At Brimstone Energy UK, when we discuss the case for energy efficiency, we use the phrase “no regrets” investment. This is because in all scenarios, an investment in making your home more thermally efficient will improve the quality of your home, make it more comfortable to live in and – of course – cheaper to run.  In this article we go beyond this and argue that the Financial Independence case for Solar PV means that you really cannot afford not to have Solar PV.

Clearly there is a priority order in which to do the work, starting with low hanging fruit which makes the biggest impact for the least cost. If your loft insulation is below 300mm, for instance, it is usually worth starting there. 

We can therefore achieve a permanent reduction in the space heating costs of your home. 

Now with solar panels and battery storage, we also achieve a permanent (25 year +) reduction in your energy costs. But consider this from another angle. Let us assume you have a lump sum available to invest. Many of us find ourselves in this position once or twice in our lives, linked to a ‘life’ event. Perhaps you have some tax-free cash from a redundancy, a retirement plan or an inheritance, for instance. 

You have decisions to make regarding what to do with this money. You could invest in property, buy an index tracker of the stock market, or buy an annuity. These will offer the chance of a capital gain, and an income.  

Investing in Solar PV and Battery Storage could be considered alongside these options. This is because the equipment will deliver a reduction in your energy bills for at least 25 years – or your entire retirement! 

The Financial Independence case for Solar PV  

But let’s re-frame this slightly. 

Let’s explore the case for investing in Solar and Battery Storage from the perspective of someone seeking financial independence, keen to minimise their income tax bill. 

Let us assume your energy bill is £3000 per year. Your taxable pension income needs to deliver £3750 gross to allow you to pay your energy bill (based on the 20% income tax rate, where income tax is payable on your private or workplace pension, with the state pension largely swallowing up your tax-free allowance). 

So not only are you paying £3000 out of pocket to the energy firm on an annual basis, but you are also committing to pay HMRC £750 per year of income tax (plus, don’t forget that VAT is payable on your energy bill). 

Bearing in mind the sale and installation of Solar PV and Battery storage is currently 0% VAT, you can quickly see that this is quite a tax efficient proposition. 

When we talk about “pay-back” periods for Solar PV, we are exclusively talking about after tax income. But if you factor in the income tax that you don’t need to pay, suddenly the business case for Solar is turbo-charged. 

The rule of 25

Taking a slightly different perspective, now lets us consider how you generate that pension income. As a very crude rule of thumb, we can say that a person requires a capital sum of £25,000 to generate £1000 of annual expenditure in retirement.  

Therefore, we can say that for you to pay your energy bill of £3750 you require a capital sum of £93,750. In other words, if you have £93,750 invested in the US stock market, that sum should be capable of generating an income of £3750 in perpetuity (under most scenarios that have been modelled). 

If your eyes are watering at this sum of money, an investment in Solar PV and Battery Storage system is starting to look even more attractive.  

The principle is very clear (and well known in retirement planning circles): if you can permanently reduce your living costs, this reduces the size of the retirement pot that you need to generate during your working life. 

Energy costs are generally considered to be a fixed cost that you cannot escape from. To be transparent, it is unlikely that you’ll be able to completely wipe out your energy bill by investing in a standard size Solar PV and Battery set up.  

But there are plenty of examples of people in the UK with oversized Solar PV arrays with associated battery storage that for 9-10 months of the year are simply paying the standing charge. 

And the capital that they invested was a tiny fraction of £90k! 

And finally. 

Now for the Disclaimer: Brimstone Energy are Green Energy Transition experts, NOT financial planners, and this article does not constitute financial advice.  

We are simply making the point that if you are entering retirement and have a chunk of capital available, we believe that permanently reducing your ongoing costs of living is worth serious consideration. Did anyone mention inflation? 

If you want to work with Brimstone Energy, a company that has your best interests at heart, contact us.