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Photovoltaics: Investment attractiveness for Belgian households

Belgium has seen a clear slowdown in the growth of its photovoltaic (PV) capacity. The total amount of newly installed capacity in 2014, the latest year of data availability, was down more than 90 % compared to 2011 [1]. This collapse of the Belgian PV market has been mainly attributed to the cutbacks in government support over recent years in each of the 3 Belgian regions. As a result, home owners have been cautious, refraining from investing in PV on a large scale in recent years. The question can be raised whether this reluctance is justified. Is PV today really an unattractive investment for households from an economic perspective? Do the current regulatory policies for PV in Flanders, Wallonia and Brussels not offer enough benefits to potential investors? In this article, Sia Partners answers these questions, by studying the case of an average Belgian household and the potential returns they could achieve by investing in a rooftop PV installation today in Flanders, Wallonia and Brussels. Moreover, these results are then compared with a similar investment in 5 other EU countries.

Context & Methodology

Which factors determine the economic attractiveness of a PV installation?

In recent years, the regulatory frameworks for photovoltaics have undergone significant changes, with the amount of support decreasing in all 3 Belgian regions. This has contributed to a loss of confidence of the residential market in the attractiveness of photovoltaics as an economically attractive investment. In 2011, the highest point in the Belgian ‘rush’ to install PV, more than 1000 MW of PV capacity was installed. 3 years later, only 65 MW were installed during the entire year of 2014 [1].  It is widely accepted that PV installations were over subsidized in the past, leading to a huge amount of new PV installations being connected to the grid in 2011 and 2012 and an uncontrollable rise in the costs for grid operators. As a consequence subsidies were cut back and the PV market collapsed. Today, the perception of decreased economic attractiveness of PV still exists, evidenced by the low level of new residential PV installation connections. This article aims to determine the accuracy of this perception, through the modelling of the lifetime revenues and costs of a PV installation for the average household, as illustrated below.

Figure 1: Factors impacting PV profitability

On the revenues side, the first element is the savings on the household electricty bill. This is achieved trough self-consumption of produced electricity. Because a share of a PV installation’s production is consumed instantaneously. It results in a reduced consumption of grid electricity by the PV-owning household.

On top of the reduction of the electricity bill trough self-consumption, some countries’ PV policies also include the possibility of net-metering or net-billing. This is a mechanism that allows households to compensate electricity drawn from the grid with produced PV electricity injected into the grid on their electricity bill. This mechanism exists in Belgium, where the mechanical ‘reversing’ meters allow smart household investors to choose an installation of the right size to minimize their electricity bill. Other European countries, like Italy and the Netherlands, have a net-metering scheme that goes a step further. The higher level of adoption of digital meters in these countries permits easy tracking of the amount of produced PV electricity locally, making it possible to remunerate producers for injected electricity beyond their withdrawals, at a predetermined rate, often the price of the electricity commodity itself.

The second element of PV revenues are direct government subsidies, which can take diverse forms. From direct premiums unrelated to the produced electricity quantity, over green certificates after a target amount of production has been reached, to feed-in tariffs that remunerate household producers on a per kWh basis. In Belgium, direct subsidies are controlled at regional level, and are detailed further below.

On the cost side, there is of course the initial investment cost of the installation. Next, there are the annual maintenance costs and the required replacement of the installation’s inverter halfway through the operational lifetime. Lastly, there exist extra fees imposed specifically on PV owning households, which can put pressure on the investment (the so called prosumer tariffs).

Policy framework for household PV installations

A different set of regulations in each of the 3 Belgian regions

Each of the Belgian regions has its own framework concerning household PV installations. Figure 2 illustrates how they translate into concrete revenues and costs. Since the level of the prosumer tariff in Flanders and the premium in Wallonia depends on the local distribution grid operator, a household in Ghent and Namur were taken as respective reference locations.

Figure 2: Regulatory frameworks for household PV in Belgium

In Flanders, after years of heavy subsidizing, the system of green certificates was abolished in 2015. Also, a ‘prosumer’ (producing consumer) tariff was introduced by the regional regulator VREG for residential PV owners for burdening the grid in two directions, with the amount of the fee dependent on the capacity of their installation. The prosumer tariff is determined based on the maximum capacity of the PV installation inverter. In this study, it is assumed this capacity is identical to that of the PV panels. In practice, the inverter capacity is not always optimally aligned with the total capacity of the PV panels.

