Could solar panels earn you £650 a year? Why Tony Hazell decided to install them Tony believes he could receive a 7% return - tax free It is light levels, not direct sunshine, that activates the panels Financial journalist thinks he will break even after five-and-a-half years By Tony Hazell for the Daily Mail It seemed like a straightforward project. My wife and I had decided to get solar panels. Has he lost his mind? I hear you say. Solar panels! In damp, cloudy Britain! And just as the clocks go back for winter. Some say solar panels are an eyesore, others that they are a new scam for double-glazing salesmen. But my decision is one driven by cold hard cash, I'll have you know. My savings are earning a pittance. I've already got money in the stock market and don't want to take any more risk. Tony Hazell realised that getting solar panels could give him an income of around 7% a year totally tax-free After I'd sat down and done the sums, I realised that getting solar panels could give me an income of around 7 per cent a year totally tax-free. And where else would I get that for a £6,000 investment? On top of this is my firm belief that energy prices are only going one way. Upwards. So that was the matter decided. The Hazells would start inquiries to get giant panels on our roof. I hope the neighbours are understanding. A £25,000 payback and some Wild West figures from salesmen We have a close to ideal house for solar panels, with a large roof facing just off south and no shading from trees or any buildings. What's important to know is that it is light levels, not direct sunshine, that activates modern photovoltaic (or PV) panels. But after making a few calls to firms we found on the internet, I was suddenly thrown into the Solar Panel Wild West. Those who provided quotes all knew their stuff as far as the technology was concerned. They were enthusiastic about their subject - and none gave the hard sell associated with industries such as double glazing or kitchen fitting. But in these days of skin-tight regulation on financial companies, solar firms are given practically free rein to bandy around figures that appear to have been clawed from Wonderland. The profits they predicted were based on assumptions of future inflation that I felt to be unrealistic. These figures suggested that for an outlay of just over £6,000 I would break even after about five-and-a-half years and see a return of £38,000 over 20 years. Such predictions led me to wonder why the Government does not publish guideline figures that all in the industry should follow. My own calculations, using what I consider to be more realistic assumptions on inflation, suggest the total return may be somewhere between £22,000 and £25,000, with break even in just over seven years. That's around a 7 per cent annual return. The Government has long offered a financial incentive for households who get panels installed - and while this has fallen, so has the price of having panels fitted. The average four kilowatt domestic system - involving 16 panels - should cost between £6,000 and £7,000. Depending on where you live in the country, my calculations suggest that this could pay for itself in seven to eight years - a bit less if you're lucky, but probably longer if you live in the far North-East. Over 20 years, the average profit after paying for the panels and maintenance is likely to be £15,000 to £20,000, but this figure will vary depending on a number of factors. You make money in three ways. First, there is the money you save on your electricity bill. If you're generating your own power, you won't be using - or paying for - so much from the National Grid. The saving will depend on how much electricity you currently use and whether you alter your behaviour to use your dishwasher, washing machine, tumble drier and the like while your panels are generating power. But it seems reasonable to assume around £175 a year. Second, there is the so-called feed-in tariff - the money your energy supplier will pay you for the power your solar panels generate. You will get a set amount for each unit (kilowatt hour or kWh) of electricity that you generate. The current feed-in tariff is 14.38p per kWh that you produce, and it increases in line with the retail prices index (RPI) every year. On a house in the South-East with a south-facing roof, you might make £500 a year from a four-kilowatt system. For a house in Aberdeen, also facing due south, you might make £440. Finally, there's the export tariff. This is the payment you get for selling any extra units you don't use back to your electricity supplier. This payment is 4.77p per kilowatt hour and also increases with RPI. The amount you export is not currently measured, but it is assumed you export half of what you generate. You might get around £80 a year from this in the South; £70 in the North-East. These payments are tax-free as long as you're running a domestic system just for your own home. Both the feed-in tariff and the export tariff are paid for 20 years, but you will continue to save on your electricity bills beyond this. The fact that you get the same export tariff whether or not you actually feed any electricity into the grid means you can run any devices "for free" while you're generating. You can even heat your water from power you generate, using specialist add-ons to your system. Going solar? Light levels, not direct sunshine, activate modern photovoltaic (or PV) panels Get out of the shade There are several important things to consider before considering solar. To start with, I would suggest it is only worth considering if, like us, you are settled in your home and have no intention of moving for, perhaps, the next 12 to 15 years. That allows time for the payback and for you to generate a healthy profit from your investment. You may need planning permission and you may also need to tell your buildings insurance company. Next, there are factors which will affect the amount of electricity you generate. It's important to be sure these are accurate on your quotation. Direction. In a perfect world, your roof (front or back) would face due south. But as long as you have a roof within about 45 degrees of this, you should still do fairly well. Location. The further south-west in Britain you are, the better the prospect of generating a good amount of power. The further north-east, the poorer your prospect. So why south-west rather than south? Look at a globe rather than a road atlas and you'll see the UK does not stand straight. Hence, Norwich is on the same latitude as Leicester and north of Birmingham. Pitch. Ideally you want the right roof pitch to get the most direct line to the sun - 35 to 50 degrees is good. But anything between 22 or 75 degrees has benefits depending on the time of year, where you are in the country and how high the sun is in the sky. A flat roof is not good because the sun is never directly overhead. Shading. Try to avoid putting panels where