When Will Solar Power Become Cheaper Than The Grid?

A solar-powered home is a beautiful idea. Our households need fuel, and the clean, bright beam of renewable energy streaming from the sun is just asking to be harnessed. Enter: the solar panel. Put a bunch of panels on your roof, and they’ll really make “hay” (electricity) while the sun shines. Over 840,000 homes in the UK now have solar power, and that figure is set to keep on rising.

What’s more, it looks like the golden era of solar power is just on the horizon. While the disappearance of the Feed-in Tariff has certainly made solar power more expensive than buying electricity from the grid, UK electricity bills are constantly on the rise, and the turning point is not far away.

solar panel farm

Our findings

So we put our financial hats on and did some good old-fashioned number-crunching. Using a lot of information (see our methodology below), we put electricity bills head-to-head with solar costs over the next 20+ years. We compared the cumulative cost of a solar-plus-storage system with the cumulative cost of buying your electricity from the grid.

This study rides on the assumption that the UK’s energy bills will keep on rising. They shot up by an average of 3.73% per year between 2004 and 2019, and there’s no reason why they won’t keep climbing. What’s more, Brexit is soon to seriously weaken the pound, and the UK currently imports about 36% of its energy.

Check out our graph below to see what we found out (the green line is the exciting bit) - or you can view it much bigger here.

That’s right: if you buy solar panels and a solar battery now, you will actually spend less on powering your home over the next 15 years than if you simply stuck with the grid. We were hardly surprised to see this, given recent reports of how renewable energy will become cost-competitive with fossil fuels in just a few years.

The cumulative cost of a solar-plus-storage system almost falls below electricity bills in 2031, but a solar battery replacement (required every decade or so, costing approximately £4,250) sets the big moment back a few years. After 2035, you’re laughing.

Here’s a focus on costs and savings in 2019 and 2035:

Electricity bills (cumulative)
Solar panel system cost (cumulative)
Solar savings in that year
Solar savings (cumulative)
Energy bill in that year (with a solar PV system)

Between 2019 and 2040, we expect the cost of electricity bills as a percentage of disposable median household income to rise from 2.26% to 3.87%. If you already feel like you’re paying an arm and a leg for energy, those arms and legs are about to get even bigger.

Plus, we haven’t even factored in the earnings that households will make from the Smart Export Guarantee (SEG), as we won’t know the market rate until it launches in January 2020. This additional income for solar-powered homes will make solar panels an even more favourable investment.

So, in other words, in less than 15 years, the switch to solar will become a bit of a no-brainer. Check out our lovely infographic for a more colourful idea of what we're saying. If you'd like to see the infographic in full size, just click here


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How we worked it out

Our steps were as follows:

1) We calculated the average annual cost of electricity bills in the UK between 2004 and 2019, using three different sources (Ofgem, OVOEnergy, and Statista). We assumed an average household consumption of 3,800kWh, based on estimates by the BEIS.

2) 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.

3) Then we applied the solar stuff. We assumed a cost of approximately £6,000 for a 3.8kWh solar PV system (based on data from Which?), along with a solar battery costing £4,250 (based on the average price of the six most popular lithium-ion batteries). 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).

4) Given that an average south-facing 3.5kWh solar PV system can produce roughly 3,000kWh of electricity each year in the UK (source: the CAT), that means that a typical UK household can rely on a solar-plus-storage system for 79% of its annual electricity consumption. Once you’ve purchased the system, you will (in theory) only need to buy 11% of your electricity from the grid each year.

Switching to solar

So there you have it. The future of solar power is very bright indeed. It might be a hefty investment now, but in the long term a solar-plus-storage system will be cleaner and cheaper.

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