This guide aims to answer the question of how much do solar panels cost. And, crucially, if that is worth it for you. Does the outlay for all the new kit mean you’re going to be making savings in the longer run? And when will you get your money back?
While everyone’s circumstances are different, this guide aims to give clear examples that show how your specific situation could benefit – or not – from investing in solar panels for your home.
To be clear, solar is a more environmentally friendly choice. And in the future, with electric cars putting more strain on the grid, their value will likely continue to rise. But they will cost you up front, so is this an investment worth making? Or simply too much hassle for not enough return?
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If you’re coming to this guide now, having considered solar panels before, know that they’re currently priced lower than they have been in the past. In fact since they took off at scale back in 2010 the price has dropped by a massive 70 per cent. We’re referring to the upfront cost of the panels and their installation.
There were previously government grants which meant companies offered solar panels for free. This has since largely ended with just a few remaining. The idea was that they installed and supplied your panels and you got your electricity bills paid for. They took the profits from any excess electricity sold back to the grid – usually with a 20-year contract.
The difference now, with government incentives like the Smart Export Guarantee (SEG), is that you can cover the cost up front. That means you stand to keep any profits from selling your energy produced back to the grid. This is now more possible than ever since, as mentioned, the prices of panels are at a low. And you could stand to make money in the future.
The panels themselves can be bought directly. That means you have the option to install yourself, although this isn’t recommended. You could also get a professional to carry out the works using the panels you’ve bought.
To take a premium panel, let’s look at the LG NeON R. This panel has an impressive 25 year warranty, generates nearly 4% more electricity than the competition outputting up to 440W thanks to a 20% efficiency. The other factor to check is what that efficiency is after the 25 year guarantee, above 85% being what you’d want at least. In the case of the LG that is an impressive 90%.
Most companies that install solar panels don’t advertise their prices in a breakdown. You simply get a finalised price that includes the panels and installation. This is why it’s important to check which panels they are going to supply so you know you’re getting what you want. Ideally you need a 25 year warranty and at least 20% power efficiency.
Based on the above LG solar panels, priced for 10, the average quote for these or similar installed is £5,520. That means you’re looking at an installation charge of £2,340. But there will be other components, wiring and installation materials in that price so the labour cost is actually going to be under the £2,000 mark.
The location you have these installed likely won’t change the price too much but based on the amount of sun you get, it can affect how much you stand to save in bills and make in selling back electricity to the grid. This is so varied it’s best to go for a local free quote to find out the potential in the area you are.
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The (Smart Export Guarantee) SEG tariff, which is government subsidised, means you can make a decent amount of money from selling your energy back to the grid. Factor in the money you’re saving on your electricity bills and this can add up to an amount which means paying off the cost of panel installation quickly.
The price a supplier pays for your power varies across companies. Most will require you to have a battery system installed, so that could mean factoring in a greater cost up front. The best option, at time of publishing, is Social Energy which offers 20p per kilowatt hour (capped at 1,000kWh). Then it’s Tesla at 12p/kWh and this goes all the way down to 1.5p from EDF Energy, but lots of companies offer around the 5p mark.
According to The Energy Saving Trust, the average household could make between £65 and £125 per year based on a low rate of just 3.99p per kWh.
Another factor to consider is the value you can add to your property. Josh Jackman from The Eco Experts told Ideal Home: “Solar panels will typically make selling your home easier, not harder. The latest research shows that homes with solar panels typically sell for 4.1% more than those without – which currently means you pocket an extra £11,000.”
The main factor that affects what you’re paid is how much energy you produce. Secondary to that is what you get paid for it. But of course how much energy you produce to sell isn’t the same as the energy produced by your solar panels. You have to factor in how much you use too.
What you use is important as it can determine what you have left to sell back. So by using most of your power during the day, when there is solar, you stand to make more than at night – depending on if you have battery storage. As otherwise that power is lost and you’ll be charged for what you need from the grid during those dark hours when you’re not generating power.
As mentioned above the company that you sell to is also important as the rates of payment vary wildly from as low as 1.5p/kWh to 20p/kWh.
Of course the initial outlay affects all this too. Spend more and get the maximum number of solar panels and you’re going to produce a lot more power than you need, meaning you have more to sell. But with the average charge for electricity greater than the amount paid to buy it back, you’re still looking at a while to pay back the initial solar panel cost.
It can take years to break even on the cost of your solar panels and their installation cost. If we take a typical 3.5kWh system, which will cost you about £4,800 to get fully installed and ready to go, it can take between nine and 21 years to pay it back.
This depends on a number of factors including where you live, how much electricity produced and when you’re using it. Then, of course, there is the amount you’re getting paid for the energy you sell back under the SEG.
Both these examples use favourable examples with the biggest bill savings and the most SEG payments.
The government once offered various schemes which allowed you to get solar panels either part funded or totally paid for. Since the prices of panels have dropped so much the newest scheme, SEG, gives money back for selling electricity but won’t cover the up front costs of solar panels.
However, until March 2022 there is still a chance to use the Green Home Grant. This offers up to two-thirds of the cost (capped at £5,000) of installing your solar panels on your home. For lowest income households that amount can be as high as £10,000 and in some cases it will cover the entire cost. But with this being phased out it’s not something to aim at if you’re reading this now.
The only other option is to take out a private loan to pay for the upfront costs. Since the solar panels will save you money on electricity bills, and can make you money through the SEG offering, you can pay off that loan over the years. But do keep in mind this is a longer term money-making solution so any loan with a rate of interest can mean it will take you even longer to cover your costs.
Another option is to install yourself to save money on the upfront cost. But Josh Jackman of The Eco Experts doesn’t recommend this. ‘You’ll end up paying around £3,000 more on the basic material if you do it yourself, according to our calculations,’ he says. ‘And you won’t get any Smart Export Guarantee payments, assuming you’re not personally a Microgeneration Certification Scheme-accredited installer.’
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You are helping the environment by producing electricity from sustainable sources, which means you’re helping long-term, globally.
You won’t have to pay a penny on your electric bills anymore, so immediately factor that into prices. Given energy price hikes, this could become even more critical in the weeks and months to come.
In the short term with the SEG you can start making money with your excess electricity generated by your solar panels. But as electricity powers more and the prices rise – and with electric cars set to expand rapidly – you could make even more money in the near future.
The upfront costs are still not small and the time it takes to pay them back, even when offsetting bills and making money selling power back, is near to a decade at least.
There’s no escaping the fact that you need to clean solar panels and carry out some maintenance. You may find that you have more costs added on if anything goes wrong or if you need to pay a professional to look at your setup.
If you use very little power anyway, then the cost of the panels and installation may not be worth it for the amount you pay on your bills.