The cost of solar panels has been coming down for years – great news for homeowners who are looking for permanent reductions in their energy bills and for those keen to do their bit for the environment.
Solar panel systems for your home now start from as little as £1,500. Higher-end systems that produce the most electricity can be installed for £8,000. There have been big price drops in recent years.
In this article, we’ll be looking at what you need to spend to get solar panels into your home and the money you can save every year for up to 25 years by making this investment.
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Solar panel for home
Solar panels can be installed on either domestic or commercial premises. In fact, because the pay-out is often so high when you sell the electricity you’ve generated back to the National Grid, hundreds of farmers have turned fields previously used for livestock and for crops into massive solar energy farms because they get more money that way.
Solar panel installations for your home are on a much smaller scale. These more modest installations will provide you with real financial benefits over the next 25 years though. You can earn up to £7,250 in payments from the Government from its Feed-In Tariff system and save up to 50% on your electricity bills from your solar panels.
Solar panels cost
Domestic solar panel installations vary from between £1,500 to £8,000. A good rule of thumb is that each panel will:
- cost you between £400 and £500,
- take up around four square metres on your roof, and
- generate about 425kWh of electricity every year.
The more solar panels you install, the greater the cost. Don’t forget though that those extra panels will create extra electricity which you won’t need to buy from your supplier and that extra electricity will trigger Feed-In Tariff payments from the government (which are tax-free).
Most homes have either 12 or 16 solar panels fitted meaning that the cost of a system will be between £5,000 and £8,000. Most professional installers recommend that you install a 3kWh solar panel system (that’s 12 panels) for homes where three or more people live.
Earlier we mentioned the drop in price of solar panels. That’s because the businesses which manufacture solar panels have found ever more efficient ways of producing them. Also, because the threat of global warming is worrying people in lots of countries, governments in many nations around the world are subsidising both the manufacture of solar panels and their installation onto the rooves of home and business premises.
At the start of this decade, a 3kWh solar power system would have cost £12,500 – now you’ll pay in the region of £5,000 to £6,000 for the same system with better technology.
The price of solar panels is likely to continue its drop which leaves many homeowners who want the benefit of solar panels believing it might be better to hold off a few years to enjoy even greater savings.
Beware. That’s probably a false economy. Why?
Again, at the start of the decade, to help cover homeowners’ investment in solar panels, the Feed-In Tariff (that’s the money you get when you sell electricity to the National Grid) was a lot higher than it is now. As prices fell, so did the value of the Feed-In Tariff.
The problem is that the Feed-In Tariff has been falling at a faster rate than the price of solar panels. This means that people who left it a few years before going ahead with their installation didn’t make as much money from solar panels as people who had their systems installed in the early 2010s.
Money has been tight for the Government ever since the financial crash of 2008. Most leading solar panel industry experts believe that the Feed-In Tariff rates will continue to fall at a faster rate than the price of the solar panels themselves before eventually being abolished.
So, if you don’t move now, you will lose out.
Household Quotes tip – worried that you’d be affected by a fall in the Feed-In Tariff rate in the future even if you got your solar panels now? Don’t. The Government will lock in the rate they pay you for the first twenty years following your solar panel installation.
Solar panel installation costs
Solar panel installation costs are normally part of the quote you receive from your supplier.
Remember, to make sure you qualify for the Feed-In Tariff, you need to make sure that both your installer and their installation are registered with the Microgeneration Certification Scheme (MCS).
You’ll be given your solar panel installer’s MCS certificate upon completion of the work. With this certificate, you can apply for and benefit from the Government’s financial incentive schemes including the Feed-In Tariff and the Renewable Heat Incentive.
Solar energy UK – how you make your money
There are three ways you make money with your solar panel installation – the Feed-In Tariff, the Renewable Heat Incentive, and lower energy bills.
Let’s look at each one in detail.
Your solar panel installation, subject to your MCS certificate, allows you to make money every year for 20 years from the two parts of Feed-In Tariff scheme.
Your energy provider (the company which sends you your electricity bills) pays you a fixed amount of money for every kilowatt on electricity produced by your solar panel system. You get these payments as soon as your system is registered, you don’t pay any tax on them, and the Government will continue to pay you for 20 years after installation. This is the Generation Tariff.
You also receive money, again from your energy provider, for every kilowatt your solar panel system produces which you don’t use. This unused electricity is the loaded on to the electricity network and you’re paid for it. This is called the Export Tariff.
Many utility companies experience difficulties in knowing exactly how much energy a solar panel system feeds back onto the Grid but the most commonly-used industry estimate is 50%.
This will all become a lot clearer to everyone once smart meters have been more widely installed. Smart meters have inbuilt tracking to accurately tell how much electricity has been fed back to the Grid making Export Tariff payments much more accurate.
