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A techno-economic analysis is undertaken to assess hybrid PV/solar-thermal (PVT) systems for distributed electricity and hot-water provision in a typical house in London, UK. In earlier work (Herrando et al., 2014), a system model based on a PVT collector with water as the cooling medium (PVT/w) was used to estimate average year-long system performance. The results showed that for low solar irradiance levels and low ambient temperatures, such as those associated with the UK climate, a higher coverage of total household energy demands and higher CO 2 emission savings can be achieved by the complete coverage of the solar collector with PV and a relatively low collector cooling flow-rate. Such a PVT/w system demonstrated an annual electricity generation of 2.3 MW h, or a 51% coverage of the household’s electrical demand (compared to an equivalent PV-only value of 49%), plus a significant annual water heating potential of to 1.0 MW h, or a 36% coverage of the hot-water demand. In addition, this system allowed for a reduction in CO 2 emissions amounting to 16.0 tonnes over a life-time of 20 years due to the reduction in electrical power drawn from the grid and gas taken from the mains for water heating, and a 14-tonne corresponding displacement of primary fossil-fuel consumption. Both the emissions and fossil-fuel consumption reductions are significantly larger (by 36% and 18%, respectively) than those achieved by an equivalent PV-only system with the same peak rating/installed capacity. The present paper proceeds further, by considering the economic aspects of PVT technology, based on which invaluable policy-related conclusions can be drawn concerning the incentives that would need to be in place to accelerate the widespread uptake of such systems. It is found that, with an electricity-only Feed-In Tariff (FIT) support rate at 43.3 p/kW h over 20 years, the system cost estimates of optimised PVT/w systems have an 11.2-year discounted payback period (PV-only: 6.8 years). The role and impact of heat-based incentives is also studied. The implementation of a domestic Renewable Heat Incentive (RHI) at a rate of 8.5 p/kW h in quarterly payments leads to a payback reduction of about 1 year. If this incentive is given as a one-off voucher at the beginning of the system’s lifetime, the payback is reduced by about 2 years. With a RHI rate of 20 p/kW h (about half of the FIT rate) PVT technology would have approximately the same payback as PV. It is concluded that, if primary energy (currently dominated by fossil fuels) and CO 2 emission minimisation are important goals of national energy policy, PVT systems offer a significantly improved proposition over equivalent PV-only systems, but at an elevated cost. This is in need of careful reflection when developing relevant policy and considering technology incentivation. Currently, although heat outweighs electricity consumption by a factor of about 4 (by energy unit) in the UK domestic sector, the support landscape has strongly favoured electrical microgeneration, being inclined in favour of PV technology, which has been experiencing a well-documented exponential growth over recent decades. [ABSTRACT FROM AUTHOR]