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The annual cost of electricity is expected to continue to rise rapidly

Annual cost of electricity for a domestic household

The rapidly increasing cost of domestic electricity is a significant concern to all home owners.  The more so at times of economic stagnation in the country.  Costs, including gas and electricity, seem to be racing away whereas household incomes are broadly static.

 

Just how fast are domestic electricity costs increasing?

The graph below is taken from data on the Government website, for the Department of Energy and Climate Change, for 1999 to 2011.  The graph shows the estimated cost of electricity for a typical home.  The upper line shows the cost for supplies from "Home Suppliers"; defined as the former public electricity suppliers within their own distribution area.  The lower line shows the cost from "New Entrants", being new suppliers, and former electricity suppliers outside of their own area.

 

The conclusions are stark.  

After a period of price stability up to 2003 prices then have accelerated sharply.  Solar4us have extrapolated this trend for a further 6 years.  No forecast can claim to see into the future with accuracy.  However, the concensus among industry watchers, who study the underlying fundamentals, is that there is every expectation of prices continuing to increase at well above the rate of inflation.

 

The trend line predicts that the cost of electricity to a typical domestic home will rise from

£489 in 2011 to £713 in 2016, an annual increase of some 12% each year.

 

How realistic are the DECC estimates?

The Department of Energy and Climate Change base their costs on an annual consumption of 3,300 KWH.  We regard that as conservative for the typical home likely to be thinking of installing solar panels.  

 

For example, one of our customers has a large very well insulated five bedroom house.  They have gas central heating but electric hob, microwave and two ovens plus the all the usual electric kitchen and utility appliances, kettle, two fridges, two freezers, toaster, dishwasher, washing machine and dryer, plus multiple televisions, computers, etc.  Despite being energy conscious their consumption prior to fitting solar panels was some 7,000 KWH/annum.  This is roughly double the government's estimate of 3,300 KWH/annum.

 

In 2012, the first full year following installation of the 16 Sanyo solar panels (4KWpeak) for this customer, the electricity bought in from the grid reduced by 2,400KWH, roughly one third.  At the end-2012 average unit price of 15p/KWH for this consumer that equates to a saving of £360 for the full year 2012.  With the cost of purchased electricty expected to rise rapidly, as above, these savings will also increase year by year.

 

What can a cost-conscious home owner do?

Although the government has reduced the Feed-in-Tariff, installing Solar Photo-Voltaic panels remains a superb investment. A typical 4KWpeak system generates a tax-free return on investment of 8-10%.  For a 20% tax payer that is equivalent to a pre-tax return of 11% ; for a 40% tax payer the pre-tax equivalent is 15%.  These are year-one figures.  The return increases year-by-year as the FiT is index linked to RPI.

 

We know of no other investment, that is genuinely risk-free, that comes even close to these excellent returns.  

Call now on 0208 654 9000 to see how you can benefit from this opportunity.

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Source: Department of Energy and Climate Change website; Domestic Price Statistics, Table 2.2.4

Trend line generated by Solar4us using a statistical "least squares" function with data from 2004 to 2011 inclusive.