Are solar panels cost effective in the UK?

Sun rising above mountains in the far distance

Photovoltaic solar panels convert sunlight into electricity. You can then use this energy to power your own home and also export any excess energy back to the National Grid.

Sounds simple right? Now you may be looking at the entire cost of setting up a solar panel system in your home and wondering if it really is cost effective, or is it too good to be true? On the whole, yes it is cost effective but let’s break it down. 

It is widely believed that solar panels are cost effective in the United Kingdom and when done correctly with your own households needs in front and centre it can be an investment that will yield results for many years to come.

Installing solar panels

For a solar panel system you will need solar panels installed in your home. Most people chose to put these on their roof, especially if they are building a new house or are in need of roof repairs.

It’s killing two birds with one stone. If it is not feasible to install them on your roof they can be placed at ground level facing South East to South West at an ideal angle between twenty to fifty degrees. 

Select the system that’s right for you

When deciding on which system to choose you will want to compare the “rated output” between systems. This is the peak power in kilowatts you can expect from your set up.

Domestic systems set ups can expect one kilowatt of panel will generate roughly between 700-900 units of electricity per year. Of course where you are based in the country will affect this, for example the south of the country receives more sunshine than Scotland. Remember to always get a quote from a qualified surveyor. 

Saving on energy bills

Producing your own energy has been described as being an investment. Obviously not in the same way as investing in stocks and shares but when you look at the money you will save on energy bills, even if you do not go completely off grid, you should still see a big reduction in your energy bills. Not only that but with the money you can earn from exporting your excess energy back to the National Grid. 

The more of the energy you create through your solar panels and use within your home the better the investment.

On average an energy customer will pay roughly 16 pence per kilowatt hour(kwh). When using solar panels this is reduced to roughly 8 pence per kwh. You can purchase a battery to store any excess energy created, which you can then go on to use at night or during the winter months when the output from your panels is lowered due to less sunshine.

Your system will still collect and convert energy during the winter, it will just be a lesser amount than in the peak of Summer. 

Selling excess energy back

With the Smart Export Guarantee (SEG) you can export excess energy back to the National Grid, in turn earning you an income. This replaced the Feed-In tariff in January 2020.

All the large energy companies with more than 150,000 customers are legally obliged to take part and are now able to set their own tariffs for the amount they will pay for your exported energy.

If you were already on the Feed-In Tariff before the switch over you will be able to stay on this until the end of your contract, which is normally about twenty years. 

Return on your investment

How quickly will you see a return on your investment?

This depends on three main factors.

  1. The entire cost of your solar system set up.
  2. How much of the electricity you use.
  3. How much you are paid for exporting your energy to the national grid.

Obviously a higher cost for a set up will take longer to see a return on your investment. The same with how much electricity you use. The more you can use your own energy created, the lower your electricity bill will be.

Your SEG tariff rate will also affect your return on your investment. These tariffs under the Feed-In Scheme were set by the government whereas now the energy companies set them themselves and the guidelines are that the tariff must be over 0 pence per kwh. A fixed rate tariff will guarantee your rate for a specific amount of time whereas a variable rate will fluctuate. 

So yes, it is widely believed that solar panels are cost effective in the United Kingdom and when done correctly with your own households needs in front and centre it can be an investment that will yield results for many years to come. 

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