Millions of UK households could save hundreds of pounds a year on their energy bills if the government approves low-cost loans for solar panel installation, research by the New Economics Foundation and the Finance Innovation Lab has found. Solar panels with batteries are among the cheapest ways to generate electricity and reduce bills, but an upfront cost of about £6,000 puts them out of reach for most cash-strapped households, even as other countries advance their solar adoption.
How the Loan Scheme Would Work
The proposed scheme would involve the Bank of England offering commercial banks access to its funds at low or no interest, on condition that the banks provide loans to households for solar installations. Loans would be available at about 2% interest, giving high-street banks an incentive to participate and covering scheme costs. Repayments, likely about £45 per month on average, would be offset by bill savings of about £66, meaning households save money even during the 15-year repayment period and beyond for the panels' remaining life.
Potential Benefits for 8 Million Homes
According to the thinktanks, the scheme could enable solar installations on about 8 million homes at no direct cost to the government. Households would save an average of £250 per year. Cooperation with energy companies could allow loan recoupment through bills, or banks could collect repayments directly. 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."
Fiscal Relief for Government
Adopting the proposals could also help the government address fiscal pressures. The Department for Energy Security and Net Zero's budget includes about £15 billion for the Warm Homes Plan, a scheme to equip low-income households with green energy and insulation. This funding is under threat as prospective prime minister Andy Burnham seeks to expand defence spending. Griffiths noted that offering solar upgrades through the Bank of England would free up Warm Homes Plan cash, allowing it to be spent elsewhere. He added that previous government-backed schemes like the scrapped "green deal" failed due to direct costs, but using the Bank of England's ability to offer preferential interest rates avoids this issue, citing successes in Japan and China.
Growing Solar Adoption in the UK
Energy secretary Ed Miliband has long championed rooftop solar as a solution to the cost of living crisis. In March, there were 25,000 small-scale solar installations registered with MCS, the standards body, the most in a single month for 11 years. So far this year, about 125,000 installations have occurred, with numbers likely to at least double by year-end. Last year, 258,000 homes, small businesses, or buildings were fitted with panels, bringing the UK total to over 2 million. However, previous stop-start government incentive schemes depressed uptake in the last decade; the high of over 203,000 installations in 2011, when feed-in tariffs were in place, was not surpassed until last year. From 2016 to 2021, only about 50,000 installations occurred annually.
International Context and Future Prospects
Other countries have forged ahead: nearly a third of households in Pakistan now use solar systems, mainly DIY installations, and rooftop solar in the Philippines has doubled. Modern panels can generate power even on overcast days, and Griffiths estimates about two-thirds of UK homes could benefit—at least half are "highly suitable" for panels, and a further 17% have east- or west-facing roofs where installations work well. Chris Hewett, chief executive of Solar Energy UK, said: "The UK's rooftop solar market has never been healthier... but we must go further and faster." The government also encourages plug-in solar panels, available in kits for a few hundred pounds from supermarkets, though these are less efficient than rooftop arrays. Miliband stated: "Amid another fossil fuel crisis, the British people are continuing to show record demand... with a new rooftop solar panel installed every two minutes in 2025." The Bank of England declined to comment.