In Wallonia, The QUALIWATT mechanism is in place since March 2014 to support residential photovoltaic installations up to 10 kWp. For the first five years after placement, PV owners receive a capacity-based premium. However, the level of the premium maxes out at 3 kWp. It is calculated and updated periodically by CWaPE to ensure the investment is paid back in 8 years [2].

In the Brussels Capital Region, a green certificates scheme for residential photovoltaics power producers still exists. Every 1000 kWh of produced electricity entitles owners to 2,4 green certificates, issued by the regional energy regulator BRUGEL. These green certificates can be sold to energy suppliers or intermediary companies, the current average market price is 81,7 € per certificate [3].

The profitability of PV for the average household

Profitability dependent on choosing an installation of the right size

The average net investment cost of a PV installation is currently around 1900 €/kWp [4]. The applicable VAT tariff is 6% for installation on buildings older than 5 years, and 21% for buildings younger than 5 years. The current generation of PV panels are predicted to have a lifespan of at least 25 years [5]. As detailed above, over its operational lifetime, the PV installation will accrue revenues and impose costs. The balance between them determines the PV investment’s profitability. Figure 3 illustrates the investment profitability for the average household, with a ‘single tariff’ electricity contract, relative to the installed capacity.

Figure 3: NPV as a function of PV installation capacity under both VAT rates

It is immediately clear the large discrepancies in regulatory policy between the regions strongly impact profitability. While the initial investment cost is identical across the regions, the subsidies in Brussels and Wallonia result in a higher profitability for all capacities. However, it also shows potential profits are strongly related to the installed capacity. Choosing a capacity that just covers the household’s annual electric consumption provides the highest returns. Indeed, an average household, consuming 3500 kWh of electricity per year [6], achieves the highest profitability with an installation that has a capacity of around 4 kWp in all 3 regions. As the average annual yield of a kWp of capacity in Belgium is 900 kWh [7], the produced amount of a 4 kWp installation just exceeds the annual consumption.

With this capacity, all produced electricity accrues savings for its owners. Either through self-consumption or through the reversing meter reducing the final household electricity bill. A smaller installation leaves potential savings on the table, because the meter does not reverse sufficiently to cover all the electricity withdrawn from the grid, while a larger installation has a higher investment cost, but produces an amount of electricity that exceeds the amount withdrawn from the grid, allowing no further reduction of the electricity bill. Even the green certificates in Brussels, for all electricity produced are not sufficient to counter this effect. Despite the 3 kWp cap on the premium in Wallonia, a slightly larger installation would still be more profitable for a household with an average electricity consumption of 3500 kWh.

Profitability strongly differs between the regions

Now that the optimal installation size has been determined, a detailed lifetime analysis of the PV installation profitability can be developed. However, the regulatory framework surrounding residential PV installations is not set in stone, evidenced by the many policy changes in the past years. As expected regulatory changes in the future already impact the lifetime profitability today, these should be incorporated. Currently, policy changes in the near future are to be expected in Wallonia and Brussels. In Flanders, no concrete modifications of the regulatory policy for PV have been announced.

In Wallonia, Regulator CWaPE is planning to introduce a prosumer tariff. Concrete modalities are unknown, and CWaPE currently finds itself in the middle of a legal battle over the tariff with consumer interest groups, but the regulator has claimed its desire to introduce a tariff amounting to an annual 200€ cost for the average household PV owner by 2018 [8].

In Brussels, Regulator BRUGEL is planning the abolishment of the electricity bill compensation through net-metering in 2018, which is possible because PV owners in Brussels are required to install a ‘double’ meter which measures the electricity injected into the grid separately from offtakes [9]. Concretely, household PV owners would only be remunerated the commodity price of their produced electricity (instead of the full retail price, which is effectively the case with the current net-metering mechanism). To compensate, 3 green certificates would be awarded per 1000 kWh, instead of 2,4 today [10].

Figure 4 shows the lifetime profitability under both the current regulations, as well as profitability when incorporating the expected changes detailed above. For clarity, only the 21% VAT rate scenario is modelled.

Figure 4: Lifetime profitability of a 4 kWp PV installation

Both under the current regulations and expected regulations, the investment cost is paid back much quicker in Brussels and Wallonia than in Flanders. Considering a discount rate of 2 % the payback period under current regulations is 7 years in Brussels and 8 years in Wallonia, compared to 18 years in Flanders. The expected regulatory changes in Brussels and Wallonia do indeed lower the profitability of the investment, with the payback period slightly increasing. However, an attractive return on investment of over 10 % is still attainable here, considerably more than the 5,3 % in Flanders. Nonetheless, taking into account that a PV installation is a relatively low-risk investment, a return of investment of at least 5 % (or more) remains interesting, especially considering the current economic climate and its low interest rates.

