Are solar panels worth it?

Buying solar panels is a long-term investment that should help cut your electricity bills and carbon footprint. But will they pay for themselves and earn you money? 

Solar panels are often marketed as a way to save money on electricity, and sometimes as a way to make money too. This is because you can get paid for the electricity they produce that you don't use.

Of course, many people install solar panels for other reasons - such as that they want to use greener energy and be less reliant on the National Grid for their energy supply. But it's still worth knowing how soon you'll see a financial return on your investment.  

Keep reading to find out how long it's likely to take to break even if you buy solar panels, and how much you could earn from them. 

If you've decided to go ahead with solar panels, use our solar panel brand reviews to find the right solar PV option for you.

How do solar panels work?

Solar panels are made of a thin layer of semi-conducting material sandwiched between a sheet of glass and a polymer resin. When exposed to daylight, the semi-conducting material becomes 'energised' and this produces electricity.

Our experts explain how solar panels convert sunlight into electricity in this video.

A solar PV system usually comprises:

• solar panels
• inverter - usually fitted in the loft, this converts the direct current (DC) produced by the solar panels into safer alternating current (AC) which can be used in your home.
• isolator switches - fitted before and after the inverter for safety
• PV-generation meter - a real-time display of how much electricity your system is generating
• cables.

What's the difference between solar PV panels and solar thermal panels?

Solar PV panels generate electricity. Solar thermal panels generate heat. 

Both types use the sun but the technology they use to capture its energy is different.

Read about solar water heating with solar thermal panels.

How long do solar panels take to pay for themselves?

How long it will take for your solar panels to pay for themselves, and whether you can make money from them, depends on a range of factors:

• The location, size, angle, orientation, and shading of your roof
• The cost of your solar PV installation
• How much of the electricity generated you are able to use - for example whether you are often home (or at least able to run appliances) during the day
• Whether, and how much, you are paid for electricity exported.

A more expensive system upfront will need to be balanced with how much money you can save by using the renewable electricity it generates (instead of buying power from your energy firm), plus how much you can earn from selling any excess.

Below we've calculated how much you might expect to save on your bills and earn from selling electricity, and therefore how long it could take for a typical rooftop solar panel system to pay for itself, across the UK.

The figures above are examples. Your actual fuel bill savings will depend on a number of factors including the size, efficiency and location of your PV system and how much electricity you use when the system is generating. If your system costs more to install, it could take longer to pay for itself. However, if your system produces more electricity, you could save more on your bills or earn more from SEG payments, meaning it pays for itself quicker.

You can cut the time your solar system takes to pay for itself by finding the best SEG tariff rate, so you get paid more for electricity you produce, and by maximising how much electricity you use (eg. to run appliances) while the sun is up. Find out how much you could earn with the Smart Export Guarantee.

What affects your solar panels' payback time?

The amount you earn from either the SEG, the FIT or the savings you make by using the renewable electricity your system generates can be affected by:

• Electricity price changes These affect how much you save on your electricity bills by using the electricity generated by your system. Higher electricity prices mean greater savings.
• Solar panel installation cost A smaller upfront cost could mean that it's quicker to break even, though a smaller will probably generate less electricity.
• SEG tariff rates These vary widely between companies. A fixed tariff guarantees the same rates for the length of the deal, while variable tariffs change based on the price of electricity (for example, rates could be linked to wholesale costs).
  
• Inflation This affects feed-in tariff payments, if you’re signed up for them. They change in line with RPI each year.

Find out how much solar panels cost for your home.

Tips for investing in solar panels

Some companies market solar panels as a money-making investment. But there are significant differences between traditional options (such as savings and investments) and buying and installing a solar panel system.

If you already receive feed-in tariff payments, they are guaranteed for between 20 and 25 years (depending on when you had the panels installed). The price per kilowatt hour you're paid changes annually with the Retail Prices Index (RPI) and any money you make is tax-free.

However, if you install solar panels now, and plan to export excess energy using the Smart Export Guarantee scheme, there is less long-term security. 

