Solar panel payback: how long does it take to recoup the costs?
In the UK, the payback period for a standard solar panel installation 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 recoup your investment with photovoltaic installations, such as:
- How much you paid for the panels;
- Whether you have a battery installed;
- The capacity 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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Please note that all the calculations assume a direct purchase, and no interest costs.
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 shortest payback times in the UK, for an average system size:
| Area | Estimated savings in the 1st year - no battery | Estimated savings in the 1st year - with battery | Payback time - no battery | Payback time - 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 |
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 | £6,600 |
| Annual household electricity consumption (kWh) | 3,650 |
| Annual production from PV system (kWh) | 3,745 |
| Annual self-consumption share | 1,873 kWh (50% of produced energy) |
| Annual consumption from the grid (kWh) | 1,778 |
| Annual surplus sold to the grid (kWh) | 1873 |
| Energy price bought from the grid (£/kWh) | 0.30 |
| Feed-in price sold to grid (£/kWh) | 0.089 |
If we proceed to calculate the solar panel payback time based on these figures, we come to the conclusion it would take 9 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 | £9,400 |
| Annual spend in electricity without PV(kWh) | 3,650 |
| Annual PV production (kWh) | 4,426 |
| Annual self-consumption share | 3,562 kWh (80% of produced energy) |
| Annual consumption from the grid (kWh) | 87,6 |
| Annual surplus sold to the grid (kWh) | 890,6 |
| Energy price bought from the grid (£/kWh) | 0.30 |
| Feed-in price sold to grid (£/kWh) | 0.089 |
Based on these calculations, the payback period with a battery included would be 8 years, for a system of this size in Glasgow.
We can then conclude that, despite the difference in prices, the payback time of a PV system with battery is inferior to that of a system without battery in Glasgow. This can be justified by the fact that the self-consumption rate of a system with a battery is significantly higher, which translates into more savings in the long run.
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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. By shortening the payback time 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.
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FAQs
Will solar panels supply all my electricity?
In theory, solar panels can provide your entire household with electricity. However, because the hours of production don’t perfectly match your consumption it is rare to rely 100% on your rooftop solar.
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.
Is my home suitable for solar panels?
The vast majority of modern homes but also new builds 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.