Outlook keeps getting brighter for green energy

The cost of harnessing solar power used to be prohibitive. But not any more, says Catherine Quinn

Until recently, solar panels could hardly be classed as an investment purchase. And in financial terms, generating green energy domestically tended to evidence idealism rather than economic judgement. But the Government's enthusiasm for green energy is finally making some inroads into solar developments, and technological change is bringing down the cost of solar installations year on year. Now, heating your water through solar panels, or powering your electrics through wind turbines is a very real possibility, both practically and financially.

Until recently, solar panels could hardly be classed as an investment purchase. And in financial terms, generating green energy domestically tended to evidence idealism rather than economic judgement. But the Government's enthusiasm for green energy is finally making some inroads into solar developments, and technological change is bringing down the cost of solar installations year on year. Now, heating your water through solar panels, or powering your electrics through wind turbines is a very real possibility, both practically and financially.

Juliet Davenport is chief executive for green electricity company Good Energy. She explains the use of solar panels as a viable financial outlay. "From an investment point of view, there are various ways of looking at it. With a grant, solar panels will pay for themselves in about 15 years. In comparison with other bank investments, this might seem quite a long-term payback, but as time goesby, it is likely that the cost of installing panels will go down."

More importantly, if you install solar panels sooner rather than later, you can take advantage of the Government's drive to promote solar energy and, in particular, solar PV (photovoltaic) panels .

Solar PV panels react with sunlight to power electricity, as opposed to solar thermal systems which use sunlight to directly heat water. Although both installations qualify for grants, PV panels currently attract the highest levels of funding.

As a spokesperson from the Department of Trade and Industry explains: "The ultimate potential that solar offers, even in our climate, is substantial. It is therefore important to maintain a position whereby the UK is well placed to take advantage of the technology as the market develops. To that end we have recently announced the allocation of a further £2.2 million for solar demonstration projects , thus taking the total budget to £25 million."

In real terms, this means if you purchase a solar panel as a domestic user, you have access to a substantial grant - usually about 50 per cent of the total cost. Grants for PV panels are currently handled by the Energy Savings Trust, a specially appointed body promoting solar energy in the UK.

PV programme manager Kirk Archibald describes the grants that can be awarded: "For solar PV panels, everyone is eligible for a grant. The basic domestic solar panel build tends to cost about £8,000, and a grant can often bring the price down to about £4,000.

"We ask people to fill out an application form, and we check that the applicant is stating a reasonable price. Also we check that the system they're suggesting fits into reasonable expectations of performance, and is being installed by an accredited installer.

"In terms of funding, we've had a fairly ambitious target to provide funding for 1,200 installations from a £6 million pot of money. We've been expecting the number of projects to double year on year, and we've roughly kept on target with this. Essentially the grant is allocated on a first come, first served basis, and we have a deadline for funding applications each year."

But the level of funding currently being awarded for solar installations is unlikely to last forever, according to Mr Archibald. "It's normally the intention with these government programmes to start funding at an appropriate level and then taper the grant down - although we would expect the prices of solar installations to come down as well. In fact, since 2002 the prices have dropped by as much as 30 per cent in some cases."

Another change which has made solar panels a more viable purchase in investment terms is the advent of new energy suppliers such as Good Energy. These suppliers make it possible for solar panel owners to sell off excess electricity generated during the daytime, and retain the power as credit against their night-time electricity usage. Essentially this means that solar panels use the National Grid as a battery, which is more cost-effective than previous methods of storing solar energy in on-site batteries.

To make solar installations pay, most experts advise doing everything possible to bring down the cost of the initial installation. "There are various things you can do to reduce the cost of having them installed," says Ms Davenport.

"If you have them fitted at the same time as you carry out some other kind of home improvement, for example, you can make a significant saving on labour. Much of the cost of fitting solar panels comes from the actual installation, so if you're able to get someone local instead of someone from a company miles away, you'll make a saving."

Ms Davenport also points out that solar panels are likely to enhance the value of your home. And as the price of property continues a seemingly inexorable rise, this may be a solid reason to invest. If you are installing solar panels for this reason, however, it makes it all the more vital to choose your panels carefully. As solar panels continue improving, so design has also become a feature, with many options for solar heating being indistinguishable from normal roof tiles.

Kathryn Hull, marketing officer of Solar Century, explains the contemporary range available: "We've got solar shingles which look almost exactly like normal roof shingles, and sun slates which look like slates. We also have glass laminates, although they tend to be used for more bespoke, commercial jobs because of the price.

"We have done some roofs which have the usual solar panels with some glass laminates added as a showpiece. The people we have in charge of designing the panels are a team of engineers and architects."

Although government grants favour solar PV panels, there are also smaller amounts of cash for other green energy generators. While the Energy Savings Trust handles PV panels grants, an organisation called Clear Skies handles funding for solar thermal panels and wind turbines. The standard grant for these is much lower - about £400 - but both have greatly benefited from technological advances, making them theoretically a better investment. "Wind turbines are a more interesting option financially because the cost has come down so much over the past 10 years," says Ms Davenport."You need space, though, and a reasonable wind flow. If you have the space to install a wind turbine, there is a real investment potential. Somewhere like London is not going to be suitable.

Solar thermal panels work by heating water annexed for the hot tap, and seem to be proving the runaway success of solar energy provision. While the panels may not heat water to a standard 60 degrees, they work to raise the temperature above base rate, substantially reducing the energy required to generate the rest of the heat.