Again, you start to receive payments on this scheme once your system is registered, these payments do not attract tax (nor contribute towards your personal tax-free allowance every year), and you’ll receive money from the Government for 20 years after installation.
The current rates for the generation tariff and export tariff are:
| Time period | Date range | Generation Tariff | Export Tariff |
| Q1 | 1st Jan – 31st Mar 2018 | 3.93p per kWh | 5.03p per kWh |
Please note that these rates apply to homes with an EPC rating of D or above. Lower rates apply to homes with E, F, and G ratings.
You can also receive payments under the Domestic Renewable Heat Incentive Scheme. Solar panels, ground source heat pumps, air source heat pumps, and biomass generators all qualify.
You can join the scheme from your solar panel system’s commissioning date – that’s the date on the MCS certificate that your solar panel installer signed once he or she had tested this system straight after installation to see that it was working properly.
Once you have been approved to join this scheme, you have to stick by the rules it sets out for seven years, making an annual declaration of your compliance. Under the Domestic Renewable Heat Incentive Scheme, you can receive an additional 20.06p per kWh from your solar panel system.
Finally, you make money from a solar panel installation because your home is now a producer of electricity as well as a consumer. The electricity produced by your solar panel no longer has to be bought from your energy supplier. Depending on the size of your system, that could be a 50% saving you’ll make for 25 years on every electricity bill you receive.
How much can you actually earn every year with a solar panel installation?
The figures stack up well, even leaving aside the Domestic Renewable Heat Incentive Scheme.
Let’s consider the average UK installation – a 3kW solar panel system costing around £5,000 in a home whose annual electricity bill is around £600.
Each year, you’ll earn about 2.1% of the £5,000 back from the generation tariff, 1.4% back from the export tariff, and around 1.5% back from electricity bill savings. So, every year, you’ll earn about £250 or 5% of your purchase price back.
Let’s spread that over 25 years (20 years of Feed-In Tariff savings and 25 years of electricity bill savings). That’s 25 years of £250 which totals £5,500. Over the 25 years, you’re £500 up.
Your system is built to last too – you can expect 25-30 years of life from your solar panels. They’ll still continue to work after that point but as the panels themselves wear out and become less efficient, the savings you’ll make each year on your electricity bills will go down.
We’ve all seen the way that electricity bills have been rising in the last five or so years. As oil and gas become harder to find, more expensive large-scale renewable energy projects will replace them. That’s great for the environment but it means that energy experts expect electricity bills to go on rising faster than the rate of inflation for years to come.
There are other significant financial benefits to be had too. A study by the Lawrence Berkeley National Laboratory found that a third of homeowners would be prepared to pay more for a house with solar panels than for one without. Going green does have financial benefits after all.
Cheapest solar panels
How can you get cheaper solar panels? Is it possible? Over the years, governments and private sector companies have worked on ways to make getting domestic solar panel systems more affordable for homeowners.
The Government launched the Green Deal a decade ago with the specific intention of incentivising homeowners to make their residences more energy-efficient. You would take out a loan to pay for the installation of energy-efficient systems like solar panels and then pay it back over time with the money you’d be saving on your energy bills. Unfortunately, the scheme was abolished three years ago but Westminster insiders are indicating that a newer version of it will be launched later this year.
Earlier in this piece, we mentioned how the Feed-In Tariff has dropped in value as the cost of solar panels became cheaper. A few years ago, companies offered homeowners money to rent their rooves to install their solar panel systems. It worked like this – the company would get the money from the Feed-In Tariff and you would benefit from lower energy bills. It’s now difficult to find a company who does this because the Feed-In Tariff is now at levels which make this method of installation unprofitable for the companies concerned.
Some companies offer a scheme called Solar Buyback. This is designed for homeowners with solar systems already installed on their rooves. For a lump sum, they would buy the rights to receive the Feed-In Tariff payments from you for the next 20 years.
There are also firms who offer you the option to pay for your solar panel system on finance. The company pays for the installation and you pay them back over five or so years with a fixed monthly payment.
Solar energy UK – are there any other costs?
Solar panel systems are designed to be low maintenance. It’s just as well given that they are fixed to homeowners’ rooves. No solar panel company owner wants to wake up to the news that one of their customers has seriously injured themselves by falling from a great height while trying to maintain their system.
There are companies who offer to maintain your solar panel system for a fixed fee every year – normally one or two hundred pounds.
If your solar panel system breaks – a very rare occurrence – you will be covered by your manufacturer’s warranty.
Solar panel systems – is now the right time for you?
Solar panel systems are great for the environment and self-financing.
Make sure you engage with a MCS-certified professional when planning the right system for your property.