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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 dishwater. But with solar panels costing an average of £7,000, there are a few things you need to understand to work out if the sums add up.


1# The solar panel maths is getting better

As the price of energy has rocketed, generating solar power and using it yourself can mean big savings. Under the smart export guarantee (SEG) scheme, which launched in January 2020, households in Great Britain 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 (which closed to new applications in March 2019) was far more generous, as 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, 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 £400/year on your bills


First and foremost, you can use the electricity your panels generate, and so reduce your 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 3.5 kilowatt-peak system can knock between £155 and £400 a year off bills at the current Energy Price Cap rates.


3# You could get paid £145/year for any excess energy you generate, but SEG tariffs differ widely (though you're free to switch between 'em)


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 1p per kWh to 16p per kWh (Octopus Agile Outgoing can pay more than this, but the rates fluctuate every half an hour) – so make sure you go for the best-paying tariff you can. Although it doesn't have to be the same firm that supplies your energy, but with some, it helps you get a better rate if you are a customer already. And keep an eye on the rate you're getting as many are variable.


The Energy Saving Trust estimates a typical household based roughly in the middle of the country could make between £100 and £145 a year based on a rate of 5.5p per kWh (though of course, the better the rate, the more you'll make).


If you had solar panels installed before 31 March 2019, it's likely you'll be on a feed-in tariff (FIT). If so, you might already be getting paid more than what's below, but if you're currently on a variable SEG tariff, you're free to switch to another provider that'll pay you more.


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


BENCHMARK: You pay about 27p/kWh for electricity under the price cap.


​SUPPLIER

SEG TARIFF

RATE/KWH

VARIABLE/FIXED

PAID

Octopus Energy

Outgoing Agile

Average 16p (1)

Variable

Monthly

Good Energy

Solar Savings

20p or 15p (8)

Variable

Monthly

E.on Next

Next Export

16.5p or 3p (2)

Fixed for 12 months

Annually (can request more frequently, max. four payments a year)

Octopus Energy

Outgoing Fixed

15p or 4.1p (3)

Fixed for 12 months

Monthly

Scottish Power

SmartGen

15p or 12p (2)

Variable

Every 6 months

Octopus Energy

Outgoing Fixed Lite

8p (4)

Fixed for 12 months

Monthly

British Gas

Export & Earn Flex

15p or 6.4p (3)

Variable

Every 3 months

EDF Energy

Export Variable Value

5.6p or 3p (3)

Variable

Every 3 months

Utility Warehouse

UW Smart Export Guarantee

5.6p or 2p (5)

Variable

Every 3 months

Pozitive Energy

SEG tariff

5p

Variable

Every 6 months

So Energy

So Export Flex

20p or 7.5p (6)

Variable

May be monthly, quarterly or half-yearly

Ovo Energy

Ovo SEG Tariff

20p or 4p (7)

Fixed for 12 months

Every 3 months

Shell Energy

SEG V1.1 Tariff

3.5p

Variable

Annually

SSE

Smart Export Tariff

3.5p

Variable

Annually

Utillita

Smart Export Guarantee

3p

Variable

Every 3 months

E

SEG January2020v.1

1p

Variable

Annually


Correct as of October 2023. You will get one month's notice before a variable tariff changes. (1) The rate you get changes every half hour in line with wholesale energy prices. 16p is the average Octopus has paid over the last 12 months. (2) You get the top rate if it installed your solar panels. (3) You get the top rate if it supplies your energy. (4) You can only get this tariff if you're on the supplier's Octopus Go tariff, which is designed for households with a home EV charger. (5) You get the top rate if you have two or more services with Utility Warehouse. (6) You get the top rate if you buy and have installed So Energy's solar panels and battery. So Energy does not need to be your energy provider. (7) You get the top rate if it installed your solar panels and supplies your energy, and you have a smart meter. You must be a homeowner and live in an eligible postcode: SA, CF, NP, GL, BS, SN, BA, TA. (8) The top rate is available to customers who have had a solar installation through Good Energy’s subsidiary Wessex ECOEnergy and are on Good Energy’s SVT. Lower rate available to households supplied by Good Energy on the company’s Standard Variable Tariff (SVT), and which have a second-generation smart meter.


4# The break-even point is about 16+ years

The price of a typical 3.5 kilowatt-peak solar panel system is about £7,000. Based on the Energy Saving Trust's figures, it could take someone living in the middle of the country, in a typical home, anywhere between 16 and 21 years to recoup the costs of installing panels, based on current Energy Price Cap rates. This depends 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.


Electricity bill savings are based on the 1 October 2023 Price Cap, which fell 7% from the previous Energy Price Cap. If wholesale prices shoot up again, prices could rise, but they'll be capped by the Energy Price Guarantee of £3,000/year on typical use, as the EPG will remain in place until April 2024.