Variable tariff rates can change when companies choose. Fixed tariffs are valid for a certain period of time (typically 12 months), after which you'll need to find a new one. You can shop around because your SEG agreement doesn't have to be with your current energy supplier (although you may a get a preferential rate from your energy supplier).

Current SEG rates are much lower than the retail price of grid electricity, so it's more cost-effective to use the energy you generate rather than sell it. 

Read more about the Smart Export Guarantee.

Paying for your solar panels

The most cost-effective way to finance the installation of solar PV panels is to pay in full using your own savings.

If you're unable to pay upfront, you could consider a loan or remortgaging. However, if you have to pay interest on the money you borrow, the loan repayments could exceed the returns you make from your solar panels, so it may not be worth it. Make sure you do your calculations carefully.

Some energy suppliers and other companies offer interest-free financing options for solar panel installation, but check the terms and conditions carefully. Offers may exclude the cost of additional essential work, or may tie you in to an energy tariff that is not the most suitable for you. 

Entering into a 'Free solar panels and solar buyback' or 'rent-a-roof' scheme is another option, but we advise caution here.

Types of solar panels

There are four basic types of PV panel. They're all made of silicon but differ in how the material is cut and treated. They differ in efficiency - how much of the sun's energy is used by the system per unit area - and price:

• Monocrystalline solar panels are made from the most pure silicon meaning they have a higher power output than polycrystalline panels. They're also very pricey.
• Polycrystalline solar panels are less efficient but cheaper than monocrystalline.
• Hybrid panels combine crystalline cells with thin film cells. They're very efficient but costly. Also known as HIT solar cells. 
• Thin film (or amorphous silicon) cells can be the cheapest but also the least efficient. They're less common for residential projects.

Solar tiles and slates are also available. These are installed in the same overlapping way as ordinary roof tiles and can be more aesthetically appealing than fitting solar panels on top of an existing roof. 

But they're pricey: solar tiles can cost double the amount of an equivalent solar PV panel system.

Ground-mounted systems are another alternative to fitting solar panels on your roof. Some state-of-the-art systems can rotate to follow the sun and maximise the amount of electricity they produce. They may need foundations and can be pricey.

Find out more about types of solar panels and other buying advice for solar panels.

To help decide which type of solar cells to go for, look at cost-per-watt (£/W) of power output. You can do this by dividing the total cost of the solar system you are being quoted for by the total power output of the system. 

When comparing quotes, make sure you know what type of solar PV cells you are being quoted for. Check that the manufacturer you choose produces some of the best solar panels.

Solar panel efficiency

More-efficient panels will tend to cost more. Before buying expensive panels, consider the size of your roof. If you have enough space, cheaper, less-efficient panels could end up being more cost-effective over time. 

However, if space is limited, you would probably want to maximise efficiency to get more power out of fewer panels.

We asked solar experts and solar panel owners for their top tips. Save yourself hours of research and find out how to make the most of your solar panels.

How are solar panels made?

A good-quality manufacturing process involves checks at every stage – from how individual cells are checked and connected, to how well panels are scrutinised for defects before they leave the factory.

We’ve outlined the process below, based on an audit of solar PV factories we carried out a couple of years ago.

1. Connecting solar cells

Individual solar cells are sorted by power. They’re soldered together into strings to form a solar panel (or module). Usually a panel is made up of 60 cells. They’re checked for tiny cracks or other defects using electroluminescent testing. Damaged cells should be rejected.

2. Lamination

The cells are placed between layers that protect them. The layers are fed into a laminating machine, like an oven, and melted into one. This needs to done carefully so air bubbles don’t form and damage the panel’s electrical insulation. If humidity gets in, lifespan could be reduced.

3. Finishing

A frame is then put round the panel to protect it. Tightness is key. A junction box is attached to connect the panel to the inverter using cables. The connection between the solar panel and the inverter must be waterproof and not too tight, so as not to apply too much pressure on the panel and damage the cells.

4. Quality control

A flash test, with a sunlight simulator, helps determine the panel’s capacity. The panels are then sorted by how much power they can produce, and priced accordingly. Further quality controls may be carried out, for example, to find breakages or so-called hotspots.

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