✔ Solar panel costs have tumbled by around 70% in the past decade
✔ A solar PV system could save you £220 per year
✔ You can significantly reduce your carbon footprint by going green
Green energy is on the rise.
More and more people and companies are implementing green initiatives in an effort to save the planet. Maybe you’ve switched to an electric car, or you’ve installed a greywater tank.
But there’s always another step to be taken in the quest to be as eco-friendly as possible, and maybe your next (or first) step is the installation of solar panels.
Making this step can be hard, however, when the information behind solar panels is conflicting and confusing. Your green intentions may be overcome by your financial concerns.
There can be all sorts of information about tariffs, prices, and different models. This overwhelming influx of info can leave you asking ‘are solar panels worth it?’
We’re here to clear the air regarding solar panels, and tell you whether or not solar panels are cost effective.
We've conducted a comprehensive, in-depth study to find out when you'll break even on your new solar panels – at which point you can start making pure profit.
We discovered that the average home in the UK will need to wait 14.2 years before recouping their initial investment, which typically leaves at least 11 years (and often more) to generate thousands of pounds.
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When will you break even on your solar panels?
Solar panels are a big investment, and the question on every buyer’s mind is simple: “When will I break even?”
After the Feed-in Tariff concluded in April 2019, the answer didn’t make for pretty reading – but thankfully, things have changed.
It looks like the golden era of solar power is just on the horizon. We put our financial hats on, and calculated when you’re most likely to break even on your solar panels.
We’ve calculated the total cost of a solar PV system, factored in the money you’ll save on electricity from the National Grid, and added your SEG savings.
The result? Install solar panels today, and you’ll break even in 14.2 years, on average.
Since the typical solar panel warranty lasts 25 years, that should leave you with at least 11 years to save even more money with your panels – and many solar arrays last well beyond the 25-year mark.
Overall, you’ll typically end up making a profit of £2,200 on a solar array for a one or two-bedroom house, £3,700 if your home has three bedrooms, and £5,100 on a four-bedroom place.
The graph below shows this clearly, as your expenses stay stable and your annual savings climb, allowing you to break even by the mid-2030s.
Another way to look at it is this: if you invest £4,800 in a 3.5kWp solar PV system today, you’ll make £8,500 on combined energy bill savings and SEG income over the next 25 years.
This rate of return is true whatever the size of your home, so gaze upon this representation of a three-bedroom house’s break-even point and enjoy the prospect of saving money and the planet.
How we worked it out
1. From our research, we found that the average solar panel has a capability of 350kW.
2. The average 3.5kWp system costs around £4,800, according to the Energy Saving Trust, so it follows that one 350kW panel costs £480 (inclusive of installation costs).
3. We also discovered that the average solar panel is able to produce 85.25% of its potential output, meaning that a 3.5kWp system can provide you with just under 3,000kWh per year.
4. The average household won’t use all of that 3,000kWh, however, as most people don’t stay home all day. When the government used to offer an export tariff, it assumed you export 50% of the electricity you generate, so we used that figure.
That means you’ll use half of the solar energy you generate – 1,500kWh – and the other 1,500kWh will earn you money through the Smart Export Guarantee scheme.
5. This will save you a considerable amount of money on energy bills, but exactly how much depends largely on the size of your home.
According to OVO Energy, the average house with one or two bedrooms uses 1,800kWh per year, a home with three bedrooms uses 2,900kWh, and a house with four bedrooms or more uses 4,300kWh.
6. We multiplied each of these figures by the average price of electricity in the UK, which is 17.2p per kWh, according to NimbleFins, to find out how much each household would pay in electricity bills every year, and how much they’d save by using solar energy.
The average three-bedroom house, for instance, would typically pay £498.80 per year for its 2,900kWh – but with a 3.5kW solar array producing 1,492kWh of energy the household uses, the occupants would save £256.60 per year.
7. We assumed that households would choose the highest Smart Export Guarantee rate currently on the market that doesn’t require you to switch suppliers.
We then multiplied that rate of 5.5p per kWh, from Octopus, by the electricity each home sends back to the grid. The average three-bedroom house, for instance, makes £82 per year from exporting 1,492kWh – half of its solar energy.
8. We didn’t include any maintenance costs in our calculations. If you’re capable of cleaning your solar panels once per year, that makes it free, and the main expense – replacing your solar inverter – is falling all the time.
Inverters’ prices should continue to fall in response to the continual decline of home solar panel prices – which have dropped by 50% since 2011, according to the government – plus the cost of electricity will go down as the grid relies more on cheap renewable sources.
I know people with solar panels who say it's a great investment
You may well have friends, family, or neighbours who have solar panels and are ecstatic with their purchase. This is likely because their solar panels were installed with the Feed-in Tariff in mind.
This tariff allowed people with alternative power sources, like wind turbines or, in our case, solar panels, to sell any unused energy generated by these sources back to the government, tax-free.
This meant that, as well as saving money on their energy bills, solar panel owners would be making money off of their excess energy, meaning the solar panels would literally be paying for themselves.
The Smart Export Guarantee
So this feed-in tariff sounds great! But why are we referring to it in past tense? Well, as past tense would imply, this tariff is history; it unfortunately ended on March 31st 2019.
