Solar Panel feed in Tariff

In 2010 the government introduced a scheme whereby small power generators (commonly solar panels on domestic residencies) got paid for any electricity they generated that was fed into the national electricity grid.

It was shut to new users on the 1st April 2019, with the justification being that generating costs (particularly for solar energy) had got a lot cheaper and therefore feeding this back to the mains wasn't commercially viable any more.

Over the years the payments had decreased enormously from as much as 46p / KwH to just 4p / KwH for domestic solar panels, but if you didn't have a registration in place by 31st March 2019, then until a new system is introduced those generating power will be expected to give away any excess they produce for free.

A new system is mooted whereby power companies will "bid" for electricity produced by domestic generators, but to date no announcement has been made as to how this will work and there will be no guaranteed minimums for supply.  It will be called the Smart Export Guarantee, but is yet to come into force.

Solar Panels

So what is the cost of solar panels?  

Other than their sustainable nature and giving access to a "feel good / smug" factor - how do the stack up economically?

Looking at the numbers, the cost (per kW) of solar panels has reduced dramatically in recent years.  Currently (2019) it is on average around £1500.  Normally households, with a large enough roof, would get 4kWH - as this was the maximum on the feed-in tariff when first set up.  Now, this limit is irrelevant, so households should buy just what they need.

At a rough average cost of 15p / kWH in the UK, this would mean 10,000 hours of generation to pay back the initial investment.  In the UK this is about 12 years worth of sunshine - so 10 years to pay back the cost of the panels.

The additional issue is that we can't necessarily use all this electricity when it is generated and with no Feed-in Tariff, we either need to store the electricity or give it away free.  This will change with new legislation going forwards and the Smart Export Guarantee, which some companies are already effectively offering (at about 5p / kWH).

Better still is to store the energy generated and use it when it is needed.  This requires a battery system in the home.  There are a variety of these on offer now, but they significantly increase the cost of the project (and mean that "going green" is currently impossible to work out cheaper than being on the grid).  It is likely that storage will cost more than the cost of grid electricity alone.  This doesn't mean it isn't a great thing to do and that the extra costs isn't worth it.

The size of batteries needed will depend upon demand, but many "packages" would offer 4 times the kW of a panel system for the battery size in kWH 

It is estimated that costs of both panels and batteries will halve in the next decade - but at current costs we estimate the following over 20 years of use of panels and batteries

1 - Cost of 3kW panels - £4,500

2-  Cost of 12kWH batteries - £5,500 (to be replaced in a decade at £2,750)

Total cost £12,750.

This would generate about 48000kWH of energy over the life-span (about 26.5p per kWH).

As stated, this is more than the cost of 15p per kWH from grid electricity - but this is only likely to go up, whilst the cost of generation at home will go down.  The cross-over is likely to come in about 5-10 years.

If you get 5p / kWH from a future Smart Export Guarantee and forego batteries (assuming you feed in half what you generate), then your sums make even more sense.

1 - Cost of 3kW panels - £4,500

This generates 48000kWH and you'd use half and feed in half.

The feed in pay back would be 24000 x 0.05 = £1200.

The cost of the electricity you use would have been 24000 x 0.15 = £3600

Therefore, you'd have made a saving and felt great about it in the process!


Images kindly provided by William Warby and Chris Lim under wikimedia commons. Files licensed under a Creative Commons Attribution-share alike 2.0 Generic Licence