James Elston

James Elston

Published June 8, 2024

Solar panels can take anywhere from 5 to 10 years to pay for themselves, but there’s a way to generate a more accurate calculation for your home specifically. 

From initial costs and government incentives to energy consumption and geographical location, we’ll provide you with a comprehensive guide to understanding when you can expect your solar panels to start saving you money.

What Factors Impact the Payback Period?

The payback period for solar panels refers to the time it takes for the cost savings from the solar energy system to equal your initial investment.

Several factors influence this period, including the cost of the solar panel system, electricity prices, energy consumption, and available government incentives.

For UK households, the average payback period for solar panels typically ranges from 10 to 15 years.

Here’s a breakdown of the factors that can influence the payback period once you install solar panels:

  • Initial investment: The total cost of installing the average solar panel system, which includes the panels, inverters, batteries, and installation fees, typically ranges from £7,000 to £15,000 for a typical home.
  • Electricity prices: Higher electricity prices lead to greater savings from generating your own power, which will shorten the payback period. The more electricity prices continue to rise, the more solar panels save you money​.
  • Energy consumption: Homes with higher energy needs save more money by switching to solar, which can reduce the payback period.
  • Government incentives: Programmes like the Smart Export Guarantee (SEG) make it possible for UK homeowners to earn money for excess electricity. SEG payments can add approximately £100 to £200 per year in savings.
  • System efficiency and maintenance: Efficient solar panels generate more electricity and save more money over time, despite potentially higher upfront costs. Regular maintenance ensures optimal performance and extends the system’s lifespan, leading to further savings.

How Do I Calculate My Solar Panel Payback Period?

Here are the steps you would follow to calculate your potential payback period after installing solar panels:

  1. Start with your initial investment costs. This should include the entire system, supporting equipment and installation.
  2. Calculate how much you can expect to save on electricity bills based on how much energy your panels generate per year. For example, if your solar panels generate 4,000 kWh per year and you pay £0.15 per kWh, your annual savings would be:
    £0.15 x 4,000 = £600.
  3. Add on any money you will receive from government incentive programmes per month by sending electricity back to the grid.
  4. Lastly, divide your initial investment costs by the total annual savings to get an estimated payback period.

Let’s look at an example:

  • Initial investment: £10,000
  • Annual energy production: 4,000 kWh
  • Electricity price: £0.15 per kWh
  • Annual savings on bills: £0.15/kWh x 4,000 kWh = £600
  • SEG government incentive payments: £100 per year
  • Total annual savings: £600 (from bills) + £100 (SEG) = £700

Final calculation: £10,000 / £700 = 14.3 Years (payback period)

What Are the Average Solar Panel Costs?

The cost of installing solar panels in the UK depends on several factors, including the type of solar panels, the size of the system, and the complexity of the installation.

Average cost of solar panels

For a typical three-bedroom home, a 4 kW solar panel system is usually sufficient. The cost of this system ranges from £6,000 to £10,000, depending on the brand and efficiency of the panels used.

For example, monocrystalline panels, which are known for their higher efficiency, tend to be more expensive compared to polycrystalline panels. Monocrystalline solar panels cost between £1.10 and £1.60 per watt, while polycrystalline solar panels cost between £0.80 and £1.10 per watt​.

Installation fees

The installation of your system also needs to be considered. Solar panel installation costs generally range from £600 to £3,000 for labour alone. There are also mounting systems, which secure the panels to the roof. This can add another £600 to £2,500 to the total cost.

Additional equipment

Beyond the panels and installation, other essential components include:

  • Inverters: Inverters convert the direct current (DC) generated by the panels into alternating current (AC) for home or business use. Inverters typically cost between £900 and £1,800 and need to be replaced every 10 – 12 years.
  • Solar batteries: Adding a solar battery allows you to store excess energy for later use, enhancing your energy savings. The cost of solar batteries ranges from £1,500 to £4,000.

Are There Any Benefits Beyond the Payback Period?

The solar panel payback period is not the only reason why these systems are a sound investment.

  • Reduced energy bills: After the solar panel payback period, electricity generated by your solar panels is essentially free. This can lead to significant savings on your electricity bills for the remaining lifespan of the panels, which can be up to 30 years.
  • Earnings from excess energy: Thanks to schemes like the Smart Export Guarantee (SEG), you can continue to earn money by selling excess electricity back to the grid.
  • Higher property value: Home and business owners who install solar systems often see an increase in property values. Serious buyers are often willing to pay more for properties with solar power capabilities. Some studies suggest that solar panels can increase property values by around 4-5%​.
  • Reduced carbon footprint: Solar power is a clean and renewable energy source. Solar panels reduce your reliance on fossil fuels, which decreases your overall carbon footprint. On average, a typical residential solar panel system can save approximately 1.5 to 2 tonnes of CO2 per year.
  • Energy independence: By generating your own electricity, you become less reliant on the grid, which can be particularly beneficial during supply disruptions.


How many solar panels do I need?

Most residential solar system sizes range from 3 kW to 6 kW. A 4 kW system is a popular choice for average-sized homes with 2 – 3 bedrooms. This means you would need roughly 8 – 13 solar panels. However, the size of your roof and how much sun the panels receive will also play a role.

How can I supply energy back to the national grid?

To supply energy back to the national grid, you would need to submit an application with an SEG tariff supplier. Ofgem lists all all of the available energy suppliers. There’s no need to choose the same supplier that provides your energy either. You can determine which tariff you’re happy with.

What government schemes can help me reduce solar panel costs?

There are several schemes that UK homeowners can take advantage of to reduce the initial investment costs of a solar system.

  • Zero VAT: The UK Government has reduced the 5% VAT relief on energy-saving measures to 0% for homeowners.
  • Smart Export Guarantee (SEG): The SEG scheme pays homeowners and businesses for any electricity they feed back into the grid.
  • ECO4: The government has allocated £4 billion towards the installation of solar panels and heat pumps across the UK, with the aim of improving the energy ratings of UK homes and reducing carbon emissions.

Final Thoughts

There’s no denying that solar panels are a long-term investment, but they’re also well worth the payback period

Eventually, you will be able to enjoy increased savings on your electricity bill and peace of mind knowing you are doing your part for the environment. 

At Eco Happy, we’re all for saving money, and reducing your energy bills is what we do best.

If you’re ready to install solar panels and start benefitting from renewable energy, we’re here to help. Whether you want to explore your solar panel options or find out more about the installation costs, our team of experts is ready to guide you.

Get a quote today!

James Elston

James Elston

Boiler Expert

James Elston is the top boiler replacement and heating expert at Eco Happy. He has over 20 years of experience in the industry, focusing on Gas Safe boiler installations and offering home-heating and energy-saving solutions to homeowners across the UK. From sourcing the most energy-efficient combi boiler to providing specialist heating advice, James ensures that Eco Happy maintains the highest standards and best customer service.

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