The Cost of a Solar PV System

How much do solar panels cost?

Solar PV panels have reduced in price by approximately 40% as a result of falling manufacturing costs and increased competition in the market. This means you can now get a decent sized solar PV system installed on your roof for between £4,000 and £6,000.

We would always recommend trying to maximise the number of solar panels that you go for – but this is often limited by the size of the roof space. 

A 250w solar panel will typically cost between £300 and £500 and each panel is approximately 1.7m2. Therefore for a 3.5kW system, you are looking at a price of between £4,200 and £7,000, and this would take up approximately 23.8m2

For a smaller 2.0kW system, you are looking at paying between £2,400 and £4,000 and this size system would take up approximately 13.6m2.

Obviously, the more solar panels you have on the roof, the more electricity you can produce. This therefore means you need to buy less electricity from the grid (as you can use the electricity you produce). 

You can also get payment from your energy supplier, provided they are signed up to the Smart Export Guarantee (SEG). 

The SEG is a legal obligation for any electricity supplier that supplies at least 150,000 customers to offer an export tariff to those with solar panels for each kWh produced.

The actual export tariffs these energy companies offer can be flat, variable or smart rate (adjusting based on wholesale prices), however the tariff must always be greater than zero (even when wholesale prices of electricity are negative).

There is quite a large discrepancy between the different SEG rates from the different providers – for example in August 2020, Utility Warehouse offer £0.02 / kWh, while Octopus are offering £0.055 / kWh.

SEG versus FIT

The SEG was introduced in January 2020 to replace the older Feed in Tariff (FIT) scheme, which closed to new customers on 31st March 2019.

The main difference between SEG and the FIT scheme was that the FIT scheme paid the owner of the solar panels for both producing the electricity and also for exporting it, while the SEG only pays for exporting it – therefore the SEG is far less generous. 

Eligibility for the SEG

To be eligible for the SEG, the solar system being installed needs to be under 5MW (or approximately 20,000 solar panels – so most homes should be okay!). The solar system must also be installed by an MSC certified installer. Finally you need to have a smart export meter installed to measure how much of the electricity is being exported back to the grid. 

SEG Tariff vs. using the electricity at home

To maximise the return from the solar PV installation, you will 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 around 15p/kWh). If you export it, you only get paid a fraction of this (£0.05 at most!) – so if you can use it in the home, then it is strongly recommended to use it!

By incorporating battery storage technology into your solar system setup – it allows you to store the electricity you produce to use as and when you need it. You can learn more about battery technology by clicking here.

Solar PV worked examples

So, to start with, we will look at a typical 3kWh system (installed on a new build with a ‘higher’ energy efficiency requirement rating) 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
SEG (@£0.05/kWh) £0 £33.75 £67.5 £101.25
Used by household (£0.15/kWh) £405 £303.75 £202.5 £101.25
         
TOTAL RETURN £405 £337.50 £270 £202.5

These numbers are correct as of 18th August 2020. 

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 has the potential to produce. The average solar PV system installed in the UK now is 3.5KW, which – working at 90% efficiency – 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 SEG

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 £4,800, or as much as £8,000. In the table below we have assumed we are exporting 50% (so this is eligible for the SEG) and 50% is used within the home (so a saving on the electricity bill). 

 

System A

System B

System C

Cost

£4,800

£6,400

£8,000

Type of Panel

Amorphous

Poly

Mono

Efficiency of Panel

9%

15%

20%

Output (kWh)

3200

3500

3700

       
SEG (£)

80

87.5

92.5

Savings on electricity bill (£)

240

262.5

277.5

       
Annual Return (£)

320

350

370

 

Payback of your Solar System

So looking at ‘System A’ in the table above, the system costs £4,800 and the annual return is £320 per year, so it will take approximately 15 years to pay back. In addition, electricity prices are expected to go up over time, so the £0.15 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 ‘made your money back’, then any money you make is paid directly to you as profit – so you will be in line to receive the SEG indefinitely while you are exporting electricity. 

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.

Installing Solar PV

Are you thinking about installing a solar PV system at home? We have scoured the country for the best tradespeople, so that we can make sure we only recommend those we really trust.

If you would like us to find you a local installer to help install a solar PV system in your home, just fill in the form below and we will be in touch shortly!