Are solar panels worth it?

Installing solar panels should help lower your electricity bills and your carbon footprint in the long term, but exactly how long will it take before they pay for themselves and start earning you money? 

Solar panels are generally sold as a way to save money on electricity – but they can be a way to make money too, because you can get paid for the energy they produce that you don't use.

Many people also install solar panels for other reasons, such as wanting to use greener, low-carbon 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. 

We've worked out how long it's likely to take to break even, and how much you could earn from solar panels over time. 

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.

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How long do solar panels take to pay for themselves?

There are a number of factors that affect how long it takes for solar panels to pay for themselves, and whether you will eventually make money from them.

• The location, size, angle, orientation and shading of your roof

In general, the further south you live in the UK, the more energy your solar panels will generate. A larger roof area means you can fit more panels and increase your generation capacity. Most standard pitched roofs are suitable but a very steep or very shallow roof pitch may reduce your system's effectiveness. South-facing roofs with no shading are the best candidates, but east or west facing, and roofs with a small amount of shading, can still be suitable. 

• The cost of your solar PV installation

The more solar panels you install, the greater the cost; however, this doesn't necessarily mean a longer payback time. If you're able to make use of the additional electricity you generate, it can still be a good investment. But if your installation costs are higher due to other factors, such as a roof that needs repairs or strengthening, or that is difficult to access, then your payback time will be longer.

• How much of the electricity generated you are able to use

If you are often at home during the day and able to use the electricity, or if you have a storage battery, your savings will add up more quickly. The cost of a unit of electricity from your supplier will normally cost more than the unit rate you'll be paid for selling it, so using your own solar-generated power saves more money.

• Whether you are paid for exported electricity, and how much

You won't automatically get paid for any unused electricity you generate. If you don't sign up with an energy company to export the excess, you'll simply be giving it away for nothing. The Smart Export Guarantee (SEG) rates on offer vary widely, from as little as 1p/kWh to  25p/kWh or more, depending on the supplier and tariff you choose.

We've looked at locations in four cities across the UK. For each one, we've calculated how much you might expect to save on your bills and how much you could earn from selling excess electricity, and therefore how long it could take for a typical rooftop solar panel system to pay for itself. 

The figures above are examples based on a common set of assumptions. Your actual fuel bill savings will depend on your individual installation, including the size, efficiency and location of your PV system, your tariff, and how much electricity you use when the system is generating. 

Of course, once your PV system has paid for itself, it will continue to save you money into the future. A roof-mounted solar panel system should last up to 25 years (some panels have a 25-year warranty) so you may have a further 10-15 years of savings, or more. In the example above, a London home might continue to benefit from £655 of savings/payments every year - or £9,170 over the subsequent 14 years following the break even point.

What if your roof is not ideal?

If your roof is not in the ideal situation for solar panels, it can still be worthwhile installing a PV system. If there is a combination of factors limiting your potential energy generation - such as significant shading plus a less-than-ideal orientation - you might find that it's not financially worthwhile.

We've recalculated the above examples using similar data, but swapping the south facing aspect for east facing, and adding modest shading (meaning that the roof is partially shaded occasionally during the day or in some months of the year), to show how this might affect the energy generation potential and payback time.

Although an east-facing, modestly-shaded solar PV system will take longer to pay back the initial outlay, it may still be worthwhile for you. It is more important, though, to be certain that you can use as much of the generated energy as possible, to maximise your bill savings. You should also expect to remain in your home for the next 16-18 years if you want to recoup your investment.

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 else affects your solar panels' payback time?

The amount you earn from either the SEG, the (now closed) Feed-in Tariff (FIT), or the savings you make by using the renewable electricity your system generates can be affected by:

• Electricity price changes Changes in the price you pay your supplier will affect how much you save on your bills when you use self-generated electricity. Higher retail electricity prices mean greater savings and a quicker payback, but if prices fall your savings will fall too, and the payback time may be extended.
• SEG tariff rates These vary widely between energy companies, so it's worth shopping around. 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). You can switch your SEG tariff, and it doesn't have to be with the same supplier you buy your energy from.
• Inflation This affects feed-in tariff (FIT) payments, if you’re signed up for them. They change in line with Retail Prices Index (RPI) each year.
• Quality of solar panel system, breakdowns and inefficiencies  Your solar panel installation may not generate as much energy as expected, due to faulty panels, poor installation or other technical issues. If they are covered by a warranty, it may cost nothing to rectify the problem, but they may have generated less (or no) electricity for a period of time. They may also require maintenance and/or cleaning in order to maintain their effectiveness. A significant reduction in efficiency, or an extended period of shutdown, may lengthen the payback time.

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. This scheme is now closed to new applicants.

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 - note that your SEG agreement doesn't have to be with your energy supplier (although you may a get a preferential rate from your energy supplier if it has exclusive deals or packages for existing customers).

Current SEG rates are generally lower than the retail price of grid electricity, so depending on your rates, using the energy you generate might be more cost-effective than selling it. If you can't use it in daylight hours, it could be worth investing in a storage battery instead. 

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 make sure you've fully understood any terms and conditions. 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 solar buyback or 'rent-a-roof' scheme is another option, but we advise caution here, as again, the long-term implications of the contracts aren't always favourable. 

Find out more about solar buyback schemes and grants.

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.

Find out more about 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.

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 also 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. Polycrystalline panels are being phased out in the UK, and few installers still offer them. 
• 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. 

This can be a good option if your roof isn't a suitable place to put a solar panel system. However, they may need foundations and can also 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:

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 between 60-144 cells depending on the type of panel. 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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