A strong incentive to switch to a single uniform electricity tariff

In the previous sections, we have considered a household with a single, ‘reversing’ electricity meter and an electricity contract with a single uniform tariff for every time of the day. However, there is also the possibility of a double tariff, with a different rate for peak and off-peak consumption of electricity. In this case, households have 2 separate meters, with one working only during daytime hours during the week and the other only at night and in the weekend. Because a PV installation only produces during the day, only electricity offtakes from the grid during this period can be compensated by the reversal of their meter. Offtakes at night cannot be compensated since there is no production by the PV installation. Concretely, this means that all electricity consumed at night, and measured on the off-peak meter, can only be compensated by daytime production by the PV installation during the 2 days in the weekend.

Figure 5: NPV with a day/night meter

Figure 5 compares the double and single tariff, under the 21% VAT rate and including the expected policy changes. Considering the average household consumer 1600 kWh during the day and 1900 kWh at night [6], the loss of net metering compensation on a large part of the nighttime offtakes, make the PV installation considerably less profitable, or even result in a negative return as is the case in Flanders. Changing from the double tariff to the single uniform tariff requires replacing the double meter with a single meter mechanism. With the replacement cost ranging from € 100 to € 400 [11], it is well worth the price for current or prospective owners of a PV installation.

Potential returns depend on the cost of the investment and the future electricity price

Of course, in a free market, the initial cost of the installation can differ for each household depending on the installing company. The assumed cost of 1900€ per kWp is an average, taken as an assumption.  Individual PV Installing firms may quote a significantly different price, depending on many factors (quality, brand, installation slope, market competition,…). A different initial investment cost obviously affects the outcome of the simulation.

Outside of the control of the investor, the growth of the retail electricity price fluctuates. In 2015 alone, several measures were taken that significantly impact the electricity bill of the residential end-consumer in all 3 regions. Compared to a year earlier the average household electricity bill has increased between 10 % (Brussel-Capital Region) and almost 30 % (Flanders) [12]. Indeed, the long-term evolution of the electricity price is very uncertain. In the sections above, an average annual growth of 3% is assumed, but a slower or stronger growth could have a strong effect on the lifetime profitability of the PV system.

Figure 6 shows the impact of deviations from the assumed parameters for both factors described above. For clarity, only the situation incorporating the expected policy changes are modelled. In a worst case scenario a high investment cost is combined with a slow growth of the electricity price, in the best case it is the other way round.

Figure 6: impact on profitability of the investment cost and the electricity price growth rate

The results make it clear that a different installation cost, as well as changes in the electricity price result in a significantly different level of profitability. Especially in Flanders, households run the risk of low returns if they do not contract an installer that offers competitive prices. Lower annual growth of the retail electricity price lowers the potential profits because less savings on the electricity bill are possible. Although, in the short term the electricity price is marked by strong fluctuations, often caused by policy changes, over the long term a price growth rate of a few percentages is probable. Considering the expected general price level inflation, stagnation of the electricity price growth seems unlikely.

Belgium compared to other European countries

How do the different regional policies in Belgium compare to other European markets for household PV investment?

The same assumptions for a standard rooftop PV installation investment can be applied to regulatory frameworks of other European countries. Of course, more southerly located countries on average receive more hours of sun, with a higher intensity. This directly impacts the potential profitability of an investment, as a PV installation with an identical capacity produces more electricity in France, Italy or Spain than in Belgium. Hence, this effect is taken into account. Figure 7 compares the rate of return of an identical investment in Germany, Italy, Spain, France and the Netherlands to that in the Belgian regions.

Figure 7: return on investment in major EU markets

The level of profitability in Brussels-Capital and Wallonia is only matched by Italy, where investors can enjoy a lofty tax credit of 50%, essentially halving the price of the installation, on top of a net-metering mechanism [13]. The profitability in Flanders lies in between that of Germany and France on the one hand and the Netherlands on the other. Germany and France use a Feed-In-Tariff (FIT), which remunerates PV owners for every kWh of electricity they inject into grid [14,15]. Dutch policy combines net-metering with the option to fully reclaim the VAT of the investment [16]. Spain currently has no noteworthy support scheme, with self-consumption savings the only form of returns.

