From the Front Line

Just doing a back-of-a-fag packet calculation for Michael Holmes in the office today - he expressed some interest in solar panels and wanted to see how it would stack up.

It was quite illuminating, and so I'll share it. I can't guarantee these figures are exact but they are pretty close, I think.

Michael has high electricity bills. Boy, actually, they are astonishingly-I-need-a-second-job high. He spends £320 a month on electricity - it's a big house and he has three kids who, one presumes, spend a lot of time ignoring his pleas to turn lights off when they leave the room, leaving iPods charging all the time and, by the size of his bill, getting involved in medium-scale manufacturing.

At £3,840 and 11p/kWh (unit) then he's consuming 34,909kWh a year.

He thinks he's got room for a large array and could possibly fit a 10kW kit on a flat roof area and perhaps as a standalone structure at the bottom of his garden. Let's say that that would generate 60% of his requirements (conservative), making 20,945/kWh a year.

Even assuming he's not selling any back to the grid, he'll get a little over 41p/unit.

That means an income of £8,587 under the FiT scheme and an additional saving of 60% of his electricity bill, i.e. an additional £2,304 (all figures p.a).

We reckon this 30kW would cost him around £30,000, meaning that with a net benefit to him of around £10,800 a year,  it would pay for itself in 3 years. Interestingly this is much more lucrative than smaller installations dealing with smaller energy demands.

If he goes for the capital cost under the new PAYS scheme announced this week - say at 2% interest over 10 years - he's paying out £3,300 a year to get £10,800 - or, effectively, the government are giving him £7,500. Tax free.

Am I missing something?