As well as saving you money on your energy bills, solar panels can also earn you cash. And don’t worry, panels can still generate some electricity on gloomy days, vital when the weather’s as dull as watching paint dry. But with solar panels costing an average of £6,500, there are a few things you need to understand to work out if the sums add up.
This guide doesn’t constitute legal advice tailored to your individual circumstances. If you act on it, you do so at your own risk. Thanks to trade association Solar Energy UK, and solar specialists GB Solar and The Eco Experts for their feedback on this guide.
The solar panel maths is getting better
As the price of energy has rocketed, generating solar power and using it yourself gives a far bigger saving now than it used to.
Under the smart export guarantee (SEG) scheme which launched in January 2020, households get paid for solar energy they ‘export’. This is electricity you generate, but don’t use yourself, which is then pumped back into the national energy grid. The prior feed-in tariff scheme was far more generous, with higher rates and you got paid for generating energy, even if you used it yourself.
However, if you’ve got savings you can use to pay for the panels, with interest rates still so low, it’s worth doing the numbers for yourself as the SEG scheme can work out well for some (we’ve full analysis of how much you’re likely to save, and how much you’re likely to get paid, below).
The biggest gain comes from using what you generate – you could save up to £405/year on your bills
First and foremost, you can use the electricity your panels generate, thus reducing your electricity bills. Savings depend on system size, electricity use, whether you’re at home during the day to use the energy you’re producing and other factors. But based on Energy Saving Trust estimates, a typical household with a 4.2 kilowatt-peak system can knock between £165/year and £405/year off bills.
You could get paid £110/year for any excess energy you generate, but SEG tariffs differ widely
The smart export guarantee (SEG) scheme works by requiring energy suppliers with 150,000+ customers to offer ‘tariffs’ to households in England, Scotland and Wales, which pay a set rate for each kilowatt hour (kWh) of electricity you generate from solar panels, but DON’T use yourself.
Crucially, the amount you get back depends on the company and ranges from just 1.5p per kWh to 12p per kWh – so make sure you go for the best-paying tariff you can (it doesn’t have to be the same firm that supplies your energy). And keep an eye on the rate you’re getting as many are variable. Though of course, the firm’s solvency matters too as if it goes bust, you’ll have to find another tariff yourself, so bear that in mind.
The Energy Saving Trust estimates a typical household based roughly in the middle of the country could make between £80/year and £110/year (based on a rate of 3.99p per kWh).
How much you can get paid under the smart export guarantee by supplier
| SUPPLIER | SEG TARIFF | RATE/KWH | VARIABLE/FIXED |
|---|---|---|---|
| BENCHMARK: You currently pay about 28p/kWh for electricity on a price-capped tariff | |||
| Tesla (via Octopus Energy) | Tesla Energy Plan (1) | 10p-12p | Variable |
| Octopus Energy | Agile Outgoing | 4p-10p (2) | Variable |
| Octopus Energy | Outgoing Fixed | 7.5p or 4.1p (3) | Fixed for 12 months |
| Bulb | Export Payments | 5.57p or 3p (3) | Variable |
| E.on | Next Export | 5.5p or 3p (4) | Fixed for 12 months |
| Scottish Power | Smart Export Variable Tariff | 5.5p | Variable |
| Ovo Energy | Ovo SEG Tariff | 4p | Fixed for 12 months |
| Shell Energy | SEG V1.1 Tariff | 3.5p | Variable |
| SSE | Smart Export Tariff | 3.5p | Variable |
| British Gas | Export & Earn Flex | 3.2p | Variable |
| Utility Warehouse | UW Smart Export Guarantee | 2p | Variable |
| EDF Energy | Export+Earn | 1.5p | Fixed for 12 months |
| Correct as of April 2022. You will get one month’s notice before a variable tariff changes. (1) Only available for those with a Tesla Powerwall battery. (2) The rate you get changes every half hour in line with wholesale energy prices. (3) You get the top rate if it supplies your energy. (4) You get the top rate if E.on installed your solar panels. | |||
Important things to understand about the smart export guarantee
If your solar export tariff provider goes bust, payments will stop until you find a new supplier
The energy market is in crisis, and with sky-high wholesale costs, more energy companies could go under, so choose your provider carefully. Unfortunately, if your firm goes bust, unlike your normal energy tariff, your export tariff won’t automatically be moved to a supplier by energy regulator Ofgem (known as the ‘supplier of last resort’). You are responsible for finding a new supplier and Ofgem will not appoint one for you.
