How solar panels can help address fuel poverty

The Resolution Foundation has suggested that the problems of the fuel-poor could be tackled if the government subsidised the installation of solar panels to reduce their energy bills. The suggestion is that it could cut bills by up to £440 per annum and lift 1.2m people out of fuel poverty. It's interesting to note that in 2015 more solar panels were installed in poor areas than richer ones but that since the Cameron government cut subsidies the opposite has been true.

The report assesses government support for solar panel adoption in the UK, particularly in the context of the government's plan to triple solar capacity by 2030. While large-scale solar farms will drive most of this growth, the government also aims for a "rooftop revolution" to increase residential solar adoption. Households with solar panels can save approximately £440 annually on energy bills, making rooftop solar a cost-effective way to reduce household expenses.

However, access to solar remains unequal. Lower-income households, which spend a higher proportion of their income on energy, face significant barriers to adoption due to the high upfront costs (£6,500 per installation). Since the reduction of feed-in tariffs in 2016, solar panel installations have become increasingly concentrated in wealthier areas. Addressing these disparities, the report recommends means-tested subsidies, low-cost financing options, and stronger regulations for fairer electricity export rates.

Solar adoption could significantly reduce fuel poverty, with one-third of eligible fuel-poor households potentially escaping this condition through solar panel installation. To make rooftop solar widely accessible, the government should integrate it into energy efficiency programs and ensure equitable financial support. Without intervention, solar adoption will remain skewed towards wealthier households, limiting its potential benefits for those most in need.

Glossary of Key Economics Terms from the Report

1. Decarbonisation – The process of reducing carbon dioxide (CO₂) emissions, typically by transitioning from fossil fuels to renewable energy sources.
2. Solar Capacity – The total potential electricity generation from solar panels, measured in gigawatts (GW) or megawatts (MW).
3. Feed-in Tariff (FiT) – A subsidy that provides payments to households and businesses for generating renewable energy and feeding excess electricity back into the grid.
4. Smart Export Guarantee (SEG) – A policy requiring energy suppliers to pay households for surplus electricity generated from solar panels, though without a fixed price guarantee.
5. Levelised Cost of Electricity (LCOE) – The average cost of generating electricity over the lifetime of a renewable energy system, including installation, maintenance, and operation costs.
6. Fuel Poverty – A condition where households spend more than 10% of their disposable income on energy costs, often leading to financial hardship.
7. Energy Efficiency Measures – Improvements such as insulation and efficient appliances that reduce overall energy consumption and household energy costs.
8. Capital Costs – The upfront expenses required to install solar panels or other renewable energy systems.
9. Self-Consumption Rate – The proportion of solar energy that a household uses directly, as opposed to exporting it to the grid.
10. Means-Tested Subsidies – Financial assistance programs that determine eligibility based on income and assets to ensure that support reaches lower-income households.