Solar panels use the sun’s energy to provide either hot water or electricity in the home There are two different types of solar panels with very different costs and benefits:
- Solar PV (photovoltaic) panels
- Solar water heating panels
Both types of panel can be mounted on a roof, ideally facing due south. Solar panels can also be mounted on the ground using either a commercial mounting system or a bespoke wooden structure. This article covers solar PV panels for electricity generation. See information on solar water heating.
Solar PV (photovoltaic) panels
These use the sun’s energy to generate electricity which can then be used to power lights and appliances around the home. Surplus energy can be sold back to the electricity grid.
These systems are described in terms of kWp or kilowatts peak. So a 4kWp system would generate 4kW at peak performance (direct sunlight in the summer). Of course when the sun goes down then this drops to zero. These types of systems are gradually coming down in price but a solar panels cost for a typical 4kWp system is around £6,500 (£6,200 ex VAT at 5%). Payment for any electricity generated and supplied to the grid, known as a Feed in Tariff (FIT), does vary according to circumstances. For new installations the house EPC (Energy Performance Certificate) has to be in band D or better to get the best FIT.
Installing solar panels on a roof is not always possible: in conservation areas; where the roof area is unsuitable or shaded; where the look of the house may be compromised. An alternative is to mount the panels on the ground using a commercial mounting system or even a bespoke wooden structure . The benefits of not mounting on a roof include:
- panels can potentially be mounted facing due south and at the ideal angle
- an area of unshaded ground can be selected
- cleaning of panels is easier
- installation is easier
Solar PV savings Example
Let’s assume a 4 bedroom family house using 7,000 kWh per year with a current electricity spend of circa £1,140 per year (16.2p kWh) which has an EPC in band D and a south facing roof.
A 4kWp system, which costs £6,500 to install would produce around 2,745kWh per year if it was reasonably located.
The Feed In Tariff payment for installations as of 1st January 2015 would be 2745 x 13.88p per kWh (compared with 6.61p/kWh if the property is worse than band D) so your income from electricity generation would be £381.00. In addition, due to the nature of the generation and your demand there will be some surplus electricity which you can export to the grid and receive payment for at a current rate of 4.77p kWh. This would generate further income of £65 based on 50% of the generated electricity being exported to the grid. In addition you would save an estimated £105 on your annual electricity bill by not having to pay the electricity company for the electricity you generated and used yourself.
Feed In Tariff’s for new installations do come down from time to time, based on a formula from Ofgem which includes the total volume of all installations. The last change was in January 2015 when the rate for new installations fell from 14.38p to 13.88p. The previous change was in April 2014 when the rate for new installations fell from 14.90p kWh to 14.38p kWh. For existing installations the rate is frozen at the level in place when the system was installed, with an increase to allow for inflation as measured by RPI (Retail Price Index). So old installations from 2011 will be receiving a rate of 46.81p kWh plus an inflation adjustment until 2031, although the cost of installation was much higher then. Feed In Tariff’s are paid for 20 years. After that there are no further payments although you do make savings on the electricity you generate and use.
- Generation Income: £381/year
- Export Tariff Income: £65/year
- Saving on electricity bill: £105/year
- Total income and savings: £551/year.
Now if you had to borrow the £6,500 at 6% interest then it would take circa 20 years to get your investment back. With a service life of 25 years for the solar PV panels this still gives a slight return but it does show the length of time it may take to get your original investment back. Note that unless you have an “off grid” system you will still lose power if there is a grid powercut. Also electricity prices are likely to rise over the next decade.
Now if your cost of borrowing money was only 4% and the solar pv panel installation cost fell to £5,000 then the payback would be closer to 11 years. Better but still a long term investment rather than a quick return.
To get quotes from solar PV installers try the solar panel quotes service.
See further example on Solar PV panels