UK households stand to save hundreds annually on their energy bills under a proposed low-cost loan scheme for solar panel installations. Up to 8 million homes could benefit from the initiative, with an estimated average saving of £250 per annum, according to research from thinktanks New Economics Foundation and Finance Innovation Lab.
The upfront cost of installing solar panels remains a significant barrier at approximately £6,000, including batteries. To overcome this hurdle, the proposed solution involves the Bank of England providing commercial banks with access to its funds at minimal or zero interest. This enables the banks to offer loans to households for solar installations at an interest rate of around 2%, thereby creating an incentive for participation and covering administrative costs.
The structure of the loans, estimated to be around £45 per month on average, is designed such that the projected savings made on energy bills, approximately £66 per month, would offset repayment costs. Consequently, households would realise net savings on their energy bills for the entire 15-year repayment period and further savings for the remaining lifespan of the solar panels.
The thinktanks also highlight a potential fiscal benefit for the government. The Department for Energy Security and Net Zero's budget includes around £15 billion for the Warm Homes Plan, which equips low-income households with green energy solutions and insulation. By operating without direct government expenditure, the proposed solar loan scheme could free up these funds. Jesse Griffiths, chief executive of the Finance Innovation Lab, suggests that this could enable the reallocation of the Warm Homes Plan budget to other priorities, particularly in light of discussions around expanding defence spending.
Unlike previous government-backed green home upgrade schemes, such as the 'green deal', which reportedly failed due to reliance on direct government costs, this new model leverages the Bank of England's capacity to offer preferential interest rates. The increasing interest in solar power is evident, with 25,000 small-scale solar installations registered in March – the highest monthly figure in 11 years – and an estimated 125,000 installations so far this year, projected to at least double by year-end.