Solar panels – are they worth it?

Solar panels – are they worth it?

How much can you really save?

As well as saving you money on your energy bills, solar panels can also earn you cash. And don't worry, panels can still generate some electricity on gloomy days, vital when the weather's as dull as watching paint dry. But with solar panels costing an average of £6,500, there are a few things you need to understand to work out if the sums add up.

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  1. The solar panel maths is getting better

    As the price of energy has rocketed, generating solar power and using it yourself gives a far bigger saving now than it used to.

    Under the smart export guarantee (SEG) scheme which launched in January 2020, households get paid for solar energy they 'export'. This is electricity you generate, but don't use yourself, which is then pumped back into the national energy grid. The prior feed-in tariff scheme was far more generous, with higher rates and you got paid for generating energy, even if you used it yourself.

    However, if you've got savings you can use to pay for the panels, with interest rates still so low, it's worth doing the numbers for yourself as the SEG scheme can work out well for some (we've full analysis of how much you're likely to save, and how much you're likely to get paid, below).

  2. The biggest gain comes from using what you generate – you could save up to £405/year on your bills

    First and foremost, you can use the electricity your panels generate, thus reducing your electricity bills. Savings depend on system size, electricity use, whether you're at home during the day to use the energy you're producing and other factors. But based on Energy Saving Trust estimates, a typical household with a 4.2 kilowatt-peak system can knock between £165/year and £405/year off bills.

  3. You could get paid £110/year for any excess energy you generate, but SEG tariffs differ widely

    The smart export guarantee (SEG) scheme works by requiring energy suppliers with 150,000+ customers to offer 'tariffs' to households in England, Scotland and Wales, which pay a set rate for each kilowatt hour (kWh) of electricity you generate from solar panels, but DON'T use yourself.

    Crucially, the amount you get back depends on the company and ranges from just 1.5p per kWh to 12p per kWh – so make sure you go for the best-paying tariff you can (it doesn't have to be the same firm that supplies your energy). And keep an eye on the rate you're getting as many are variable. Though of course, the firm's solvency matters too as if it goes bust, you'll have to find another tariff yourself, so bear that in mind.

    The Energy Saving Trust estimates a typical household based roughly in the middle of the country could make between £80/year and £110/year (based on a rate of 3.99p per kWh).

    How much you can get paid under the smart export guarantee by supplier

    SUPPLIER
    SEG TARIFF RATE/KWH VARIABLE/FIXED
    BENCHMARK: You currently pay about 28p/kWh for electricity on a price-capped tariff
    Tesla (via Octopus Energy) Tesla Energy Plan (1) 10p-12p  Variable
    Octopus Energy Agile Outgoing 4p-10p (2) Variable
    Octopus Energy Outgoing Fixed  7.5p or 4.1p (3) Fixed for 12 months
    Bulb Export Payments 5.57p or 3p (3) Variable
    E.on Next Export 5.5p or 3p (4)  Fixed for 12 months
    Scottish Power Smart Export Variable Tariff 5.5p Variable
    Ovo Energy Ovo SEG Tariff 4p Fixed for 12 months
    Shell Energy SEG V1.1 Tariff 3.5p Variable
    SSE Smart Export Tariff 3.5p Variable
    British Gas Export & Earn Flex 3.2p Variable
    Utility Warehouse UW Smart Export Guarantee 2p Variable
    EDF Energy
    Export+Earn
    1.5p Fixed for 12 months
    Correct as of April 2022. You will get one month's notice before a variable tariff changes. (1) Only available for those with a Tesla Powerwall battery. (2) The rate you get changes every half hour in line with wholesale energy prices. (3) You get the top rate if it supplies your energy. (4) You get the top rate if E.on installed your solar panels.

    Important things to understand about the smart export guarantee 

    • If your solar export tariff provider goes bust, payments will stop until you find a new supplier

      The energy market is in crisis, and with sky-high wholesale costs, more energy companies could go under, so choose your provider carefully. Unfortunately, if your firm goes bust, unlike your normal energy tariff, your export tariff won't automatically be moved to a supplier by energy regulator Ofgem (known as the 'supplier of last resort'). You are responsible for finding a new supplier and Ofgem will not appoint one for you.

      What's more, you won't receive SEG payments while you're in limbo, so get your skates on (see full SEG supplier list). Your new supplier will only pay you for exported electricity from the start of your new contract.

      One would hope the market doesn't change, but unlike the feed-in tariff scheme, there are no long-term guarantees for the export scheme, so things could always change.

    • You need a smart meter to get the smart export guarantee payments

      To get a SEG tariff, you'll need a smart meter that's capable of tracking how much solar electricity you're exporting to the grid. This includes what's known as 'SMETS 2' meters – the second generation of smart meters – and certain 'SMETS 1' meters (the first generation).

