So, you're considering adding solar panels to your home, but you're still unsure if you really want to make the investment. Perhaps you're concerned about the upfront cost and whether it's truly worth it, or if the money could be better invested elsewhere. Well, in this post, we break down whether solar is still worth it in 2024.
One way to look at the investment in solar panels is that you're essentially pre-paying for at least 25 years' worth of electricity upfront, based on the life of the panels (though for many models, the warranty is now 30 years, and they can still function beyond this). So, one thing to consider is how much that upfront investment costs you versus what your energy costs will be over the next 25-30 years.
As we all know, the energy market has been particularly volatile lately. While the price of energy has significantly reduced from its 2022 peak, there is uncertainty about which way energy prices will go, given international tensions. No one has a crystal ball, but we can provide a few examples of the different costs and potential savings involved when you invest in solar energy.
Consider a standard 4kW domestic installation. Without a battery, this would entail an upfront cost of around £6500-£8000 (Early 2024), depending on the complexity of the installation. A 4kW system will on average produce 3,600 kWh of electricity per year. Essentially, you're buying at least 90,000 kWh of electricity upfront over the life of the panels, which translates to a cost per kWh of just 8.3p. The current average market cost per kWh for domestic consumption is 29p. So, from this perspective, there is a huge saving to be had from installing solar.
Then, take the average energy bill of a typical property large enough to support that installation. For a typical 3-bedroom detached property, this would be in the region of £940 annually at 2024 prices. Due to more energy being used in the evening or night when solar isn't generating, on average only 1/3 of energy generated is actually used on site (without a battery), so you can expect savings on your energy bill of around £320.
However, you can add to this what you get paid for exporting the remaining 2/3 of the energy generated - SEG rates vary, but on the best fixed tariff you can expect to earn 15p per kWh. With a standard domestic install generating 3,600 kWh per year this translates to 2,400 kWh exported. Which means £380 or so in your pocket, translating to an annual return of £700, combining what you earn from exports and what you save from using on site.
This would give you a payback period of 9-12 years. Given the life of solar panels is over 25 years, it means that over the life of your solar panels, you are essentially recouping at least 2 to 3 times your initial upfront investment at very little to no risk. This return on investment for the risk simply can't be beaten in the financial sector.
Of course, the above is contingent on energy prices remaining stable for that 25-year period, which is highly unlikely given geopolitics and historical trends. While energy prices are expected to dip slightly in 2024 from the highs of 2022, it's a safe bet that energy prices will continue to outpace inflation and interest rates over the medium and long term.
This is another way to look at buying solar panels: you're locking in energy at a cheaper rate than the current market, and if you believe energy prices are going to rise over the lifetime of the solar panels, your payback period could fall drastically.
While energy prices may have fallen slightly, the good news for consumers is that due to the rush on solar in 2022, the market is now reaching a saturation point, meaning the average cost of an installation has come down. From the £9,000 cost in 2022, a conservative installation price for a 4kWp system is now £6,500 - £8,000 (Early 2024), making now a great time to go solar.
The environmental considerations are another factor when considering a solar investment. A 4kWp array can save around a tonne of CO2 per year, helping to reduce the environmental impact of your energy usage and ensuring a greener future for your children. Augmenting your solar system with a battery saves you even more, as the battery can further decrease the load your house will have on the grid, even at night when the sun isn't shining. In 2023, 4.7% of the UK's energy came from solar, much of that from small domestic installations, making a dent in the UK's reliance on fossil fuels.
At the same time as the cost of installing solar is coming down from the highs of 2023, the technology behind solar is also improving. As this filters through to the market, many of the solar panels now available are more efficient and longer-lasting than those on the market even a few years ago. For more detailed and up-to-date information on the solar panels available, please consult our extensive knowledge bank article here.
An investment on the scale of a solar panel system is always worth considering carefully, but if you want to know more, please feel free to pick up the phone for a no obligation discussion with one of our friendly technical experts who would be more than happy to give you bespoke advice for your specific property and circumstance.
Give Spirit Energy a call on 0118 951 4490 or email info@spiritenergy.co.uk to get the conversation started, and help us make solar work for you.