In today’s economic climate, the best way to achieve a healthy return on investment from your commercial solar panels or domestic solar panels is by using as much of your generated power as possible.
Over the last 2 years, various factors have led to energy prices rising to record levels; and by enabling property owners to cut high utility bills solar panels deliver a significant return through electricity cost savings.
In real terms, most solar PV systems pay for themselves within 5-7 years, and the long life of solar panels and inverters mean that all of the energy produced for the next 20+ years is effectively free!
The secret to generating the best returns from your solar investment is ensuring that the system you install, whether that’s a standalone solar PV system or a system that incorporates solar panels and battery storage, is designed with your energy consumption in mind.
But how much can you realistically expect to save or earn with solar panels in the UK climate? What are the costs, incentives and key factors that you need to consider when determining the ROI from solar panels?
Understanding the savings from solar power
There are three main financial benefits to installing solar panels:
- Reduced electricity bills: Every kWh of solar electricity generated, and consumed on site, is a kWh knocked off your electricity bill. At present, the cost of 1 kWh of electricity is 52p per kWh.
Your individual tariff, the cost of your system and your energy usage will determine how much you can reduce your bills by and how long it will take to break even on your investment. Most systems pay for themselves within 5-7 years.
- Export Payments: The Smart Export Guarantee (SEG) is the government scheme which requires energy suppliers to pay properties with solar panels for any excess power that’s generated and exported to the grid rather than being used on site. Large commercial installations may also have the option for a Power Purchase Agreement.
The UK’s previous Feed-In-Tariff scheme paid early adopters of solar energy for all the energy they produced, this was a huge incentive to invest which came to an end in 2019. The Feed-In-Tariff is still in place for systems that were installed before it closed.
Should you export or store excess energy?
Once installed your solar panels will generate electricity during daylight hours which will be fed directly into your supply and utilised instantly, reducing or ideally eliminating the need for you to purchase electricity from your provider at that time.
If a significant amount of the power you can produce won’t be consumed as it’s generated, and you have a high demand later in the evening or overnight you may want to consider an energy storage system. It may be more cost effective for you to invest in a battery to save and use the majority of the electricity you generate with your panels, rather than automatically switching to your energy provider when the sun goes down.
Some solar batteries also provide an Uninterruptible Power Supply (UPS) which means in the event of a power cut, your lights and power will stay on.
Every kWh of solar electricity generated is another knocked off your electricity bill. With today’s high energy prices, and the reducing costs of battery storage, more homes and business are better off looking at combined battery and solar installations. The savings you can make by storing and then using your own energy are better than the income you would get from exporting it.
Some other things to consider
When selecting panels, invest in the highest-grade mono- or polycrystalline silicon models you can afford. The most efficient panels on the market today are rated at 18-22% efficiency. Going with premium efficiency translates directly into better energy output and savings over time.
The inverter you choose is also important for maximising solar ROI – opt for a reliable brand with a 10+ year warranty. Solar PV systems have long life spans of up to 30 years and require little service and maintenance, and choosing good quality inverters will ensure your system performs dependably for as long as possible.
The size of your solar PV system should be determined by the amount of energy you would like it to produce, but may be limited by the space available for your installation. The size and orientation of your roof may limit the number of panels that you can realistically install or you may not have a suitable area for a ground mounted or tub system. If this is the case, a smaller system will still deliver savings on your energy bill but won’t allow you to benefit from increased generation and battery storage.
Calculating your individual ROI is an important step when considering your investment in renewable power, whether for your home or your business. Your returns will be based on the initial cost to install your system, the amount of energy it will produce, and possibly store, and what this will mean in terms of electricity bill savings or export payments. To fully understand these calculations you will need to model the options that are available to you using specialist software, or enlist the help of a renewable energy installer.
At Geo Green Power, we’re experts in renewable technologies and putting you in control of your energy get in touch to talk with a member of our highly experienced team.