      If you're not sure what type of meter you have, you can contact the supplier you're thinking of using for your SEG tariff and it can arrange an appointment to get a new meter installed if needed – see our Smart meters guide for more on how they work.

      SMETS 2 meters are capable of tracking solar energy exports and your standard import energy tariff, even if you have a different supplier for each, so you won't need two meters.

    • To qualify you need certified solar panels with a capacity of five megawatts or less

      To qualify to receive payments from energy suppliers through the smart export guarantee, you'll need:

      • Solar panels with a capacity of five megawatts or less.

      • Solar panels that are certified by the Microgeneration Certification Scheme.

      • A meter that can track how much solar electricity you export, and send this automatically to your supplier every half hour.

      Unfortunately, if you have solar thermal panels, you can't get the smart export guarantee. Solar thermal, which allows you to heat water and can cut down heating bills, isn't covered. 

    • You need to apply directly with smart export guarantee provider

      To apply for a tariff, you'll need to fill in an application form on the supplier's website, or download one and email or post it back. You'll need your Microgeneration Certification Scheme certificate to hand and an up-to-date meter reading of the energy you export. 

  4. The break-even point is about 13+ years

    The price of a typical 4.2 kilowatt-peak solar panel system is about £6,500. However, this doesn't include a 5% cut to VAT on solar panels that was recently announced in the Spring Statement. While hopefully this will lead to lower prices, it's too early to tell. What's more, with high levels of inflation it's possible rising costs could wipe out any benefit.

    Based on the Energy Saving Trust's figures, it could take someone living in the middle of the country anywhere between 13 and 24 years to recoup the costs of installing panels, based on current energy prices, for a typical home – depending on how much electricity you use and when you use it, and what you're paid under the smart export guarantee.

    For a rough estimate of how long it'll take to break even, if you lived in about the middle of the country, see our table below.

    How long it will take to break even

    TABLE_CELL_STYLE If the price cap falls by 40% (1)
    If the price cap falls by 20% (1)
    Savings based on 1 Apr price cap If the price cap rises by 20% (1) If the price cap rises by 40% (1)
    Electricity bill savings (2)

    Average: £171

    (£99-£243)

    Average: £228

    (£132-£324)

    Average: £285

    (£165-£405)

    Average: £342

    (£198-£486)

    Average: £399

    (£231-£567)

    Smart export guarantee payment (3) Average: £95
    (£80-£110)
    Average: £95
    (£80-£110)
    Average: £95
    (£80-£110)
    Average: £95
    (£80-£110)
    Average: £95
    (£80-£110)
    Cost of system (4) £6,500 £6,500 £6,500 £6,500 £6,500
    Years to break even 24
    (20-31)
    20
    (16-27)

    17
    (13-24)

    15

    (11-21)

    13
    (10-19)
    Correct as of April 2022. Source: Energy Saving Trust. (1) Electricity bill savings are based on the 1 April price cap and how that may rise or fall in future. (2) Savings vary depending on how often you're home, how much electricity you're using and when (we've given the range in brackets above). (3) Based on a rate of 3.99p per kilowatt hour. (4) Based on a 4.2 kilowatt-peak system.

    Many factors affect the payments you receive – such as where you live

    A combination of factors will determine how quickly you'll recoup your outlay:

    How much you'll make depends on where you live. The table above assumes you live somewhere in the middle of the country. If you live further south, in London for example, the bill savings will be about 4% higher, while savings in Scotland would be about 4% lower.  

    It's all about daylight, not hours of sunshine or temperature. Northern homes get slightly less, so where you live needs to be factored in.

    If you're at home all day, it will take you less time to make your money back. You'll recoup the installation costs in about 13 years on average, if you live in the middle of the country. In comparison, if you're only home during the evenings, it's about 24 years.

    This is all about how much electricity you're using. If you're home all day, you're using more electricity while your panels are generating energy, so the bill savings will be greater, but you'll export less (as you're using more yourself). Conversely, someone at home only in the evenings could make more from the smart export guarantee (SEG) than the savings on their electricity bill. 

    However, this is based on the SEG being available for the next 20+ years. While there are no plans for the scheme to end anytime soon, there's also no guarantee the scheme will last this long.

    For tons more top tips from solar nerds, read the MSE Forum's Make the most of solar panels thread.

  5. To max your savings, use most of your electricity while you're generating it

    While you currently pay roughly 28p per kilowatt hour for electricity on a price-capped standard tariff, you'll get paid a lot less than this for the energy you don't use yourself and export back to the grid. So try to shift as much of your electricity use to when you are generating it as possible (in other words, in daylight hours), as unless you have a solar battery, you're unable to store it to use later.

    While it means you'll be exporting less so will get paid less, overall you will be a lot better off as you won't be paying for as much pricey energy.

