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Solar PV

Are Solar PV Panels a good investment in the UK?

 

You’ve likely heard of solar panel systems, also commonly referred to as photovoltaics (PV). These panels, which are usually made of silicon, work by capturing the Sun’s energy and converting it into electricity which can then be used to power one’s home or business and – at least until recently, could even be sold to certain electricity companies as part of the Feed-In Tariff scheme.

In 2010, this scheme hit the United Kingdom and transformed the way many people managed their electricity. Under it, people who installed certain types of renewable-energy generating technology into their home or business received quarterly payments from participating electricity suppliers. One of the primary types of eligible technology under this scheme were solar PV panels. A pretty sweet deal, to say the least – even leaving the financial aspect aside, the environmental implications were resoundingly positive too.

Unfortunately for those who are only just hearing about this, nine years after the opening of the FIT scheme – on April 1st 2019 – it closed to new applicants. That means that anybody not already enrolled will no longer be able to receive payments for generating renewable electricity from solar PV panels on their property, which raises one big question – are they still worth it?

The costs of solar electricity

On average, for a family of three living in the UK, the cost of installing a 3kWp solar PV panel system averages between £4,000 and £6,000. For those who don’t know, kWp stands for ‘kilowatts peak’ – a measure of the total amount of electricity they generate at peak performance on a clear and sunny day. To install such a system you’d need around 20m² of free roof space – which most homes comfortably possess. What’s even more encouraging is that these systems are only getting more affordable.

An additional (though optional) part of the aforementioned cost of installing a solar PV panel system is the installation of a solar battery, designed to store the energy the system generates. These usually cost anywhere between £1,200 and £6,000, depending on a number of factors including the capacity, lifespan and chemical composition of the battery you choose. Such batteries are wise investments, allowing you to store energy for use overnight and reduce the amount you need to buy from your supplier.

The good news is that these batteries are becoming cheaper – they tend to last for between 5 and 15 years, meaning that they’ll likely need replacing at least once in a solar array’s 25-year lifespan. By the time you require a new one, it’s more than likely that it’ll cost a lot less than at present. This means you’ll not only save money, but shorten the length of time it takes to cover the initial setup costs of your array.

When it comes to the array itself, the average individual solar panel usually clocks in at between 250 and 400 watts-per-hour, which means to make a 3kWp system you’d need – at most – to have 12 of them installed. Such a system produces an average of around 2550kWh per year – and, as mentioned, the average lifespan tends to clock in at around 25 years. Overall, that means the system will generate around 88,000kWh. Let’s say that you end up paying around £8000 for your overall solar panel system and battery – you’re looking at a nifty 9p per kWh produced!

Based on figures supplied by UKPower.co.uk, the average cost of electricity from the grid is 14.37p – though of course this will vary depending on where you live and who your supplier is. Simply from that figure alone, however, you’ll be saving around 5.37p per kWh, which is nothing to turn your nose up at!

Time-of-use tariffs

To maximise the cost-saving benefits of a solar PV system, you ought to switch to what is known as a ‘time-of-use’ tariff. These are a fairly recent phenomenon, intended to encourage consumers to use more electricity at off-peak times – essentially balancing out the level of demand. By changing to such a tariff, you’ll have access to cheap electricity at night (costing around 8p per kWh, for example). During the day, electricity prices remain high – but with a solar PV panel system you can avoid paying daytime rates altogether by displacing the electricity from the grid with that generated and stored by your solar panels.

The smart decision would be to use the stored solar energy from your PV system during the day – displacing the expensive daytime electricity from your supplier – and then use the lower-cost off-peak electricity from your energy supplier at night. Considering the average household in the UK uses around 4000kWh each year, and (as mentioned) PV panel systems produce around 2,550kWh annually, let’s say you’d need an extra 1,450kWh of electricity to meet your home’s demands.

The long-and-short of it is that this difference can be bought at night on a time-of-use tariff for much cheaper than it would be otherwise. You can therefore potentially reduce the cost of all your electricity (not just that which the PV panel system generates) to less than 9p per kWh. Considering the aforementioned average price of electricity from the grid, this is a considerable price reduction. And according to the Government’s Quarterly Energy Report from Q4 2018, these prices are rising – having gone up by 7.4% between the October 2017 and October 2018.

What’s the catch?

There isn’t really one. The only thing you’d have to make sure of is that you’re using most of your generated solar electricity on-site during peak times. The reason for this is that, if you aren’t using the electricity your panels are generating you’re currently – provided you already have an array installed prior to April 1st – left with the alternative of exporting it for around 5p per kWh under the Feed-In Tariff. Considered alongside the 9p per kWh cost of solar-generated electricity, that leaves you making a loss of 4p for each kWh. However, so long as you’re making use of as much PV-generated electricity as possible on-site during the daytime, you’re quids-in.

So consider trying to switch up your energy consumption habits – perform energy-sapping tasks such as laundry or dishwashing overnight instead of during the day, for example. Your wallet will undoubtedly begin to feel the effects.

One more reason to go solar

According to the Government’s recent, from January 2020, homeowners with solar panels are expected to once again be able to sell their excess energy directly back to their energy suppliers under the Export Guarantee. This is expected to be more generous than the Feed-In Tariff, and the new guaranteed amount per kWh will be a minimum rate, meaning that you can expect to see even higher rates for your excess energy from providers seeking to secure customers. Making the switch to solar energy now will essentially future-proof your home in advance of this change, guaranteeing you the ability to make extra income from your extra solar-generated electricity.

Summary

Hopefully this article has shown that, even with the phasing-out of the Feed-In Tariff for new registrants, investing in solar PV panels is still a judicious financial decision. To sum it all up, the sun is free – so once you’ve paid the money to get a solar panel system installed in your house you won’t be paying a penny for the electricity it generates. If you can use the majority of the energy it generates on-site then you’ll end up paying around 9p per kWh, which is well-below the average cost of electricity from the grid of 14.37p per kWh.

Balance this with clever use of a time-of-use tariff, which offers very cheap energy at night, and you can end up paying this rate (or even less!) across-the-board for all of the electricity you use. Additionally, in the next few years you should also be able to start selling your excess energy back to providers at an even higher rate than under the Feed-In Tariff, increasing your total savings even more! All-in-all, it’s clear that installing a solar PV array is perhaps the smartest decision you could make when it comes to safeguarding the future of your energy.

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