"I would say solar thermals have the most benefits in terms of saving money," says John Gilbert, an architect whose firm has been involved in numerous green energy projects. "I think solar water panels are a much better investment than PV panels."

Charlie Westhead, the director of Neals Yard Creamery in Hereford, certainly has no complaints. His business, which makes traditional goat's cheese and organic cow's cheese, is energy-intensive, and he says he has made great savings through a symbiotic combination of wind power and solar thermal panels.

"Basically we wanted to use green energy because we use a lot of electricity down here. We've got machines for the cheese-making, dishwashers always running, and hot water for all sorts of things. And we're at the top of a hill, so it makes sense being in a windy place to have a wind turbine fitted.

"It was something I really wanted to do, both to save money in the long term, and so we could do our bit for green energy. I don't believe you can do something like this purely to save money - it also has to be part of a personal realisation that this is something you should be doing. We've also got solar thermal panels for heating the water. They save us an awful lot of electricity and heating.

"And we got the wind turbine and the solar panels put in at the same time, with some other building work we were doing. It was part of a separate grant we had for a building project, which we applied for to tie-in. I wouldn't necessarily recommend going that route, though. There are certainly more straight-forward grants you can get, specifically for green energy systems.

"Generally, though, we had no problems fitting the turbine or the panels, they've been no trouble to run, and I'm really pleased with them."

And, if none of these options sounds suitable, the range of green energy sources is expanding all the time. Mr Gilbert says, "We've also recently been looking at developments such as natural solar air collectors. This is where the heat naturally present in the gap between the roof rafters and the building is collected. You can also keep water heated at a higher temperature by storing it in pipes in the ground, which naturally has a constant temperature of about 9ºC."

While solar investment may be the energy of the future, home-owners should also remember the more mundane and old-fashioned money-saving measures. Combine green energy with draft excluders, double glazing, loft installation and energy-efficient appliances to really make the most of the power you generate. After a hefty investment in a solar panel, you certainly don't want all the energy escaping through the roof.

ALTERNATIVE POWER SOURCES

* GROUND SOURCE HEAT PUMP

Imagine a green energy source that could cut your household hot water and heating requirements to less than £250 a year. A long plastic pipe buried in your garden could achieve just that. A circulating mix of water and antifreeze in the pipe absorbs large quantities of low-grade heat from the ground (earth temperature is 9-10ºC) and is converted by the heat pump into a small quantity of high-grade heat - about 55º for hot water.

The downside is a minimum installation cost of £6,000, rising sharply for homes with small gardens requiring bore holes to be drilled. However, the DTI-run Clear Skies programme provides a £1,200 grant, and the system is zero-maintenance, hidden, long-lasting (a lifetime of 50 to 100 years) and massively efficient, returning three units of heat for every one unit required to run it. It substantially reduces household carbon emissions and may grow in popularity in the face of the rising price and diminishing supply of fossil fuels. In areas off the gas grid, heat pumps are already cheaper to run than oil or LPG systems.

GeoScience, 01326 211 070, www.earthenergy.co.uk; Cholwell Energy Systems, 020 8747 0367.

* MICRO WIND TURBINES

Wind turbines are under attack for being unwieldy blots on Britain's rural landscape and incapable of meeting urban power needs, but the growing popularity of micro turbines (below) may change that image.

Roof- and wall-mounted turbines up to 2 metres across can normally be attached to urban homes without planning difficulties, and a 600-watt turbine saves 2,500 units a year - enough to run the house lights with some spare capacity, says Richard Caldow of Proven Energy, near Kilmarnock. The company sells a 600-watt micro kit for £1,800, not including installation, but a grant is available from Clear Skies (£1,000 per kilowatt), knocking the price down by a third. Micro turbines have a shorter "payback" time than PV panels.

Proven Energy, 01560 485 570.

* BIOMASS STOVES

A wood burner may not sound environmentally friendly or fuel-efficient, but technological advances and falling prices make biomass stoves (above) an increasingly viable domestic heat source. The machines, which run on clean fuel ("carbon neutral" compressed sawdust pellets), are 85 per cent fuel-efficient, self-loading and auto-ignition, and produce just 0.5 per cent ash, which can be mulched into fertiliser. A fortnightly "de-ashing" is no more complicated than emptying the vacuum cleaner. They can also be converted from direct space heaters by adding a back boiler to heat water for radiators.

With a Clear Skies grant of £600, a biomass stove costs £800. A yearly service costs about £200, and fuel, while bulky and only financially viable if you live within 50 miles of a pellet mill, can be as little as 2p per kilowatt-hour - cheaper than oil, but far more expensive than gas.

"People perceive it to be logs-on-fires technology and it isn't," says Keith McKendrick, manager of Devon-based Wood Energy. "It's a highly sophisticated, very efficient and convenient heating system."

Wood Energy, 01398 351166.

* RAINWATER HARVESTING

A simple but overlooked eco-friendly measure is conserving water by using filtered rainwater to flush toilets, fill washing machines and irrigate gardens. Below-ground tanks are expensive and best installed in newly-built or excavated houses, but a modest option is a fine mesh in the gutter down-pipe to filter clean water into a small pump-controlled tank.

The basic kit alone costs £600 before installation.

Electricity running costs are low and water savings significant, but it takes 10 years to reach "payback", says Paul Munns, director of Rainharvesting Systems in Gloucestershire. He admits: "It's difficult to justify on a financial basis at the moment. But it reduces the amount of water that goes straight down the drain."

Rainharvesting Systems, 01452 772000. Oliver Duff