  6. Not all homes are suitable for solar panels

    To maximise what your panels can make, it's best to make sure your home is right for them:

    • 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.

    • Your roof should be unshaded between 10am and 4pm. While some early or late shading from other buildings or trees is OK, during the peak period for daylight you want the panels to be out of any shade.

    • You need a fair bit of space. Solar panels typically take up two square metres each, so the size of your roof matters. 

    • Your roof needs to be in good condition. Make sure you've had an inspection carried out to ensure your roof isn't damaged, as this could affect the installation. If you have old tiles, it may be worth getting them replaced before your panels are installed. 

    • It's best to have a diagonal roof to catch the most rays. If you want to install panels on a flat roof it could cost more, as you may need fixings to hold the panels in place.

    • You generally won't need planning permission. In England and Wales, the Government's Planning Portal says that panels are likely to be considered as 'permitted development' – meaning you don't usually need to apply for planning permission. The big exceptions are if your property has a flat roof, is listed or is in a conservation area. In these cases, you might need to get approval from your council's building control team, so check with your local authority.
  7. If you're likely to move home in the next decade, it probably doesn't add up

    As it takes typically more than 13 years to recoup your installation costs, if you're considering moving it's probably not worth it (though see the point below on whether this could be offset by the panels pushing up the value of your home).

    While you could physically remove the panels from your old home and install them on the new one, this could prove costly. Plus, while you could still use what you generate yourself at your new address, you'd no longer get paid for what you export. To receive payments your panels need to be certified by the Microgeneration Certification Scheme and the organisation told us it wouldn't certify panels that have been moved.

    It's also worth noting solar panel installations are tailored to each home – to fit the roof and be positioned to maximise the level of sunlight they receive – so it's likely they wouldn't perform as well if you installed them on a different home anyway.

  8. Don't assume you'll always recoup the cost of solar panels on your home's value if you sell your house early

    Some people assume that a more efficient home generating its own energy would be more attractive to buyers. But others worry that 'ugly' panels plastered all over their roof could push the price of their house down. 

    Solar panels are a 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.

    Trade body Solar Energy UK recently published a report which found homeowners who move having had panels installed would claw back some of the value of their investment in a higher sale price. It looked at more than five million property transactions and said a typical home with solar panels could increase in price by at least £1,800.

    When we asked NAEA Propertymark (the National Association of Estate Agents) for an overview, it was more cagey. It said: "Having such sustainable technologies will become more attractive for homeowners in the future. There are benefits to having solar panels – however, in the short term, they don't provide an increase in house value, with the panels often costing more than they attribute in value. With houses coming on to the market in short supply and other factors, people are being forced to compromise on their preferences, including energy saving measures."

  9. You can still switch energy supplier

    If you have solar panels, don't think this locks you in to your energy provider so you can't get cheaper bills – you can join the MSE Cheap Energy Club to stick on the cheapest deals (while there is nothing cheaper than price-capped standard tariffs right now, we hope to see that change later this year).

    Your energy provider doesn't need to be the same as the supplier that pays you for your solar-generated energy, so you're free to switch.

    Also, with a modern SMETS 2 smart meter, two firms can use the same device, so you don't need to get a new smart meter.

    It's just as simple to switch your supplier for the export tariff, and as rates vary wildly between firms, make sure you're always getting the best rate possible – see what each firm pays.

  10. If you decide solar panels are right for you, find a registered installer and get three quotes

    As we're MoneySavers, not electricians, picking installers isn't our speciality. You can see the firms shortlisted for the British Renewable Energy Awards 2020, run by the Renewable Energy Association, or ask friends and colleagues for recommendations.

    The system and the installer should meet the standards of the Microgeneration Certification Scheme (MCS). And make sure the installer is a member of the Renewable Energy Consumer Code.

    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. Fitting the panels themselves is a one or two-day job.

    Once they're fitted, registering your panels is a must – you'll need an MCS certificate, which you'll use to register for smart export guarantee payments with a licensed energy supplier.

    Never borrow from solar companies to pay for the panels

    Some installers let you buy solar panels on credit. If you don't have the cash upfront, panels aren't for you. The loan's interest could dwarf the savings.

    Solar panels are generally low maintenance

    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 that is a key part of the mechanism – within about 25 years (costing around £800).

    Of course, though, things can go wrong. If so, check the installer warranty you get – it can cover you for up to 20 years. If the panels are damaged by something unexpected, such as a storm, you may also be covered by buildings insurance – check with your insurer before you have them installed.

    • Pay with a credit card for extra safety if you can

      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 in 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 there's no delivery. See our 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 American Express credit cards – though it isn't a legal requirement. See our Chargeback guide.

