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SOARING energy bills have prompted an increasing number of people to look into generating their own electricity through solar panels - but make sure you know all the facts before signing up.

Due to the Government’s Feed-in Tariff, people who invest in a solar electricity system can earn a guaranteed tax-free income for the energy generated by their system over the next 25 years.

However, payback rates are set to drop from December 12, which means only people who have panels installed before this date will benefit from the highest rate of return for the electricity they produce.

“There is a real and growing appetite from the UK consumer to look for alternative ways of heating their homes and reducing their energy usage,” said John Egan of renewable energy specialists Enact Energy.

“There is no doubt that yet another round of energy price rises have triggered considerable interest in solar electricity.”

But with so many different offers to choose from, and with subsidies set to change next month, it can be difficult to know where to start.

Here we explain all you need to know about generating your own electricity through solar panels, and why you should act now before Feed-in Tariffs are reduced…

What is happening on December 12?

Feed-in Tariffs, which were launched in April 2010 to encourage renewable energy generation in the UK by guaranteeing an inflation-linked income for renewable energy projects, are due to be reduced from this date.

Take up of the scheme has surpassed expectations, so the original pot of money allocated to Feed-in Tariffs is already running out and as a result the Government is cutting the subsidy.

The returns from the Feed-in Tariff scheme are split into three parts, the Generation Tariff, the Export Tariff and a reduction in current electricity bills.

The Generation tariff delivers 43.3p per kilowatt hour (kWh) of energy produced and is index-linked for 25 years.

The Export Tariff delivers an extra 3.1p per kWh for energy exported to the national grid. In addition to this, you can usually save at least £90 off your energy bills each year by using electricity you have generated.

The Generation Tariff is going to be slashed from its current level to as little 21p per kWh from December 12, although any changes won’t affect homeowners who already have solar panels.  

If I want to install solar panels now before the Feed-in Tariff is reduced, how much will it cost?

The cost of installing panels can vary widely depending on which provider you go to, so it pays to do plenty of research before signing on the dotted line. 

As a general rule, the initial outlay for electricity-generating solar panels or tiles is about £12,500, and they can usually earn you around £1,200 a year.

As an example, prices of solar electricity systems from Enact Energy start at £5,499, with the company also offering a Price Match Promise that will see them match the price of any quote for a comparable system found elsewhere.

The large energy companies also usually offer a range of micro-generation products. EDF Energy, for example, offers both solar panels and solar water heating systems.

Can’t I get solar panels installed for free?

You can, but it means you won’t get the Feed-in Tariff. Instead you will only get the free electricity.For example, HomeSun, once of the companies offering free solar panels, will pay for the equipment, installation insurance and maintenance for 25 years on your behalf.

Homeowners get the free electricity – as much as they can use, but HomeSun gets the generation and export tariffs. If at any point, the homeowner wants to receive the tariff and end their contract, they have to buy out of it.

The cost of the PV system decreases over 25 years so the ‘buy out’ price will vary depending on when you want to do it.

Once the ownership is passed over, the homeowner will receive the level of tariff that was current at the time they took out the contract with HomeSun.

Many other free solar companies do not offer this buy-out option.If you move house the contract will pass to the new homeowner, and they will continue to receive free electricity.

But if the new owners don’t want to inherit the deal, they or the old homeowners can buy the contract out.

 Liz Laine, energy expert at Consumer Focus, said: “Free solar panels could cut consumers electricity bills and allow them to produce green energy at no cost, but customers need to go into these deals with their eyes open.

These long-term contracts need to be considered carefully.  Asking the right questions and getting legal advice could help customers avoid the potential pitfalls of these schemes.”

Can anyone install panels on their home?

Your house is most likely to be suitable for solar panels if it is south-facing with little or no shading on the roof. It you don’t have a south-facing roof, then you may still be able to install panels, but they might not be quite as effective.

If you live in a listed building, you are very unlikely to be allowed to install solar panels. You can contact your local Energy Saving Trust Advice Centre on 0800 512 012 for more information on whether solar panels are likely to be suitable for you.

You will also need to tell your building insurance provider about the panels and make sure the sum insured for your building insurance is adequate to cover the cost of rebuilding the house and replacing the panels. You will also need to let your mortgage provider know.

Are there any schemes available which give me extra protection?

Yes. If you are thinking about purchasing solar panels to look out for the REAL Assurance and Microgeneration Certification Schemes (MCS) which show you can trust the company.

The MCS mark shows that the installer offers high quality products, while the REAL Assurance Scheme is a Consumer Code which dovetails with MCS to cover pre-sales activity, contracts, completion of orders and after-sales activity.

REAL Assurance will help consumers if they are unable to resolve complaints with their provider, provided they are members of the REAL Assurance Code.

What else can I do to reduce energy bills?

If you can’t fit solar panels to your property for whatever reason, or if you are planning on fitting them but have gas central-heating, it’s essential to ensure you are on a competitive energy tariff. 

This is especially important given recent energy price hikes.Scott Byrom, energy manager at MoneySupermarket, said: "Energy bills are certainly a ‘hot topic' at the moment with the government urging consumers to take control and switch to cheaper deals.

With households across the UK switching on their heating, and the threat of more colder weather predicted for later this week, bill payers will no doubt be concerned about how they are going to be able afford their energy bills.

“Our survey found that worryingly six per cent of respondents can't afford to turn on their heating - the latest round of price increases added an average 17.4 per cent to the cost of gas and 10.8 per cent to the cost of electricity, resulting in average annual standard bills of £1,287.

Moving from a standard tariff to the best fixed deal would save 15 per cent on the cost of bills, which goes someway to limit the impact of the price hikes.”

You can compare energy tariffs and switch to a cheaper deal here.

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