Solar panel payback – What is it and What you should know

A sail boat in the water with the sun shining off the water

You may have heard people describing having a solar panel system installed in their home as an investment. When we say the word investment your mind automatically goes to savings, stocks and shares so how can having solar panels in your home be an investment? 

With a bit of careful planning, working out your current energy requirements and choosing the solar panel system size that is right for your household, you will find that after a while not only will you earn back the initial expense, but you can create an income just from the sun.

Cost of installing solar panels

The initial outlay for a solar installation can cost between £4000 and £6000 for a 4kwh system and around £8,000 to £10,000 for a 6kwh.  It isn’t a cheap process to undertake but over time you can earn your money back to where the system eventually pays for itself. 

The first thing to remember is that although the initial set up is expensive when you factor in the solar panels themselves, the inverter, wires, battery and installation, there is very little maintenance that is needed afterwards.

Maintaining solar panels

Most systems come with at least a ten year warranty and you can expect it to last for an average of twenty five years, with only the inverter needing to be replaced every five to ten years.

The only up keep that is normally required is ensuring that the panels are cleaned twice a year to keep them at their maximum efficiency. 

Energy costs and savings

The average energy consumer will be charged 16 pence per kilowatt of energy used but when you have solar panels this is reduced to roughly 8 pence per kwh.

Obviously the bigger your system, the more of your own energy you can produce and the less you will have to rely on the national grid for your electricity.

A 4 kilowatt solar system can generate roughly 3700 kilowatt hours of electricity so you can expect your energy bills to be significantly reduced and in some cases households will choose to go completely off grid, getting rid of their energy bill all together. 

What size solar panels will you need?

To help work out the size of the solar panel system you need, take a current monthly energy bill. Divide the kilowatt used amount by 30. This will show you how many kilowatts of electricity you use daily. 

Smart Export Guarantee

Another way you can ensure that your solar panels become an investment is by taking part in the Smart Export Guarantee which was launched in January of 2020.

Before this there was the Feed-In Tariff, where you were paid a generation tariff and also an export tariff. The generation tariff was a payment for every unit of renewable energy you created and the export tariff was a different payment for any renewable energy that you fed back into the national grid.

Anyone that was on the Feed-In tariff before it was cancelled can stay on it until the end of their contract, which is normally around twenty years. 

The new Smart Export Guarantee is different in a couple of ways. To begin with you now receive one payment which is for the amount of renewable energy you feed back into the national grid. If you have a larger system then obviously you will have more excess energy that you will be able to sell back to the national grid and in turn create a passive income.

The tariff amount is set by the energy companies themselves and each energy company with over 150,000 customers legally has to take part. The guidelines currently state that the price they pay has to be over one pence per kilowatt hour.

The old Feed-In tariff was set by the Government along with OFGEM. By comparing the tariffs between all the different energy suppliers you can ensure that you get the best price tariff for you. 

So with a bit of careful planning, working out your current energy requirements and choosing the solar panel system size that is right for your household, you will find that after a while not only will you earn back the initial expense, but you can create an income just from the sun. 

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