What’s more, you won’t receive SEG payments while you’re in limbo, so get your skates on (see full SEG supplier list). Your new supplier will only pay you for exported electricity from the start of your new contract.
One would hope the market doesn’t change, but unlike the feed-in tariff scheme, there are no long-term guarantees for the export scheme, so things could always change.
To qualify you need certified solar panels with a capacity of five megawatts or less
To qualify to receive payments from energy suppliers through the smart export guarantee, you’ll need:
- Solar panels with a capacity of five megawatts or less.
- Solar panels that are certified by the Microgeneration Certification Scheme.
- A meter that can track how much solar electricity you export, and send this automatically to your supplier every half hour.
Unfortunately, if you have solar thermal panels, you can’t get the smart export guarantee. Solar thermal, which allows you to heat water and can cut down heating bills, isn’t covered.
You need to apply directly with smart export guarantee provider
To apply for a tariff, you’ll need to fill in an application form on the supplier’s website, or download one and email or post it back. You’ll need your Microgeneration Certification Scheme certificate to hand and an up-to-date meter reading of the energy you export.
The break-even point is about 13+ years
The price of a typical 4.2 kilowatt-peak solar panel system is about £6,500. However, this doesn’t include a 5% cut to VAT on solar panels that was recently announced in the Spring Statement. While hopefully this will lead to lower prices, it’s too early to tell. What’s more, with high levels of inflation it’s possible rising costs could wipe out any benefit.
Based on the Energy Saving Trust’s figures, it could take someone living in the middle of the country anywhere between 13 and 24 years to recoup the costs of installing panels, based on current energy prices, for a typical home – depending on how much electricity you use and when you use it, and what you’re paid under the smart export guarantee.
Energy Saving Trust’s solar panel calculator
Plug your details into the Energy Saving Trust’s solar panel calculator for a decent estimate of how long it’ll take to break even
Note: It is an estimate. The cost of energy can change, as can what you’re paid for selling it back to the grid.
For a rough estimate of how long it’ll take to break even, if you lived in about the middle of the country, see our table below.
How long it will take to break even
| If the price cap falls by 40% (1) | If the price cap falls by 20% (1) | Savings based on 1 Apr price cap | If the price cap rises by 20% (1) | If the price cap rises by 40% (1) | |
| Electricity bill savings (2) | Average: £171(£99-£243) | Average: £228(£132-£324) | Average: £285(£165-£405) | Average: £342(£198-£486) | Average: £399(£231-£567) |
| Smart export guarantee payment (3) | Average: £95 (£80-£110) | Average: £95 (£80-£110) | Average: £95 (£80-£110) | Average: £95 (£80-£110) | Average: £95 (£80-£110) |
| Cost of system (4) | £6,500 | £6,500 | £6,500 | £6,500 | £6,500 |
| Years to break even | 24 (20-31) | 20 (16-27) | 17 (13-24) | 15(11-21) | 13 (10-19) |
| Correct as of April 2022. Source: Energy Saving Trust. (1) Electricity bill savings are based on the 1 April price cap and how that may rise or fall in future. (2) Savings vary depending on how often you’re home, how much electricity you’re using and when (we’ve given the range in brackets above). (3) Based on a rate of 3.99p per kilowatt hour. (4) Based on a 4.2 kilowatt-peak system. | |||||
Many factors affect the payments you receive – such as where you live
A combination of factors will determine how quickly you’ll recoup your outlay:
How much you’ll make depends on where you live. The table above assumes you live somewhere in the middle of the country. If you live further south, in London for example, the bill savings will be about 4% higher, while savings in Scotland would be about 4% lower.
It’s all about daylight, not hours of sunshine or temperature. Northern homes get slightly less, so where you live needs to be factored in.
If you’re at home all day, it will take you less time to make your money back. You’ll recoup the installation costs in about 13 years on average, if you live in the middle of the country. In comparison, if you’re only home during the evenings, it’s about 24 years.
This is all about how much electricity you’re using. If you’re home all day, you’re using more electricity while your panels are generating energy, so the bill savings will be greater, but you’ll export less (as you’re using more yourself). Conversely, someone at home only in the evenings could make more from the smart export guarantee (SEG) than the savings on their electricity bill.
However, this is based on the SEG being available for the next 20+ years. While there are no plans for the scheme to end anytime soon, there’s also no guarantee the scheme will last this long.
For tons more top tips from solar nerds, read the MSE Forum’s Make the most of solar panels thread.
