For free advice call 0118 951 4490 or email

Request free advice / quote 

Homeowner Blog

Are Solar Panels Worth It in 2018? Yes, Solar Power Costs From 5p/kWh!

Erica Charles 09 Jan 2018

This month saw a modest drop in the feed-in tariff. The tariff for a typical 0-10 kWp domestic system is now 3.93p per kWh, down from 4p per kWh before Christmas.

And well down from the heady days of 2010, when the feed-in tariff scheme was first launched and the subsidy was 43p per kWh.  So, are solar panels a good investment today?

Speaking purely from a financial view, the answer is a resounding yes.  Of course beyond the financial, there are many other environmental benefits to be gained from installing solar, installing residential battery storage, driving an electric vehicle etc. Not least because they all contribute directly or indirectly to tackling air pollution, which, we are told, is gradually destroying the nation's health.

Back to the financials. The solar subsidy may have fallen, but so has the cost of the technology.  Overall the cost of domestic solar electricity is now between 4p and 10p per kWh.  This is well below the 15p average domestic import cost from the grid (which, by the way increased by 7% in the last 12 months....)

The economics of solar in 2018

A typical 4 kWp solar system (13-16 panels) with a state-of-the art SolarEdge inverter now costs around £6,300 incl VAT.  There will be some maintenance costs over the life, and a probable inverter replacement required, total cost around £1,200 in today's money.  So the true all-in cost of the system is around £7,500.

On average a system will generate around 3,700 kWh a year, with a modest degradation over time. In its 25 year life, it is expected to generate over 85,000 kWh of electricity.

The unsubsidised cost of solar

Ignoring the Feed-in Tariff subsidy for now, that means each kWh generated costs 8.8p:

kWh from 4kWp system over 25 years: 85,131
System cost including VAT: £6,300
Lifetime maintenance cost (present value): £1,200
Total system cost: £7,500
Un-subsidised cost per kWh: 8.8p


The subsidised cost of solar

What if we take the Feed-in Tariff subsidy into account, whilst allowing for the fact that not all of the electricity will be used on site?

With a Feed-in Tariff of 3.93p per kWh, an Export Tariff in respect of 50% of generation of 5.03p per kWh, and an assumed inflation rate of 3%, the present value of the total system subsidy is around £3,760.

This brings the cost per kWh of solar electricity down to 4.4p if all of the electricity is used on site. It's back up to 8.8p if only 50% is used on site:

Total system cost incl maintenance (from above):   £7,500
Lifetime Feed-in Tariff income (present value*): £2,292  
Lifetime Export Tariff income (present value*): £1,468  
Total lifetime tariff income: £3,760  
Adjusted system cost (present value) after taking into account subsidy income:   £3,740
Cost per kWh of solar electricity used on site with 100% on-site usage:   4.4p
Cost per kWh of solar electricity used on site with 50% on-site usage::   8.8p


*Tariffs paid quarterly over 20 year life of system - we have discounted all future cashflows discounted to present value using a discount rate of 5%. Export Tariff paid in respect of 50% of system output, whether exported or not.

Conclusion: solar is still a very good investment!

All of these costs are well below the average home's grid electricity cost of around 15p per kWh

What's more the cost of grid electricity is rising. According to Page 8 of the Government's latest "Quarterly Energy Prices" publication, domestic electricity prices rose by 7% when comparing Q3 2017 with Q3 2016... 

On a financial return basis, the internal rate of return (IRR%) from an investment in a solar system is typically 9% over the life, non-taxable and linked to inflation. How many other investments yield 9%, dependent only on the sun continuing to shine?

Topics: Is Solar a Good Investment?

Leave us your thoughts on this story