Solar panel payback: how long does it take to recoup the costs?
In the UK, the payback period for a standard solar panel installation slightly varies across different regions of the country. In several regions, the average figure is 8 years. In some other regions, it takes less time. Several factors should be taken into consideration when predicting how long it will take to get a return on investment with photovoltaic installations, such as:
- How much you paid for the panels;
- Whether you have a battery installed;
- The capacity of individual components of your PV system;
- The angle and orientation of your solar panels;
- What you would have paid for electricity without solar energy.
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Six years is the payback period for a 10-panel system costing £4,820 with a 3.9 watts peak (kWp) and annual production of 3600 kilowatt-hours (kWh), installed in Sheffield. Here's some of the best ROI in the UK, for an average system size:
| Area | Estimated savings in the first year without a battery | Estimated savings in the first year with a battery | ROI without a battery | ROI with battery |
|---|---|---|---|---|
| Surrey | £940 | £1,400 | 6 years | 7 years |
| Cornwall | £950 | £1,420 | 6 years | 7 years |
| Kent | £980 | £1,460 | 6 years | 7 years |
| Manchester | £960 | £1,425 | 5.8 years | 6.3 years |
| Sheffield | £930 | £1,390 | 6 years | 7 years |
| Bedfordshire | £940 | £1,400 | 5.5 years | 6.2 years |
| Essex | £935 | £1,390 | 6 years | 7 years |
| Norfolk | £950 | £1,420 | 6 years | 7 years |
| Norwich | £880 | £1,320 | 5.8 years | 6 years* |
| Oxfordshire | £890 | £1,330 | 5.8 years | 6 years* |
| Suffolk | £940 | £1,400 | 5.2 years | 5.5 years* |
| Southampton | £980 | £1,440 | 5.4 years | 5.9 years |
| Bristol | £970 | £1,420 | 6 years | 6.8 years |
| Newcastle | £1,000 | £1,600 | 6 years | 6.5 years |
| Ipswich | £960 | £1,400 | 5.2 years | 6.2 years |
| London | £950 | £1,385 | 6.2 years | 7 years |
*our price with a battery in this area is low
Where to start when calculating your payback period of solar panels?
It might be helpful if we get into more detail. What is to be taken into account when calculating the solar panel payback time? To begin with, the household standard energy spending and the system size that will be required to address those levels of consumption.
Let’s consider a system size of 4.4 kWp, without a battery, to be installed in Glasgow:
| System size | 4.4 kWp |
|---|---|
| Total system cost based on this size | £6600 |
| Annual spend in electricity without PV(KWh) | 3650 |
| Annual PV production (kWh) | 3745 |
| Annual self-consumption(kWh) | 1872.5 (50% of produced energy) |
| Annual consumption from the grid (kWh) | 1777.5 |
| Annual surplus sold to the grid (kWh) | 1872.5 |
| kWh bought from the grid | 0.3 |
| kWh sold to the grid | 0.89 |
If we proceed to calculate the solar panel payback time based on these figures, we come to the conclusion it would take 8.5 years to recoup the costs. Now, let’s consider a system size of 5.2 kWp with battery included, also in Glasgow:
| System size | 5,2 kWp |
|---|---|
| Total system cost based on this size | £9400 |
| Annual spend in electricity without PV(KWh) | 3650 |
| Annual PV production (kWh) | 4426 |
| Annual self-consumption(kWh) | 3562.4 (80% of produced energy) |
| Annual consumption from the grid (kWh) | 87.6 |
| Annual surplus sold to the grid (kWh) | 890.6 |
| kWh bought from the grid | 0.3 |
| kWh sold to the grid | 0.89 |
Based on these calculations, the payback period with a battery included would be 8 years, for a system of this size in Glasgow.
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What impacts return on investment for solar panels?
There are many different factors that will affect the rate at which you receive payback on your initial investment in solar. This means that there isn’t a universal timeframe that will apply to every household across the country. The following three things will play a huge role in determining the length of time it takes to get a return on your investment.
