Low-cost loans for solar panels could save UK households £250 annually, say thinktanks

Millions of UK households could save an average of £250 annually on energy bills if the government approves low-cost loans for solar panel installations, according to research from the New Economics Foundation and the Finance Innovation Lab. The proposal suggests that with backing from the Bank of England, around 8 million homes could benefit from this initiative.

Potential Savings from Solar Panel Loans

Solar panels with batteries are recognized as one of the most cost-effective ways to generate electricity and reduce energy expenses. However, the initial installation cost of approximately £6,000 remains a barrier for many cash-strapped households. The thinktanks propose that low-interest loans, around 2%, could be offered, allowing households to install solar panels without upfront costs.

By utilizing the funds from the Bank of England, commercial banks would be incentivized to offer these loans, which could lead to substantial savings for households. While repayments may average about £45 monthly, households could offset this with average savings of £66 on their energy bills.

Government Support and Financial Implications

This proposal could also alleviate some fiscal pressure on the government. Currently, the budget for the Department for Energy Security and Net Zero includes around £15 billion for the Warm Homes Plan, aimed at providing green energy solutions to low-income households. Jesse Griffiths, chief executive of the Finance Innovation Lab, noted that adopting this loan scheme could free up funds for other government priorities.

Griffiths stated, “The government’s (warm homes) plan relies on government spending to subsidize cheap loans, but our research shows that, for rooftop solar, cheap loans can be delivered without direct costs to government.” This could potentially expand the reach of solar installations beyond current public budget limitations, allowing more households to benefit.

Comparative Success of Solar Initiatives

Looking at international examples, countries such as Japan and China have successfully implemented similar schemes, resulting in a significant increase in solar adoption. In the UK, the solar market is experiencing a resurgence, with around 125,000 installations registered this year alone, a number expected to double by year-end. This comes amid rising energy prices exacerbated by global events, making solar installations an appealing option for many.

• Solar panel installation cost: £6,000
• Average annual savings: £250
• Loan interest rate: 2%
• Monthly loan repayment: £45
• Average monthly bill savings: £66

Despite historical challenges with government-backed schemes, the current momentum in the solar market suggests a promising future. The Solar Energy UK trade association's chief executive, Chris Hewett, emphasized the importance of accelerating solar adoption, stating, “The UK’s rooftop solar market has never been healthier.”