The Average Payback Period For Solar Panels

Overview

The average payback period for a 3.5kWp solar panel system costing £7,000 is in the region of 10-15 years. 

The Energy Saving Trust suggests an average saving of £600 per year based on the same system, meaning the time to recoup costs according to their estimates sits at under 12-years. 

However, payback periods can range from 7-15 years due to variables such as: 

• Installation costs
• Household energy consumption and electricity produced by your solar panel system
• Electricity prices (the higher they go, the shorter the payback period)
• The efficiency of your panels
• Whether or not you choose to sell your excess electricity via the Smart Export Guarantee
• Whether or not you choose to use a solar battery, it’s cost and it’s capacity (kWh)

Use our solar panel configuration tool here to determine how much your solar panel system will cost and expected savings, to help you calculate the payback period.

What is The Average Payback Period For Solar Panels?

The average solar panel payback period sits at 10-15 years. This assumes a 3.5kWp system, a household with reasonable electricity demand, and no solar battery being installed. 

However, this average is exactly that…an average. There are dozens of variables that affect exactly how long it takes for solar panels to pay for themselves including:

• Installation cost
• Current electricity prices
• Household electricity consumption
• Whether or not your plan to use the Smart Export Guarantee (sell electricity back to the National Grid)

With all these variables in mind, some households are able to reach a breakeven point on their installation within just 7-12 years. That’s an amazing ROI (return on investment)!

This is emphasised by the Energy Saving Trust. They estimate an average 3.5kWp system costing £7,000 and saving on average £600 per year; less than 12-years for your solar panels to pay for themselves.

Remember, the above is based on current electricity prices. Electricity prices consistently rise and as they do, your payback period will decrease (higher prices equal higher savings).

By using green energy, you’re insulating yourself from future price hikes.

Solar Panel Payback Period Variables

When determining exactly how long solar panels take to pay for themselves, there are a few variables that need to be accounted for. 

Everything from the efficiency of your system to the type of battery storage you use (if any) is going to impact your overall payback period.

The Cost of Solar Panel Installation

The first and biggest variable that affects your solar panel system’s payback period, is the cost of the installation. 

A typical 3-bedroom house in the UK would require a system somewhere in the range of 3.5kWp. This would use 10 x 350w panels, and likely cost around £7,000 to install. This could double to £14,000 for a property such as a 6-bedroom detached. 

The cost of this installation wouldn’t include battery storage (essential if you want to be self-sufficient).

Like any household project, solar panel installation costs vary from property to property. 

Variables that affect the overall installation of your solar panels include: 

• Exact size (kWp) solar panel system you want installed
• Complexity of your installation (access to your roof etc)
• Whether or not you choose to have a solar battery, and what size
• If your eligible for government grants

Our solar panel configuration tool calculates exactly how much an installation will cost for your property.

Electricity Consumption & Production

Now you’ve got your figure for the cost of installation, you’ll want to look at your average electricity consumption (using your smart meter or annual electricity bill).

By doing this, you can work out what size solar panel system you’ll need. 

Ideally, you want a system that can keep up with electricity demand completely, so you’re self-sufficient. This might mean adding a solar battery for times where you’re consuming a lot of energy, but your solar panels aren’t producing any (evenings).

By working out exactly what you consume and your panels produce, you can work out exactly how long it will take to recoup the costs of your solar panels. 

Electricity Tariffs

This is where it gets a little complex. 

You’ll outlay around £7,000 for a solar panel installation (without battery storage), which is a fixed one-off cost. However, electricity tariffs are based on the current energy price cap, and are ever-changing; usually going up over time. 

The higher the energy price cap goes, the more electricity costs, and the more you’ll save. 

In the most recent change to the energy price cap, electricity costs have gone down. 

However, this isn’t typical. If we take a look at a document over at Parliament, we can see that over time, the solid trend for energy prices is…upwards.

Put simply, it’s obvious that over time energy bills will increase; although it’s hard to say when or by how much. 

What this means is that the average payback period for solar panels is likely to be much less than buyer’s expect. Higher electricity prices mean larger savings and the time for solar panels to pay for themselves is reduced. 

Use our solar panel installation tool here. That’ll give you estimates on energy savings, as well as fixed prices on-screen for the most suitable solar panel setup for your property.

Efficiency 

Next, we have efficiency; incredibly important to factor in when calculating how long solar panels take to pay back. 

Solar panels can be as low as 15% efficient, all the way up to 25% efficient. And that’s just the rating for the panel itself. Other factors that affect the overall efficiency of solar panels include: 

• The orientation and pitch of your roof (south facing at approximately 35 degrees is ideal)
• Anything that might block solar panels at certain points in the day including: other properties, hedges or trees

Installing panels that are 15% efficient over those that are 20% efficient, is actually a drop in efficiency and electricity production of ¼.

So, when getting solar panels installed, it’s important to choose panels that are as efficient as possible!

Smart Export Guarantee

The Smart Export Guarantee replaces the old feed-in tariff. Put simply, if you’re eligible you can sell electricity back to the main UK energy suppliers, earning an income in the process. 

This isn’t an automatic process, if you want to sell energy back to the grid, you’ll need to sign up to the Smart Export Guarantee scheme found here. 

Major energy suppliers set their own prices when it comes to what they’ll pay for every kWh of electricity they receive from you. So, whilst this is a way to reduce the payback period of your solar panels, it’s hard to determine exactly by how much simply because: 

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• The rates paid by major energy suppliers are constantly changing
• You’d need to know exactly how many kWh per year you’re sending to the grid to calculate how much you earn

Battery Storage

Buying a solar battery enables you to store excess electricity. So, if your solar panel system is producing more electricity than you’re consuming in the daytime, it can be stored for use in the evening. 

However, this comes at a cost. A typical 4kWp system should cost around £7,000. This is increased to approximately £12,000 with a suitable solar battery, which may need to be replaced during the lifespan of your solar panels. 

Typically, solar batteries are most suitable for those that have a system that struggles to keep up with anywhere near your household’s demand for electricity. You’ll be using stored energy (via the battery) more regularly, making it a cost effective solution. 

If you choose to use a solar battery (typically around £5,000 in addition to your installation costs), you’ll need to factor this in, to calculate your exact solar panel payback period.

Configure your setup with or without a battery using our solar panel installation tool here. 

How Much Do You Save With Solar Panels?

Are solar panels really worth it? 

As you can see from the Energy Saving Trust’s cgraphic, you’d expect to save around £600 per year on average using solar panels alongside the Smart Export Guarantee scheme: 

With an average system costing around £7,000, the payback period in this case would be less than 12-years, making solar panels a solid investment!

How Long Do Solar Panels Last?

Solar panels can take anywhere from 7-15 years to pay for themselves. But how long do they actually last? 

Leading brands supplying panels and roof tiles will generally offer a guarantee of around 25-years. So, you can assume that you’ll get around 10-18 years worth of “free” electricity once your panels have been “paid off”. 

Remember, during this period, you’ll have to have some basic maintenance done. As an example, simply cleaning your solar panels on a regular basis improves their efficiency. 

Want to get prices on-screen for the perfect solar panel setup? Use our clickable tool here.