How much you pay for them
Not all solar panel systems are created equal and some will offer a quicker return on investment. Generally speaking, the larger your solar panel system (and better equipped), the greater the return. However, bigger systems will have a higher upfront cost. Of course, this will be supplemented by an increased rate of energy production, but you will need to find a suitable balance between the amount you pay and the amount of energy you use.
Paying for a bigger system that you won’t be able to use optimally will have an impact on your payback time. You will also have to consider other factors such as the size of your roof and the budget you have available before determining how big a system you want to have installed.
How much they save/make you per year
It’s important to consider that two households with identical solar panel systems won’t necessarily save or make the same amount of money annually from their solar panels. How you use the system and the energy it generates will be key in determining how quickly you can start to recoup the costs.
Solar panels generate electricity most efficiently when the sun hits them directly during the day, but if no one is home to utilise this energy and you don’t have a means of storing it, this power can be wasted. This ultimately means you won’t be seeing the maximum benefits of having a system installed, and your payback time will increase.
To reduce your payback time, consider ways you can make your system more efficient. Regular cleaning and maintenance, removing any shading and using more energy during peak generation hours by running appliances during the day. All of these factors will help you make the most of your solar panels and, ultimately, profit from them.
The cost of electricity
The biggest gains come from using what you generate and reducing your grid-dependence, but the payback period of your solar panels will be impacted in two ways by any rises in the cost of electricity:
- To use. Higher electricity costs ultimately mean you will be paying more for your home’s energy supply, but people with solar energy will be less affected by these costs since they generate some of their own power. You can further reduce the impact of rising electricity costs by lowering your energy usage and shopping around for a better deal. Also, the more reliant you can be on your solar panel system, the less your bills will be affected by higher costs. And if you can lean more heavily on solar, you will ultimately benefit from a faster payback time.
- To sell. The Smart Export Guarantee (SEG) allows you to send excess energy to the grid. The amount you’re paid varies depending on the tariffs offered by various providers. Higher feed-in tariffs that reflect the value of the electricity exported would substantially reduce payback times.
There are a number of different suppliers that are part of the SEG Supplier List. It’s always worth shopping around to find the best rate. In the UK, the majority of suppliers offer rates between 3-6p per kWh you generate, with an average system in Sheffield able to generate an annual surplus of 2,028 kWh to be sold to the grid.
Certain tariffs, such as the Tesla Energy Plan, require the use of certain equipment in order to receive the highest rates for the energy you generate. Some also have exclusive rates that are only available to customers who receive their electricity supply from the same company.
Are solar panels profitable?
In recent years, many people across the country started realising that going solar is a valid solution to address the current volatility of electricity prices. As the cost of installation steadily falls and the cost of electricity rises, it's expectable the average solar panel payback time will gradually decrease across the country in the near future. By shortening the length of the return on investment of solar panels, people that once saw solar energy as an interesting - but complicated - solution, might now be willing to take the first step, given how profitable solar panels have become.
In case the return on your investment in solar panels is 6 years, the yearly profitability is 17%.
What other product or service offers such a high benefit?
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FAQs
Will solar panels supply all my electricity?
In short, solar panels do have the potential to provide your entire household with enough electricity to function normally. However, there are lots of factors that can affect this outcome, including the size of your home, the time of year, your energy consumption, your location and the type of solar panel system you have installed.
Typically, households will use solar panels in conjunction with the national grid, becoming more reliant on the latter during the darker winter months. Using a battery to store solar-generated electricity will mean you’re less reliant on the grid, but this can delay the time it takes to recoup your investment.
Is my home suitable for solar panels?
The vast majority of modern homes will have the necessary conditions that make them suitable for solar power generation. But there are certain factors that can make one property more compatible with solar than others. For example, solar panels will work most efficiently on south-facing roofs, which aren’t shaded by trees or other buildings.
It’s also crucial that your roof is in a good structural condition before going ahead with the installation. It’s always best to get an expert opinion on whether your home is suitable for generating your own solar power before committing to an investment.