How long it will take to break even

If typical bills fall by 20% (1)

Savings based on the Price Cap until 31 December 2023

If typical bills rise by 20% (1)

Electricity bill savings (2)

Average £124 (£128 to £308)

Average £263 (£160 to £385)

Average £316 (£192 to £462)

Smart Export Guarantee payment (3)

Average £124 (£100 to £145)

Average £124 (£100 to £145)

Average £124 (£100 to £145)

Cost of system (4)

£7,000

£7,000

£7,000

Years to break even

21 (17 to 26)

18 (14 to 23)

16 (12 to 21)

Correct as of October 2023. Source: Energy Saving Trust. (1) Electricity bill savings are based on the 1 October Energy Price Cap, in place until 31 December 2023. (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 5.5p per kilowatt hour. (4) Based on a 3.5 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 10% higher, while savings in Scotland would be about 6% 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 14 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 23 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.


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

While you currently pay roughly 27p per kilowatt hour for electricity on a standard tariff under the October Price Cap, 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 typically takes at least 15 years to recoup your installation costs, if you're considering moving, solar panels probably aren't worth it (though see the point below on whether this could be offset by them 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.


Are solar panels covered by home insurance?

Generally speaking, solar panels are typically covered under standard buildings insurance policies for damage, such as storm, fire, and some even cover glass breakage. Solar panels are also typically covered by a manufacturer warranty, so if you do notice a fault, you should first contact the company that installed them before going to your insurer.

If you don't yet have solar panels but are looking to get them, tell your insurer before you get them fitted to make sure they have no concerns regarding the works going ahead.


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 £2,000. And according to EcoExperts, solar panels could increase a property's value by as much as 14%, on average.


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 – you can still switch your supplier, although there's only a couple of options cheaper than standard tariffs under the Price Cap right now, and most are for existing customers only. You can see what your options are in our Stick, switch or fix your energy tariff guide, or find out more details of fixed energy deals in our Should you fix?. 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. Though with some providers, Octopus for example, you can get better export rates if it also supplies your energy. 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 2023, 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 or the Home Insulation and Energy Systems Quality Assured Contractors Scheme (HIES).

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 10 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.


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 can cost as little as £1,000 for a three kilowatt-hour battery. The Eco Experts estimate the average price to be around £4,500. 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. 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# There's funding available for some households for solar panels There's help available to get solar panels installed in your home, but you usually need to be on certain benefits or have a low income to be eligible. What each scheme offers, and its eligibility criteria varies:

  • The Energy Company Obligation (ECO) scheme: If you live in England or Wales, under the ECO scheme you can get up to £14,000 towards energy-saving initiatives if your home qualifies, including solar panel systems. To qualify, you'll need to meet specific criteria, including having a household income less than £31,000/year or be receiving certain benefits.

  • Home Upgrade Grant: 45 local authorities in England are offering grants of up to £10,000 to homeowners in their area for improvements, including solar panels. Typically, a local authority will cover the majority (and in many cases, all) of the cost to install. To qualify, you must have total household income of less than £31,000/year and your property must have an Energy Performance Certificate (EPC) rating of D, E, F or G.

  • Warmer Home Nest Scheme Wales: The Welsh Government initiative offers free energy-saving home improvements, including solar panels. You may be eligible if you own or privately rent a home that's expensive to heat, and you or someone you live with receives a means-tested benefit OR has a chronic respiratory, circulatory or mental health condition. You can check full eligibility details on the Nest Scheme website.

  • Home Energy Scotland Grants and Loans: This scheme offers interest-free loans of up to £6,000 to install solar panels on your home in Scotland. And if you take on multiple energy-saving measures through the scheme, up £1,250 of the loan won't be repayable. You may be eligible for the funding if your home has a poor energy rating, and someone in your household receives certain benefits, or is over 75 and has no central heating system. You can check full eligibility criteria on the Warmer Home Scotland website.

There are no grants available for solar panels if you live in Northern Ireland.



13# 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 fact the feed-in tariff is now a closed 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.

14# How long do solar panels last?

Solar panels have a life span of around 25 years or more, but this can vary depending on what they're made from and when they were installed. According to experts, some of the latest models of solar panels that are being installed today could have a useful life of 40 years or more. Either way, their efficiency will begin to slowly decline after around 20 to 25 years.


Solar panels are recyclable

Most of the materials used to make solar panels are widely recycled, but there are some components that must be disposed of by a specialist and should never go to landfill. All solar panel manufacturers and importers in the UK are required to join a Producer Compliance Scheme (PCS), such as the Government-approved PV CYCLE. So once your solar panels have reached the end of their useful life, you need to ensure they're removed and recycled properly, through an approved scheme.


You do not need to pay for solar panels to be removed and recycled

Under EU regulations, your solar panel installer is legally obliged to take your obsolete solar panels off you at no cost – that's right, it shouldn't cost you a penny. They'll take your old panels to a designated collection facility before the panels go on to a recycling plant.



Source: moneysavingexpert.com

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