With only the reversing meter mechanism as indirect support, and an additional prosumer fee payable, potential profitability in Flanders is still higher than in Germany and France, both with a direct subsidy in place. Moreover, other countries also allowing net-metering (Italy and The Netherlands) have comparably high profitability. This shows that its impact on household PV profitability shouldn’t be underestimated.

It should be noted that in this study an identical initial investment cost over all countries was assumed. However, in big markets, especially Germany, it is found that the investment cost is often slightly lower than in Belgium, which has a positive impact on profitability.


Huge differences exist today regarding the potential return of an investment in a residential PV installation between Flanders (5,3%), Wallonia (12,6%) and the Brussels-Capital Region (13,4%). The cause of this discrepancy lies in the different regional regulatory frameworks for residential PV. Whereas Brussels and Wallonia continue to actively support household PV investors, Flanders imposes extra cost on them through a ‘prosumer tariff’. Even when incorporating the expected policy changes, the potential investment return in Wallonia (10,5%) and Brussels (11,2%) remains attractive. When comparing with the major PV markets in Europe, profitability in Brussels and Wallonia is comparably high, while Flanders shows a similar return to the neighboring countries. Currently, the perception of a large share of the public is that an investment in a PV installation is not as attractive as it once was because of the cuts in the regions’ subsidy policies over the years. However, this study shows that investing today in a residential PV installation remains an attractive option from a financial point of view. Convincing the public opinion of the maintained attractiveness of PV could provide interesting opportunities for players active in the market.



[1]     Apere (L'Association pour la Promotion des Energies Renouvelables), Observatoire photovoltaïque, http://www.apere.org/observatoire-photovoltaique

[2]     CWaPE, http://www.cwape.be/?dir=6.2.01

[3]     BRUGEL, Quel est le prix d’un certificate vert, http://www.brugel.be/fr/secteur-de-l-energie/questions-electricite-verte...

[4]     CWaPE, Communication CD‐15j09‐CWaPE sur le ‘montant des primes QUALIWATT pour le premier semestre 2016’, October 9 2015, http://www.cwape.be/?dir=6.2.02

[5]     A) The real lifespan of solar panels, Energy Informative, http://energyinformative.org/lifespan-solar-panels/

B) SEIA, PV recycling, http://www.seia.org/policy/environment/pv-recycling

[6]     VREG, Gemiddeld energieverbruik van een gezin, http://www.vreg.be/nl/gemiddeld-energieverbruik-van-een-gezin

[7]     PVGIS PV Estimation Utility, European Commission Joint Research Centre, http://re.jrc.ec.europa.eu/pvgis/

[8]     Renouvelle.be, Quel tarif « réseau » pour les prosumers?, http://www.renouvelle.be/fr/actualite-belgique/quel-tarif-reseau-pour-le...

[9]     BRUGEL, Aanvullende inlichtingen voor de houders van A+/A- meters (alleen in Brussel),http://www.brugel.be/nl/aanvullende-inlichtingen-voor-de-houders-van-a+-...

[10]   BRUGEL, Proposition 20141219-13, relative au coefficient multiplicateur appliqué au photovoltaïque - Analyse des paramètres économiques, December 19 2014, http://www.brugel.be/Files/media/SIGI/54c756a517578.pdf

[11]   Infrax, Kostprijs plaatsen dubbele meter, http://www.infrax.be/nl/Elektriciteit/dag-en-nachttarief/kostprijs

         Eandis, http://www.eandis.be/nl/veelgestelde-vragen/meterstanden#hoe-veel-kost-h...

[12]   CREG, Evolution des prix en Belgique et dans les pays voisins, consulted ‘Tableau de bord 10/2015 and 10/2014’, http://www.creg.be/fr/evolprix.html

[13]   Photovoltaiconorditalia.it, http://www.fotovoltaiconorditalia.it/idee/incentivi-al-fotovoltaico-nel-...

[14]   Fraunhofer ISA, Recent facts about photovoltaics in Germany, October 16 2015, https://www.ise.fraunhofer.de/en/publications/veroeffentlichungen-pdf-da...

[15]   ECOinfos, http://www.les-energies-renouvelables.eu/9702prix-de-revente-de-lelectri...

[16]   Rijksoverheid Nederland, Zonne-energie, https://www.rijksoverheid.nl/onderwerpen/duurzame-energie/inhoud/zonne-e...

[17]   Eurostat, electricity prices for medium sized households (2015), http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&language=en&p...

[18]   CREG, Tableau de bord mensuel, novembre 2015, http://www.creg.info/Tarifs/tableaudebord.pdf


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