Marcel | Edited by Steve N
Updated July 2016
Solar panels can mean big bucks. Photovoltaic panels generate electricity from the sun, and not only do they cut down on your energy bills, you can get paid for generating energy too.
However the Government slashed payouts in February 2016, which means for many people, the sums are much less likely to add up. This guide takes you through whether solar panels are right for you and how much you can earn.
In this guide...
We've made every effort to ensure this guide's accuracy, yet it doesn't constitute legal advice tailored to your individual circumstances. If you act on it, you do so at your own risk.
Solar panel need-to-knows
"Solar power? Hang on, we don't live in California!" True, but it's all about daylight, not sunshine. Panels can still generate some electricity on gloomy days, vital when the weather's as dull as watching paint dry.
Before you stick them on your home, understand these key need-to-knows:
There are two types of solar panel
The type we're talking about is photovoltaic solar panels – also known as solar PV – which catch the sun's energy and convert it into electricity that can be used to power household goods and lighting. The other type is solar thermal, which allows you to heat water and can cut down heating bills.
This guide shines a light on solar PV, as that's where you can earn money through generating your own electricity through the 'feed-in tariff', as well as save on your electricity bills. According to the Department for Business, Energy & Industrial Strategy (formerly the DECC), over half a million British homes have panels installed.
To maximise what your panels can make, you usually need a predominantly south-facing roof. If your roof faces south-west or west you'll still get some benefit, but it may be less effective and you might not get the maximum savings.
While some early or late shading from other buildings or trees is okay, your roof should be unshaded between 10am and 4pm.
An Energy Performance Certificate (EPC) rates a building on its energy efficiency, from A (highly efficient) to G (inefficient). Once you get one, it's valid for 10 years. The amount you get paid for generating electricity depends on your building's rating, and you'll need one to register for feed-in payments.
If you've got a grade D or above, you'll be able to bag the full feed-in payment. From July, that'll be 4.25p/kWh. If your property scores below a D you'll only be eligible for a lower rate of 0.61p/kWh though.
So if you're assessed and rated E or lower, it's worth making the advised improvements to reach grade D before you register for the feed-in payments – remember, the feed-in rate is guaranteed for 20 years once you've registered. The Government has an online tool to help find an accredited assessor.
You can still switch energy supplier
Don't, for heaven's sake, think this locks you into your energy provider so you can't get cheaper bills (join the MSE Cheap Energy Club to stick on permanently low prices).
The feed-in tariff is supported by a number of suppliers, as it's mandatory for those with over 250,000 customers. Ofgem has a list of all of them on its website. Yet you don't need your energy supplier to be the same as the supplier that pays your feed-in tariff, so you're free to switch around.
While you don't need a summer home in Hawaii to get some juice from solar panels, the further south you are can make a difference when it comes to their effectiveness. Remember, this is about daylight, not hours of sunshine. Northern homes get slightly less, so where you live needs to be factored in.
The Energy Saving Trust estimates that panels in Manchester could earn you and save a combined £300/year on bills, compared with around £325/year in London and £290/year in Stirling. See Does buying solar panels add up? below for full analysis.
Some people worry that ugly panels plastered all over their roof could push the price of their house down. However, equally, a more efficient home generating its own energy may be more attractive to buyers.
Solar panels are a fairly hefty investment and might not be suited to those planning to move in the next few years – certainly you shouldn't expect a big upfront investment to be immediately reflected by a jump in your home's value.
Be wary that being tied in to a contract that remains with the property once you've left could be unattractive to buyers, whereas a buyer's ability to benefit from the feed-in tariff once they move in might make your house more appealing.
Think about how visible the panels are and ask local estate agents for their experiences before installation. When we asked the National Association of Estate Agents for an overview, it told us:
Solar panels can indeed affect the value of a property, in both a positive and negative way. If the panels are new technology, show significant savings and are aesthetically acceptable, they may very well boost value. However, in some instances, the agreement which ties respective owners into old technology is onerous and could well affect the value of a property in a negative way.
You don't generally need planning permission for solar PV systems. The big exceptions are if your property has a flat roof, is listed or in a conservation area. You might need to get approval from your council's building control team, so check with your local authority.
In England and Wales, the Government's Planning Portal says that panels are likely to be considered as "permitted development".
The Energy Saving Trust says little maintenance is required on a properly installed, well-designed solar PV system, though you'll likely need to replace the inverter – a gadget which is a key part of the mechanism – within about 20 years (£800ish).
Of course, though, things can go wrong. Check the installer warranty you get covers the 20 years you'll be getting the feed-in tariff. If the panels are damaged by something unexpected, like a storm, you may also be covered by buildings insurance – check with your insurer before you have them installed and bear in mind you may need to increase the sum insured.
Once you've got your panels installed and they're up and running, make sure you make the most of them by using them at the right time.
For example, in the winter, when there's less sunlight and you'll generate less solar power, you'll take more energy from the grid. It's a good idea to set appliances to run while it's light outside, staggering them to max the savings.
