Solar panels – are they worth it?

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By AdFeatures | Wednesday, August 15, 2012, 11:58


With current gas and electricity prices anything that could shave a little off our fuel bills is welcome, and recently we have all seen houses being fitted with solar panels, and perhaps you have looked into it yourself. The question is always if installing them is worthwhile and what are the real savings.

Solar panels, which are also known as photovoltaics, often abbreviated as PVs, work by converting solar energy into electricity. They don’t work only on sunny days; they still produce electricity when the skies are cloudy, and the electricity can be used to power household appliances and lights.

The advantage is that you will save on the cost of your electricity. You might also get paid for the electricity that your PVs generate. When you are generating more than you need you fed the surplus back into the electricity grid and get payment for doing so.

Let’s look at some real figures. You will need to have a roof that faces approximately south and is relatively free from shade. We will consider an average size semi-dethatched or detached house that faces 160 degrees south-south-east, that is free from shade, and has a standard roof pitch of around 40 degrees and a roof area sufficient to accommodate twelve solar panels which will provide an output of up to 2.6 kW. This is in many ways an ideal house for installing PVs, so we are looking at an almost best case scenario.

Assuming that the average electricity bill is around £35 a month, then the amount of money saved from the electricity bill is around £73 a year. The feed-in tariff payments would be £344 a year and the grid export income would be £48 a year. Taken together this gives a total annual income of £465 a year.

On the minus side you would need to pay the installation costs. Such a system as the one described would cost around £6,900 to install and once installed it should be maintenance free. The actual lifetime of the system should be around 25 years, so over its lifetime at current values the system would produce an overall profit of £9,250 less the interest that could be produced on the initial investment over that period.

If instead of opting for PVs you invested the £6,900 installation cost in an ISA paying 3.5% interest, then after 25 years your investment would be worth £16,306 tax free, so you would have made £9,406.

The conclusion is that you might as well invest your money in an ISA as paying to have PVs installed as the returns are equivalent.

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  • Profile image for litzie

    This is a very, very weird article. Where are you getting a savings of £73 per year on an electricity bill of £35 per month? If you produced enough electricity to cover all your needs, you would save £420 per year on bill savings alone. If you did NOT produce enough electricity to cover your total usage, how could you be producing enough to feed in, and therefore why would you receive a feed in tariff?

    Also it seems bizarre to see the profit on solar panels negatively versus the interest on an ISA, rather than seeing it positively as in, an investment equivalent to getting an ISA? Given the obvious environmental benefits, it seems clear what one should choose if you get roughly equivalent returns!

    By litzie at 13:26 on 15/08/12

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