  11. Solar batteries are expensive but may be worth it for those who use a substantial amount of electricity

    A solar battery can store any excess power generated by your solar panels that you don't use at the time, rather than exporting it back to the grid. They aren't cheap – costing about £2,100 for a three kilowatt-hour battery.

    The savings you make on your bills can be significant, though. The price you're paid for each unit of energy you export to the grid is usually much lower than the price you pay your supplier for electricity. So, economically, it makes more sense to store the energy and use it yourself – with E.on saying a household with a battery could use 30% more of the electricity they generate themselves.

    Another potential advantage of a battery is that it can increase the rate you get paid for exporting your electricity back to the grid. Some firms will pay many times more than the standard amount if you buy certain types of batteries. See what firms pay.

    The battery isn't all about what you generate yourself, either. If you're on a flexible 'time-of-use' energy tariff, with cheaper electricity overnight for example, you can charge the battery at cheaper times from the grid and use it to power your house during more expensive hours.

    But for most, the initial outlay won't be recouped quickly enough. The extra cost can add years to the break-even point – Solar Energy UK says it could typically add anything from an extra five to 13 years, depending on the size of the battery and system.

    However, if you use a large amount of electricity (for instance, you have a big family and have electric cars) and use time-of-use tariffs to maximise cost-efficiency, it could be worth considering a battery. See our Economy 7 and Electric vehicle tariff guides for more on how these tariffs work.

  12. If you already have solar panels and get the feed-in tariff, nothing changes

    If you already have solar panels and get the feed-in tariff, the closure of the scheme won't affect you. Depending on when your panels were installed and certified you're guaranteed to get the payments for at least 20 years:

    • 25 years if installed and certified before 31 August 2012
    • 20 years if installed and certified between 1 September 2012 and 31 March 2019
    • I installed my solar panels before 31 March 2019 – what payments should I be getting?

      In addition to electricity bill savings, anyone who installed their panels before the payment scheme's closure on 31 March 2019 gets what is known as the 'feed-in tariff' and the 'export tariff':
       

      • The 'feed-in tariff'. This is money from the Government (but paid via an energy supplier) to households in England, Scotland and Wales for ALL the electricity they generate – whether they use it or not. The final rate before the scheme ended was 3.79p per kilowatt hour (kWh).

        The feed-in tariff is income tax-free, guaranteed for up to 25 years and index-linked, so rises with inflation. The Energy Saving Trust estimates panels registered to someone in a typical home who signed up just before the scheme ended would earn between £130/year and £165/year on average under the feed-in tariff, depending on where they live.

      • The 'export tariff'. This is a payment for energy you don't use that is sent back to the grid (unless you have an export meter, it's normally assumed 50% of energy produced is exported). The final rate before the scheme ended was 5.24p per kWh.
    • How much can you make under the feed-in tariff?

      What you get depends on where you live, how much electricity you use, the size of your system and when you signed up to the feed-in tariff. According to figures from the Energy Saving Trust, combined savings and earnings can amount to between £305/year and £495/year.

      The rates you got under the feed-in tariff also changed every three months – our estimates are based on the final rates for January to March 2019.
       

      How much you can earn & save on average (before March 2019 changes)

      INCOME GENERATOR SAVINGS AND/OR EARNINGS EACH YEAR
        London        
      Aberystwyth    Manchester    Stirling          
      Feed-in tariff payment (1) £165 £145 £140 £130
      Export payment (1) £110 £100 £95 £90
      Electricity bill savings (2) £100 - £240   £100 - £230 £95 - £230 £90 - £220
      Total each year £375 - £515 £345 - £475 £330 - £465 £310 - £440
      Payment scheme covers England, Scotland and Wales, not Northern Ireland. Source: Energy Saving Trust. (1) Based on a four kilowatt-peak solar photovoltaic system. (2) Savings vary depending on how often you're home, how much electricity you're using and when.
    • Can I switch my energy supplier?

      If you get feed-in tariff (FIT) payments, you're also free to switch your energy supplier. Like the smart export guarantee, your FIT supplier doesn't need to be the same as your energy supplier.

      You are also free to change your FIT supplier if you want, though the rates are set by the regulator and depend on when you joined the scheme, so you'll get the same amount regardless of the firm you're with.

    • If your firm goes bust, payments won't transfer automatically

      If you're on a feed-in tariff (FIT), your payments won't transfer automatically to a new provider if your current supplier goes bust.

      This is different from the smart export guarantee – if you're on a FIT, regulator Ofgem will appoint a new supplier for you, but payments won't start until your contract starts.

      The new company will contact you to confirm your tariff information and it must also confirm whether it's a FIT licensee. If it's not, you may need to find another FIT supplier to continue to receive payments. 

      As above, you're able to choose a different supplier from the one Ofgem appoints for you if you wish, but it shouldn't really matter, as your FIT rates won't change.

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