✔ 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.
If you’d like to start exploring your options and receive free quotes from professional solar panel installers, please pop your details in here and our suppliers will get back to you with free quotes.
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.
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 cross-referenced the cumulative cost of a 3.5kW solar PV system with cumulative energy bill savings, plus SEG earnings.
What does this tell us? Install solar panels today, and you’ll break even by 2037.
This graph should paint a clearer picture. You can see the cumulative cost of a solar PV system gradually increase due to annual professional cleaning fees, along with the purchase of a new inverter each decade.
However, DIY cleaning and a sturdy inverter would reduce the cumulative cost, and bring the break-even point even closer.
For example, if you don’t spend any money on professional cleaning, and you get your hands on a premium string inverter with at least a 12-year warranty, you’ll break even before 2033.
Another way to look at it is this: if you invest around £6,000 in a 3.5kW solar PV system today, you’ll make almost £12,000 on combined energy bill savings + SEG income over the next 20 years.
For all the details, check out our methodology below.
How we worked it out
1) We assumed a cost of approximately £6,000 for a 3.5kW solar PV system (based on data from Which?). On top of that, there’s the average annual cost of keeping your solar panels clean (£100), and the cost of replacing your inverter every decade (£1,000, according to the CAT).
2) A south-facing 3.5kWh solar PV system can produce roughly 3,000kWh of electricity each year in the UK (source: the CAT). In other words, it can produce 85% of its potential output.
3) But the average household isn’t going to use all 3,000kWh, as everyone is likely to be out during the day. For its Export Tariff, the UK Government assumed that each household used around 50% of its solar-generated electricity. Based on this assumption, a house with a 3.5kW solar PV system uses about 1,500kWh each year (and exports the other 1,500kWh to the grid).
4) So how much would this save a house on energy bills? Well, the average UK household consumes around 3,800kWh of electricity each year (according to the BEIS), so 1,500kWh would cover 39.5% of its annual electricity bill. Once you’ve purchased the 3.5kW system, you will (in theory) need to buy only 60.5% of your electricity from the grid each year.
5) We then needed to work out what the average household actually spends on grid electricity each year. Using three different sources (Ofgem, OVOEnergy, and Statista), we calculated the average annual cost of electricity bills in the UK between 2004 and 2019.
6) This enabled us to work out the Compound Annual Growth Rate (CAGR) of UK electricity bills, which is 3.73%. Combining this with median household disposable income, we created a 20-year forecast for UK electricity bill costs.
7) What about the SEG? There are currently 14 energy suppliers in the UK paying out an export tariff, with an average rate of 3.82p per kWh (ranging from 1.5p to 5.6p). A household with a 3.5kW solar PV system would send around 1,500kWh back to the National Grid, so 1,500 x 3.82p is £57.30 per year.
8) Finally, we added the annual SEG earnings to the annual energy bill savings to create the total annual income from a 3.5kW solar PV system, and cross-referenced this with the system’s cumulative cost.
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.