I discussed the Government’s announced cut on the VAT rate on solar PV panels and installation costs on Today with Claire - RTE this morning. Here a quick blog expanding on some of the points I made, and some additional points I didn’t manage to get to.

It’s a great change to talk about a tangible and practical solution to climate change, skyrocketing energy bills, and geopolitical uncertainties. Solar power is a crucial solution to these issues. Despite Ireland’s reputation for not having the sunniest weather, solar photovoltaic (PV) technology will play a significant role in Ireland’s energy system, and is causing a seismic shift in disrupting fossil fuel demand worldwide. Globally, solar power is expected to surpass coal within 5 years, according to IEA analysis. In the words words of Mary Robinson, we need to go for clean energy like a moonshot and ditch fossil fuels as quickly as possible.

By installing solar panels, homeowners can generate their own electricity, essentially turning their homes into small power plants. This not only provides free electricity for up to 25-30 years (once the initial cost of installation has been paid back) but also reduces dependence on imported fossil fuels, which are subject to political and economic fluctuations. One of the most compelling aspects of solar power is its ability to provide energy security, at a time where fossil fuel exporting countries hold major power over import-dependent countries.

As Ireland continues to electrify transportation and heating systems with electric vehicles (EVs) and heat pumps, the benefits of solar power will only increase. The electricity generated by solar panels can be used to power not just household appliances, but also EVs and heat pumps, significantly reducing carbon emissions and energy costs.

Installing solar panels is relatively hassle-free - it requires minimal internal work and homeowners don’t have to move out - and an affordable way for many homeowners who have access to the cash to reduce their climate impact and energy bills. Once the panels are up and running, they require little to no maintenance. Moreover, studies from the US and UK have shown that solar panels increase the value of a home.

At today’s energy prices and with the cut in VAT, the upfront cost of investing in solar panels can pay back within 6-7 years, making it a sound financial investment irrespective of the other advantages. More solar energy will also bring wholesale electricity prices down, and so benefitting even those who do not have solar panels on their roofs.

A typical home installation will be around 8 panels, or 3.3 kW. While quotes will be different for each household and supplier, this will cost around €4,700 upfront after the SEAI grant (€2,200) and VAT cut (€1,600). That system will produce around 2,700 units (kWh) of electricity each year, which at today’s electricity prices (around 40c) is worth around €1,100. If these prices were to remain high in the future, and if the household was able to use all the electricity the panels produce (both best-case scenarios), the system would be paid back after 4.5 years, and after that would produce more than €20,000 worth of electricity over the following 20 years. This is the very best case. It’s likely that electricity prices will fall soon as the gas supply crunch becomes resolved, and also homeowners will likely sell some of the electricity the panels produce back to the grid. Currently, electricity suppliers are offering around 20c for each unit sold back to the grid, and this can fall or rise over time.

In Ireland, the government is aiming to accelerate solar PV capacity to 5 GW by 2025, which is nearly equivalent to the current power generation capacity of wind energy. So we are seeking to achieve the same deployment rate for solar PV in 3 years as was achieved over around 10 years for wind energy, which will be very challenging but certainly achievable. Delivering this target will require a significant acceleration in both rooftop solar installations and utility-scale solar farms. This would reduce greenhouse gas emissions in the power system by about 10% by 2025, 1 million tonnes of carbon dioxide each year, around one-quarter of the total cuts needed according to the agreed sectoral emissions ceilings.

However, Ireland is still playing catch-up compared to other European countries. As of 2021, Ireland had the third-lowest per-capita solar capacity in the EU, lagging behind countries like Belgium, the Netherlands, and Germany, which have more than 20 times our per-capita solar energy. In the Netherlands, for example, nearly a quarter of all homes have solar panels, and installations are still accelerating.

There is significant potential for rooftop solar PV in Ireland, with research from my colleagues in University College Cork indicating that around half of Irish homes are suitable for rooftop PV installations. The proliferation of one-off homes with large gardens creates problems when it comes to decarbonsing heat and transport, but it creates an opportunity for rooftop solar PV that countries with more apartment buildings don’t have.

Despite the clear benefits of solar power, it is not a silver bullet for all of Ireland’s energy and climate challenges. It will play an important and necessary, but secondary role to other sustainable energy solutions - wind energy (onshore and offshore), and reducing overall energy demand needs. Electricity accounts for only 15% of Ireland’s greenhouse gas emissions: far more carbon (and costly energy bills) are from heating and transport rather than electricity. To maximize the benefits of solar PV, it is crucial to electrify heating and transport systems.

In addition to promoting solar power, the Government sould also consider cutting VAT on other sustainable energy solutions, like insulation materials, heat pumps, and used EV imports to further accelerate the energy transition. Furthermore, policies must be implemented to ensure that renters, who make up around 500,000 homes in Ireland, can also avail of the same solar grant benefits as homeowners. Favouring homeowners alone is not fair, exacerbates the huge gulf caused by the housing crisis, and also limits the potential of solar PV.

In conclusion, solar power is a low-hanging fruit and a crucial piece in our puzzle to address climate change and energy insecurity.