chief executive of the Solar Energy UK trade association, said: “The UK rooftop solar market has never been so healthy, and it’s no wonder, given that the price of solar and battery installations is at an all-time low, while the cost of power from the grid remains stratospheric. But we must move forward and quickly.”

The government is also keen for people to buy solar panels, which will be available in kits of a few hundred in supermarkets and other retailers, but these systems are often less efficient than rooftops. “They are very useful for balconies and areas where rooftop solar is difficult,” says Griffiths.

Miliband says: “Amidst another fossil fuel crisis, Britons continue to demonstrate the need to record and break clean energy records with a new rooftop solar panel installed every two minutes by 2025.

“We’re moving forward again quickly with our rooftop revolution, with the Warm Homes Program set to deliver zero-interest and low-interest loans for solar panels – and quick, low-cost plug-ins to be in stores within months.”

The Bank of England declined to comment.