Solar panels will still offer very good investment returns for domestic properties despite the coming reduction in Feed-in Tariff (FiT) levels, according to the Solar Trade Association (STA).

The STA has devised a returns calculator for use by its members which shows the returns customers who invest in solar photovoltaic (PV) panels can expect.

After the FiT rate drops to 16p/kwh in August this year, a family installing a 4kw system at a cost of £8,000 will see their investment paid back within 10 years, according to the calculator, with returns of 9.2% over the 20-year life of the FiT. The STA believes the system itself is likely to last around 40 years.

STA chief executive officer Paul Barwell said: "Our figures show that solar is a no brainer investment. Compared to the returns you can get these days in banks and many other investments, solar provides a very solid and attractive return. That is particularly the case if you consider energy bills are rising faster than anyone expected. Investors in solar are also helping us to drive an exciting energy revolution, putting power in the hands of everyday people, while saving the planet."

The STA Calculator is based on the government's own projected increases in electricity prices and on established national average yields from solar power. In practice, electricity prices are rising faster than the government is projecting and power yields from solar in some parts of the country are higher.

Analysis of government statistics by the Renewable Energy Association (REA) shows that the average annual increase in electricity bills for the period 2005 to 2011 was 6.6% above inflation. While the STA Calculator is based on conservative assumptions, using this real-world rate of increase in electricity prices means returns on the above example rise from 9.2% to 11.4%, with payback after 9 years.

Barwell added: "Nobody knows what electricity prices will be in future but we do know they have gone up substantially over the past few years. This trend may well continue as the UK becomes more reliant on importing its energy in an increasingly competitive world. Solar gives people the opportunity to take control of their electricity bills and help us move away from damaging fossil-fuel dependence. We believe the smart money is on solar.”