For tons more top tips from solar nerds, read the forum's Make the most of solar panels thread.
Whether they add up for you is all about how much you're paid back later down the line to cover your initial spend via electricity savings or government payments for you generating electricity.
This is the key point to start with. The price of a typical solar panel system, including installation, is now around £5,000-£8,000. In the scheme's early days, a system this size used to cost £10,000-£12,000.
There are three ways to recoup the outlay...
Electricity savings. First and foremost, you can use the electricity your panels generate, thus reducing your electricity bills. The Energy Saving Trust estimates a typical 4kWp system can knock off around £70 from a family's bills each year.
Savings depend on the system size, electricity use, whether you're at home during the day to use the energy you're producing and other factors. If you can use more energy during the day when the panels are generating, you'll save even more as you'll need less electricity from the grid.
The 'feed-in tariff'. This is a payment from the Government (but paid via an energy supplier) to pay households in England, Scotland and Wales for ALL the electricity they generate – whether you use it or not. The rate is 4.25p/kWh. Before rates were slashed in February 2016, you used to get 12.03p/kWh.
The feed-in tariff is income tax-free and paid quarterly by energy suppliers. It's guaranteed for 20 years, and is index-linked so rises with inflation. The Energy Saving Trust estimates panels registered at a typical home can typically earn £150/year under the feed-in tariff.
The export tariff. This is a payment for energy you don't use which is sent back to the grid (unless you have an export meter, it's normally assumed there's a 50:50 split). It's set at 4.91p/kWh. A typical house can earn £85/year through the export tariff.
How do payments work in Northern Ireland?
While the feed-in tariff isn't available in Northern Ireland, there is a similar system. It's a bit more complicated than the feed-in tariff, but the Northern Ireland Renewables Obligation (NIRO) is a scheme that allows you to export back to the grid and be paid for it. According to the Energy Saving Trust, if you're eligible for the scheme you could make around £7o/year, including payments and bill savings.
Details on NIRO and the application process can be found on Ofgem's website.
If you're thinking about installing solar panels, you're going to need to do the sums first. On average across all areas, you could save around £305/year (which will rise with inflation).
You can start by doing back-of-the-envelope calculations based on typical prices for your area, though you'll need more precise estimates before going ahead with installation. Of course, what you can earn can vary hugely depending on lots of factors – for example, how many panels you can fit on your roof and how much of the energy you generate you're able to use. The figures below relate to an average property in Manchester.
The table below shows the Energy Saving Trust's estimates for a typical house in four locations – plug your details into its solar calculator for a more precise estimate.
|Income generator||Savings and/or earnings per year|
|Generation tariff (1)||£255||£240||£230||£220|
|Electricity bill savings||£70||£70||£70||£70|
|Correct from 8 Feb 2016. Payment scheme covers England, Scotland and Wales, but not Northern Ireland. (1) based on a 4 kilowatt solar PV system.|
Getting solar panels is a lofty investment. Over 20 years the feed-in payments and electricity savings could add up to roughly £6,000 (based on a home in Manchester). Depending on the cost of the panels, it could take 22 years to break even. Here's how the figures stack up.
How much you can make over 20 years on a £6,500 system? (Manchester)
|Time||Total savings and earnings||Profit/loss|
|Source: Energy Saving Trust. Warning: these are estimates and assume panels don't develop faults. An £800ish inverter (which converts electricity into power for the home), is sometimes needed within 20 years. Based on a home in Manchester.|
Based on the rates from February 2016, a typical London house could break even in around 20 years, whereas in Stirling it's 23 years, though of course it could be quicker or longer based on your circumstances.
Back in the day, solar panels were a no-brainer. When the Government launched the feed-in scheme, people typically got a gobsmacking £1,100+ per year in payments. That cash was guaranteed for 25 years back then too, so that was at least £27,500 back – not taking into account electricity savings. That said, they used to be much more expensive to install.
How to install solar panels
If you think solar panels are for you, here's how the installation process works...
Step 1: Find an installer
Call local installers to get the best price. Both the system and the installer should meet the standards of the Microgeneration Certification Scheme (MCS). Get at least three quotes before deciding.
As we're MoneySavers, not electricians, picking installers isn't our speciality. You can see the firms shortlisted for the British Renewable Energy Awards 2016, run by the Renewable Energy Association, or ask friends and colleagues for local recommendations.
As always, get at least three quotes, and get 'em in writing. When comparing quotes, check the following are included: scaffolding, removal of the existing roof and other roofing works, internal wiring works, sorting out a connection agreement with the energy supplier, electrical connection work, and a generation meter.
What else should I watch out for?
Make sure the installer is a member of the Renewable Energy Consumer Code (RECC). Plus you've 14 days to cancel after you sign up to buy.
A Which? magazine investigation back in 2011 showed many solar companies were using dodgy sales tactics and giving poor advice to people looking to buy solar PV panels. The Office of Fair Trading also unearthed poor practice in 2013, so be vigilant.