they will be shaded by other buildings or a leafy tree. Sun isn't vital for PV panels, but light levels are - so shade is bad news. Geek dream: You can monitor how much electricity you're using and how much money you're making by an app on the iPhone Too good to be true? Tread with care when you get quotations. Solar power companies are using all sorts of assumptions - and some are totally potty. Here are the main ones you should examine. RPI: Your generation and feed-in tariffs increase with the retail prices index - or inflation - each year. When providing you with an illustration of how much money you will receive, the panel salesman will make assumptions on what RPI will be over the next 20 years. I received quotes assuming between 3.5 per cent and 10 per cent inflation. Given that inflation is expected to be low for at least the next few years, around 3.5 per cent might be reasonable. Energy inflation: We all know energy prices are rising faster than consumer price inflation. The Department of Energy and Climate Change says they are 20 per cent above inflation since 2007. But how fast will they rise over the next two decades? This figure is vital because the faster they rise, the more you will potentially save from using the electricity you generate. Two quotations I received showed energy inflation of 7 per cent and 10 per cent. Panel power: Your solar panels will gradually produce less electricity every year as they degrade. It's similar to a rechargeable battery. Most are guaranteed to produce at least 80 per cent of their original output after 20 years, but some quotes don't take this into consideration. Electricity savings: How much energy will you continue to buy from the grid and how much will you save? One quotation suggested my electricity usage from the grid would drop to nearly zero. This conjured up images of my wife and I creeping around our house in candlelight. Be realistic. Your panels will produce power only in daylight. You will continue to use electricity during the evening, whether it's watching TV, cooking or tapping away on your laptop. Switch your energy deal to save more Assessing the best energy deal for you isn't so simple with solar panels because any standing or daily charge will become a greater component in your bill since you're going to be using more of your own energy. As a solar panel owner, you'll want a tariff with a low standing or daily charge - so bear this in mind if you use a price comparison website to track down a new deal. Beware the solar panel cowboys Look carefully at what guarantees come with your system. Over the past five years, many installers have gone out of business, mainly as a result of the frenzy when the generation tariff was more than 43p per kWh. It's important to make sure your installer has good industry insurance cover so someone else will deal with any problems if they do go out of business. Also, check the guarantees on the main items of equipment: the panels themselves, the inverter (which converts the electricity you generate into a form that can be used in the home) and any monitoring equipment. Any installer offering a system that can earn money from the feed-in tariff must be certified by the government's Microgeneration Certification Scheme. It must also be a member of the Assurance Scheme - a consumer code covering contracts, completion of orders and after-sales activity. The Renewable Energy Consumer Code is a member-operated scheme which promises high standards. Become a tech geek Don't be bamboozled by the technology. If you have internet access, there is loads of information online. Most panel components are now manufactured in China, even if they have names like Canadian Solar - one of the more popular and better performing panels. There are two key things to get to the bottom of. The first is the efficiency of the panels in generating electricity, and, second, the efficiency of the inverter in making it usable. Energy: You can save money if you use electricals such as the washing machine when the sun comes out How to get paid There's one small detail I haven't mentioned yet - and that's how you get your money from the feed-in and export tariffs. This should be straightforward. Your installer should provide you with the documentation to show that your new system is up and working. Wait until you have this before you give them their final payment. You can then contact your energy supplier and arrange for your system to be registered. Until it is, you won't get paid. You'll need to supply a reading of your generation meter quarterly and will be paid based on this. Payment can be direct to your bank account. If you pay for your electricity by direct debit, it is worth asking for this to be reduced, as you'll be using less. Our happy ending We've now had our panels fitted - and I'm already in love with them. There was surprisingly little disruption. Scaffolders came on Tuesday morning, the panels went up on the Wednesday and the scaffolding was down again by Thursday lunchtime. I can monitor how much electricity I'm using and how much money I'm making by an app on my iPhone - and there are all sorts of graphs to look at. It's a geek's dream. Our panels have been up for 20 days and I've made £23.62 from the feed-in tariffs plus some savings from using the washing machine only when the sun comes out. My Solarman app tells me I generated 16.6 kWh on the sunniest day so far, October 28, worth £2.78. But the next day I generated just 1.1 kWh, worth 18p. Still, that's about twice what I'd have made from putting my £6,250 in a building society. Here in the Hazell household, Mrs Hazell has expressed concern that I may start hiding the kettle at night to prevent her sneaking a morning cuppa before the sun rises. She already thinks I am spending too long with my head in the airing cupboard playing with the heating and hot water timer. And she was quite affronted when I asked her to stop hoovering until the sun came out. I do suspect that foggy days and a snow-covered roof will provoke a new sense of anxiety in me. But, all in all, I'm hoping for a decent return. Switch your energy provider for cheaper bills The simplest, and often best, way to slash your energy bills is to use an online service that can compare all the best tariffs on offer for you. One option is Mail Online's award-winning money section This is Money's fuel bills switching service, powered by Energy Helpline. Switching is quick and easy and can be done online. All you need to do is put your postcode into the box to the right and follow the simple steps. The service is free to use and in a few minutes can tell you whether you can save hundreds of pounds. There's no need to fill out any paperwork or sign a new contract - it does the hard work for you. For more information on how to get the best deal, read our energy switching guide. Money-saving experts Read and bookmark the following pages to stay up-to-date with the latest deals: