Millions of UK households could save hundreds of pounds a year on their energy bills if the government were to approve low-cost loans for solar panel installation, research has found. Solar panels with batteries are one of the cheapest ways to generate electricity and reduce energy bills, but with an upfront cost of about £6,000 they remain out of reach for most cash-strapped households.
Bank of England-backed loan scheme could benefit 8 million homes
According to the thinktanks New Economics Foundation and the Finance Innovation Lab, if the Bank of England backed a system of low-interest borrowing, solar panels could be installed on about 8 million homes at no direct cost to the government. Households would save about £250 a year on average. The scheme would allow the Bank of England to offer commercial banks access to its funds at low or no interest, on condition that they provide loans to households for solar installations at about 2% interest.
How the loan scheme would work
Cooperation with energy companies could allow the loans to be recouped through bills; otherwise, repayments—likely about £45 a month on average, offset by bill savings of about £66—could be collected by banks. Even with the loan cost, households would save money on energy bills for the 15 years of repayments and beyond. Jesse Griffiths, chief executive of the Finance Innovation Lab, said: “The government’s (warm homes) plan relies on government spending to subsidise cheap loans, but our research shows that, for rooftop solar, cheap loans can be delivered without direct costs to government. This makes the potential take-up of the scheme far larger than what limited public budgets could subsidise, meaning that anyone with a suitable rooftop could benefit – over 8 million households.”
Fiscal benefits and past failures
Adopting the proposals could also help the government out of a fiscal hole: the budget for the Department for Energy Security and Net Zero includes about £15bn for the Warm Homes Plan, now under threat as prospective prime minister Andy Burnham seeks to expand defence spending. Griffiths noted that previous government-backed schemes like the “green deal” failed because they carried a cost to the government. By using the Bank of England’s ability to offer preferential interest rates, this could be avoided, pointing to success in Japan and China.
Current solar installation boom
Heatwaves and the war in Iran, which has sent fuel prices soaring, have encouraged increasing numbers to seek solar. In March, there were 25,000 small-scale solar installations registered with MCS, the most in a single month for 11 years. So far this year, about 125,000 installations have been recorded, likely doubling by year-end. Last year, 258,000 homes, small businesses, or buildings were fitted with panels, bringing the total UK installations to over 2 million. Chris Hewett, chief executive of Solar Energy UK, said: “The UK’s rooftop solar market has never been healthier, and it’s no wonder, considering that the price of solar and battery installations is almost the lowest on record, while the cost of power from the grid remains stratospheric. But we must go further and faster.”
Government support and future plans
Energy secretary Ed Miliband, who has championed rooftop solar, said: “Amid another fossil fuel crisis, the British people are continuing to show record demand and break clean power records with a new rooftop solar panel installed every two minutes in 2025. We are going further and faster on our rooftop revolution, with the Warm Homes Plan set to bring in zero- and low-interest loans for solar panels – and quick, low-cost plug-in panels will be in shops within months.” Plug-in solar panels, available for a few hundred pounds, are less efficient but useful for balconies. The Bank of England declined to comment.