Finally, never borrow from solar companies to pay for panels. Some installers let you buy solar panels on credit. If you don't have the cash upfront, paid-for panels aren't for you. The loan's interest could dwarf the savings.
Step 2: Get them installed
Installation typically takes place up two to four weeks after you've booked with an installer. Bear this timescale in mind when planning what feed-in tariff you'll be able to register for.
Fitting the panels themselves is a one- or two-day job.
Step 3: Register for feed-in payments
Once the panels are in, the installer will send you an MCS certificate. You can then register for feed-in payments with a licenced energy supplier.
Send a completed application form with the MCS certificate, Energy Performance Certificate, proof of purchase and ID. Sometimes you can ask your installer to email these documents to you, so you can forward them to the supplier. If you send them by post, it's best to send them recorded delivery.
Pay with a credit card for extra safety
Pay by credit card for something over £100 and Section 75 laws supercharge your consumer rights. Unlike with debit cards, cheques and cash, pay in full or part (even just £1) on a credit card, and by law the lender's jointly liable with the retailer.
This means you have exactly the same rights with the card company as you do with the retailer, so if it goes bust, you can simply take your complaints there instead and get money back if no delivery. See the Section 75 guide for a full explanation.
If paying by debit card, there's also valuable hidden protection that means you may be able to get your money back if something goes wrong. It's called 'chargeback' and applies to most debit and charge cards, as well as Visa, Mastercard and Amex credit cards – though it isn't a legal requirement. See the Chargeback guide.
Will solar panels make my meter clock backwards?
After having panels installed, you might find that your electricity meter starts running backwards when the energy you haven't used is exported back to the grid. This is because some analogue meters don't have backstop built in to stop them winding the wrong way.
If you notice this happening, the best thing to do is to get in touch with your energy supplier so it can exchange the meter for one which is suitable. For more information, see this Which? guide to meters clocking backwards.
Some companies used offer to fit solar panels for free, but crucially you didn't get the biggest benefit of solar panels – the feed-in tariff. With free panels, the company that installed them kept it. You did, however, get the benefit of saving money on your energy bills, with the firms maintaining the panels and paying for insurance.
One of the biggest companies that used to fit free solar panels was A Shade Greener, which we featured on this guide. A Shade Greener no longer takes applications for free solar panels, but it's told us it will continue to monitor and maintain the systems that it has installed – it had fitted panels to over 65,000 homes up to the end of December 2015.
Tips to save £100s on energy bills
Solar panels are a big move. First, ensure you're on the cheapest energy tariff and do the energy-saving basics.
Switch energy provider
Ditch and switch energy provider and you can save £100s each year. Our Cheap Energy Club checks you're on the cheapest deal and if you're not tells you the best deal. Plus we'll keep monitoring your tariff and the market to ensure you're always on the cheapest deal. To encourage you, there's usually up to £30 extra if you switch gas and electricity via the club.
It's the same gas, the same electricity, the same safety. All that changes are the customer service and the price you pay. Normally, switch and you risk the provider hiking prices, or giving you a cheap deal for 18 months then ramping costs. So every month, without you doing anything, we do a comparison for you, and alert you when it's worth switching again.
Can you switch energy with solar panels?
Yes. You don't have to get your electricity supply and feed-in tariff from the same company. That means solar panel users can switch freely on Cheap Energy Club, just like everyone else. After switching, payments still come from the current feed-in tariff provider, so nothing changes.
If you want to switch to a different company that pays you the feed-in tariff, contact your feed-in provider to see if it's possible. Usually, if you want to get the payments from a different supplier, you'll have to switch energy to that company too. As feed-in payments are fixed and therefore the same across every provider, it may not be necessary.
At application stage, you can't choose a feed-in provider you want, you have to get the feed-in payments from your current energy supplier. A full list of feed-in tariff providers – or 'licensees' – is on Ofgem's website.
There are more ways to cut energy costs, such as always paying by direct debit, which shaves £75 off your annual bill.
For a full list of tips, see Cheap Gas and Electricity. If you're on Economy 7, you can slash costs even further by using storage heaters, washing machines and dishwashers through the night. See our Economy 7 guide for full info.
Free insulation and boilers
The big energy providers are giving wads of freebies to people on benefits, from new boilers to insulation. It's because they have to help certain groups save energy.
New boilers alone typically cost £2,300, so this is a fantastic freebie. A boiler is a big contributor to your energy bill – so the more efficient your boiler, the more heat it produces from each gas unit. Depending on your old boiler's age, a shiny new efficient one could save you up to £350/year.
Wall and top-up loft insulation can slice up to £160 off energy bills per year. You could qualify if you get tax credits or income-based benefits, such as pension credit or income support.
Do the energy-saving basics
If you wander round the house in boxers or bra 'n' knickers with the radiators on full and windows wide open... STOP IT!
Sensible changes can save you large, from draught excluders to setting washing machines to 30°C, and low-energy light bulbs to notching down the thermostat. Get more energy-saving tips in our Energy Mythbusting guide.