Are Solar Panels Worth the Investment in the UK?
There is a common misconception that solar panels only work properly in sunny locations. However, solar panels can also reduce power bills considerably in less sunny places with high electricity prices.
The UK is a perfect example: Local sunshine rates are around 50% lower than in tropical locations, but electric tariffs exceed 35 pence per kilowatt-hour (kWh) as of 2023.
According to the latest data from the Department of Energy Security and Net Zero, solar panel systems with a size range of 0-4 kilowatts (kW) have a mean price of £2,365 per kW.
- Based on this figure, you can expect to pay around £9,460 for a 4-kW solar system.
- A solar array of this size can potentially save between £800 and £1,100 per year, depending on local sunshine and your energy consumption habits.
- Considering the upfront cost of solar panels and their typical savings in the UK, you can expect a payback period of around 9-12 years.
This payback period can seem long, but consider that the best solar brands offer a 25-40 year warranty. Even if you wait 12 years before recovering your investment, your solar panels will still have a guaranteed lifespan of 13 or more years.
Comparing Solar Panel Costs and Lifetime Savings
The price of solar panels increased between 2022 and 2023, but UK electric tariffs have been rising at a faster rate, as you can see in the following table:
Year | Financial Year 2021/22 | Financial Year 2022/23 | Change (%) |
Average electricity bills for a home that uses 3,600 kWh per year | £833 (23.14 p/kWh) | £1,288 (35.78 p/kWh) | 55% increase |
Mean cost of home solar systems with 0-4 kW installed capacity | £1,876 per kW | £2,365 per kW | 26% increase |
Solar panels became 26% more expensive since the start of 2022, but the electricity they save became 55% more expensive during the same time period. Even with the higher prices reported in 2023, installing solar panels makes sense from a financial standpoint.
The annual savings and payback period of a photovoltaic (PV) system can vary depending on several factors. For example, a 4-kW solar system in southern England will tend to generate more electricity than an identical system in Scotland, where the annual sunshine is lower.
Energy consumption habits are also important. Two homeowners with identical solar systems can achieve different results, based on how they use electricity throughout the day:
- When using solar energy directly, you save the full value of each kWh.
- However, solar electricity that is not consumed right away is sent to the grid, and you only get partial credit for each kWh.
- This means you can achieve higher savings by consuming a larger percentage of solar electricity, while minimising your grid exports.
As a quick example, assume you pay an electric tariff of 35 pence/kWh, while getting a solar export tariff of 10 pence/kWh. If you install a solar panel system that generates 3,600 kWh per year, your savings depend on how your generation is split among consumption and grid exports.
Here is a quick comparison of three scenarios, showing how the same amount of solar energy can achieve different based on usage:
Scenario | Savings from Direct Solar Energy Usage (35 pence/kWh) | Savings for Excess Solar Energy Send to the Grid (10 pence/kWh) | Total Savings |
Homeowner No. 1 -2,700 kWh of solar energy used directly -900 kWh exported to the National Grid | £945 | £90 | £1,035 |
Homeowner No. 2 -1,800 kWh of solar energy used directly -1,800 kWh exported to the National Grid | £630 | £180 | £810 |
Homeowner No. 3 -900 kWh of solar energy used directly -2,700 kWh exported to the National Grid | £315 | £270 | £585 |
This is a simplified analysis, but it shows the importance of your energy consumption profile. All three homeowners generate 3,600 kWh/year with their solar panels, but the first one achieves higher savings by using a larger fraction of that energy. The third homeowner gets the lowest savings, since 75% of solar generation is exported to the grid at a reduced tariff.
Estimating the Payback Period and ROI of a Solar Panel System
Here is the payback period and return on investment (ROI) achieved by each homeowner, assuming all three of them paid an upfront cost of £9,460:
Scenario | Payback Period | Annual ROI |
Homeowner No. 1 | 9.1 years | 10.9% |
Homeowner No. 2 | 11.7 years | 8.6% |
Homeowner No. 3 | 16.2 years | 6.2% |
As you can see, the payback period of solar panels can vary. All three homeowners will eventually recover the upfront cost if they use high-quality panels with a 25-year warranty. However, the investment is much more attractive for the first homeowner in this example.
Professional solar installers consider many other factors such as roof pitch, roof orientation and local shading conditions. They also use simulation software to estimate the electricity output of solar panels, based on the actual sunshine conditions available in your property.
You can use the World Bank Global Solar Atlas to visualise solar resources throughout the UK. Solar panels tend to generate more electricity as you move farther south, thanks to the increased sunshine. However, there are also site-specific factors that must be considered when estimating your savings and payback period.
Written By
Reviewed By
