The Cost of a Solar PV System

How much do solar panels cost?

Over the past year, solar PV panels have reduced in price by approximately 40% as a result of falling manufacturing costs and competition in the market. This means you can now get a solar PV system installed on your roof for between £4,000 and £7,000.

>>> Read our detailed Solar PV case Study <<<

The Government is also helping to make solar energy more affordable and even profitable. Cutting your energy bill, the ability to sell electricity back to the grid and reducing your carbon footprint all make solar energy highly attractive. Here we take a look at the price of solar panels and the types of system available.

Eligibility for Solar PV Feed-in Tariff

In order to make installing solar PV more attractive, the Government launched the Feed-in Tariff, which pays households for any electricity produced from the solar PV system.

>>> Learn more about the Feed-in tariff and how to apply <<<

In the most simple terms, the tariff pays 12.47p (from October 2015) for every kWh of electricity generated regardless whether you use the electricity in your home or you export it to the grid. To be eligible for the maximum FiT payments, you need to install Microgeneration Certified Scheme (MCS) certified panels, and these need to be installed by an MCS qualified installer. In addition your home needs to have an EPC rating of band D or higher to qualify for the 12.47p FiT (otherwise it is 5.94p / kWh).

Export Tariff vs. using the electricity at home

To maximise the return from the solar PV installation, you want to use as much of the electricity you produce in your home as possible. In the most basic terms, if you use the electricity you produce in the home, then you don’t need to buy it from your energy provider (a saving of 12.5p / kWh). If you export it, you only get paid a fraction of this – but this isn’t actually the main reason to export the electricity.

>>> Learn how to use 100% of the electricity from your solar PV <<<

How and when households use their solar PV-generated electricity could be about to change hugely, with big developments in battery storage technology. Read more about it here.

In the following worked examples, we have actually ignored this point pretending that homes have an export meter installed to give a more complete view, and also with the introduction of smart meters, this loophole could well be closed.

Solar PV work financial Examples

For someone to be in the 75% and above usage range, they would have to be at home almost constantly throughout the week. Going forward, we are going to assume that the typical user uses about 50% of the electricity they produce and exports the other 50%, but in the table below we have shown the financial implications of home use versus exporting the electricity.

So, to start with, we will look at a typical 3kWh system and see the annual return, based on the percentage you use in the home versus how much you export. Over a year a 3kW system would expect to be around 90% efficient and generate about 2700 kWh of electricity (an average home used 4,800 kWh per year).

Worked Examples – % of Electricity used in the Home : % of Electricity Exported to the Grid

100% : 0% 75% : 25% 50% : 50% 25% : 75%
Total kWh/year 2700kWh 2700kWh 2700kWh 2700kWh
FiT (12.47p/kWh) £337 £337 £337 £337
Used by household (12.50p) £338 £253 £169 £84
Export tariff (4.85p) £0 £30 £61 £91
TOTAL RETURN £675 £620 £567 £512

 

What impacts the initial cost of your solar PV installation?

The cost of your solar PV system is dependent on two things.

1. The size of the installation

Obviously the larger the system you install the more electricity it will produce. The average solar PV system installed in the UK now is 3.5KW, which at 90% will produce approximately 3150kWh of electricity (depending how much sun you get in your part of the country). As reference an average house uses approximately 4,800kWh. The number of panels you can install will probably be limited by either the amount you can afford or the size of your roof. Suppliers will also charge different prices for their installation services and it’s important to ensure they are MCS accredited to qualify for the Feed-in Tariff.

>>> Read our detailed Solar PV case Study <<<

The costs of a typical system can be seen below, with their approximated annual return. As was mentioned previously, the more electricity you use in the home, the higher the returns will be. In the example below we have assumed a 50:50 home use to export ratio.

Typical System Size

2

2.5

3

3.5

4

Approximate Roof Space (m2)

14

17.5

21

25

28

Estimated Cost

£4-5k

£5k

£5-6k

£6k

£6.5-7.5k

Annual Output (kWh)

1800

2250

2700

3150

3600

Feed-in Tariff (£)

224

281

337

393

449

Savings on electricity bill (£)

113

141

169

197

225

Electricity exported (£)

44

55

65

76

87

Annual Return (£)

381

477

571

666

761

 

2. The quality of the solar panels used

Not all solar panels are the same!

See our guide to the different types of solar panels for more details, but in a nutshell there are three types.

    • Monocrystalline solar cells (made from single crystals grown in isolation) are the most efficient at 15-22%, but they are also the most expensive type of solar cell.
    • Polycrystalline cells are cheaper than monocrystalline, but their efficiency is far lower at just 13-17%.
    • The cheapest solar cells of all are amorphous solar cells, which also have the bonus of being more efficient in low-light (great if you live in the UK!) but they are the least efficient overall at 9%.

How are the efficiency figures calculated? Well it is determined by how many watts of power are produced in a square meter. 100% efficiency means that a square meter of panel would create 1,000 watts. Therefore a panel rated at 18% would create 180 watts from every m2; it follows that panels with higher efficiency ratings create more electricity (per meter squared) and this is reflected in the price.

>>> How solar return changes based on pitch and shading <<<

As you can see in the table above, the actual price of your installation varies depending on the types of panel you get installed, so a 4kW system could cost as little as £5,500, or as much as £7,000.

System A

System B

System C

Cost

£5,500

£6,250

£7,000

Type of Panel

Amorphous

Poly

Mono

Efficiency of Panel

9%

15%

20%

Output (kWh)

3200

3500

3700

Feed-in Tariff (£)

399

436

461

Savings on electricity bill (£)

200

219

231

50% electricity exported (£)

65

80

90

Annual Return (£)

664

735

782

 

Payback of your Solar System

So having chosen to go for a typical 3.5kW solar PV array for your home, what kind of payback time can you expect?

Well if you were to make £666 a year via Feed-In Tariff (as in the table 2 above), then a £6,000 pound system will payback in 9 years. The Feed-In Tariff is guaranteed for 20 years, the payments are tax free and they are linked to RPI, so will actually increase over time.

In addition electricity prices are expected to go up over time, so the 12.5 pence you save for every kWh of electricity you use in your home will actually increase and could be nearer 20 pence in just 5 years – therefore the absolute return could actually become bigger.

Once you have ‘got your money back’ then any money you make is paid directly to you as profit – so you will be in line to receive 11 years of quarterly payments directly into your bank account – again tax free!

There are a few other costs to think about with Solar PV

Maintenance

There are maintenance costs associated with your solar PV installation, including cleaning them at least twice a year to ensure they are working as efficiently as they can.

Replacing Inverters

In addition, despite the solar panels being good for 20 years plus, the inverters have a lifespan of about 10 years, and replacing these will cost just shy of £1,000 – so factor this in to your calculations when your solar installers give you a quote.

>>> Microinverters can also increase Solar PV return – click to find out more <<<

Insurance

You will need to insure you solar PV array as part of your home insurance, so your insurance premium payments will slightly increase.

Planning Permission

Installing solar panels on your roof does normally not require planning permission, however if you live in a conservation area or world heritage site you will need to speak to your planning authority to get the necessary permission. Note: there will also be legal fees associated with this.

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