If you have installed solar panels under this tariff before March 31st 2019, there is no need to worry – you are still covered by the tariff until your 20-year contract expires.
The exact reasons it ended were never officially released, but the most common explanation is that the government wanted to redirect this money towards more large-scale commercial projects (that would have a bigger, positive impact on the environment, ostensibly).
While it’s a shame that the tariff was ended, solar panels have become more affordable than ever before, which means the subsidization isn’t as necessary as it was when the tariff was implemented.
Prices for solar panels have dropped around 70% since 2010, which is a faster drop in price than most emerging technologies.
Don’t worry though, the Smart Export Guarantee (SEG) launched on 1st January 2020. The scheme requires all large energy providers in the UK (i.e. with at least 150,000 customers) to pay households for the renewable electricity they send to the National Grid.
However, small energy suppliers are choosing to get involved too, so there's a lot of healthy competition.
There's a handful of energy providers currently offering at least 5.5p for every kWh of renewable electricity that a household exports to the grid, which is slightly more than the government's Export Tariff rate (5.38p/kWh).
To get the full lowdown, check out our detailed guide to the SEG.
Or, have a read of Solar Panel Statistics.
What are the benefits now?
Along with SEG payments, there are several other big benefits to installing solar panels today.
Clean, green energy machine
Unlike petrol, coal, or gas, the energy that solar panels produce is entirely clean. Installing a solar panel system can stop up to 1.6 tonnes of carbon from entering the atmosphere every year.
The industry is also futureproof, as evidenced by its resilience during the coronavirus crisis.
But you came to this article looking to see if they were a good investment, so let's get onto the money side of things.
Shrinking energy bills
Solar panels will still save you money on your energy bills. Based on estimates from Energy Saving Trust, a typical 4 kWp solar PV system will save you between £85 and £220 every year. For more information, Energy Saving Trust has a detailed table on how much solar panels can save you depending on your general location in the UK. As you can see, a large percentage of your energy bills can be saved by installing solar panels, which quickly adds up.
By minimizing the drain of energy bills, solar panels seriously free up your financials.
Don't even think about it
Nowadays there are so many small gaps for our money to trickle out of our pockets. Taxes, mortgage, and all kinds of monthly bills are all constant drains on our bank accounts. Solar panels, however, are not one of these drains.
Once a solar panel system is installed, all it will do from then on is save you money. Solar panels last for decades, no matter which type, so the odds of having to replace one are slim.
They are famously resilient, require almost no maintenance, and on the slim chance that something does go wrong, most solar panel warranties last 25 years, meaning no money will have to come from you to repair it.
The fact that solar panels are a one-and-done purchase and require no further cost or attention is a huge boon. Take a look at our guide to the best solar panels on the market today.
Cheaper than ever
Like we mentioned above, solar panels are cheaper today than they ever have been before.
This means that the money spent is much more easily outweighed by the money gained through savings on energy bills, and the need for government subsidy is far smaller than before.
While the lack of Feed-in Tariff is an unfortunate side effect of the low price, there is no arguing that such an enormous drop in price can only be good for someone looking to buy solar panels right now.
A typical 3-4kWp solar panel system can run you around £6,000, but you can see more specifics in our article about the typical cost of solar panels.
Do solar panels increase your house's value?
With energy bills on the rise and the climate emergency in full swing, it’s not surprising that properties with solar panels are more desirable than those without.
To a prospective house buyer, solar panels basically mean “low energy bills” and “low carbon footprint”.
What’s more, the costs of maintaining solar panels are extremely low, as there are no moving parts at risk of breaking.
Every property comes with an Energy Performance Certificate (EPC), with grades ranging from A (the best) to G (the worst). A solar PV system can boost a property’s EPC by up to two grades, which can then have a positive impact on price.
A study conducted by Zillow in April 2019 found that US homes with solar panels sell for 4.1% more than homes without, and this enthusiasm for solar is certainly mirrored in the UK.
As the world’s awareness of global warming continues to increase, the effect of solar panels on property prices is expected to grow and grow.
Of course, there are people who find solar panels to be an eyesore, but panels are looking ever sleeker (particularly monocrystalline panels), and the climate-conscious younger generations tend to think aesthetics are a lower priority than our dear, declining Earth.
Take a look at: How to pigeon-proof your solar panels
Selling a house with solar panels
If you’re looking to sell your solar-powered home, here are some tips for how to go about it.
• Find an MCS-registered company to install your solar panels. This will guarantee that you qualify for the FiT scheme and that your panels have a secure warranty.
• Be sure to provide evidence of the benefits of solar panels to prospective buyers. For example, you can show them your energy bills before and after installing the solar panels.
• Give your solar panels a thorough clean before showing them to prospective buyers. The shinier the better!
• Find an estate agent who understands and appreciates the value of solar PV. Some have not yet realised the full potential value that solar panels can bring to a property.
Do you really save money with solar panels?
For most people, solar panels are a significant investment, but after the initial cost, all they do is save you money and make you money.
They’re also cheaper today than they ever have been before, because of a 70% drop in price since 2010. This, combined with their enormous environmental benefits, makes it worth it to get solar panels.
To find out how much it would cost you to install solar panels, fill in our quick form and you’ll receive free solar panel quotes from local, professional installers.