Personal Finance

Time it takes to repay cost of solar panels slashed to just four years, new analysis shows

Soaring energy prices mean it will take just four years to repay the cost of installing solar panels, new analysis has suggested.

Climate website Carbon Brief says the time for an average rooftop solar panel installation to start being cost effective has plunged from 16.7 years in October 2020 to 4.1 years in April 2023 when bills could rise as high as £5,277.

Solar panels have an expensive outlay, but mean electricity bills are, in most cases, slashed to zero as households are not buying from the grid and instead can even sell back any surplus energy generated.

While this eventually saves people money, many have been reluctant to invest, particularly if they are not sure if they will still be in their homes in 20 years' time to reap the rewards.

Dr Simon Evans, senior policy editor at Carbon Brief, told the i: “Stratospheric gas prices are driving our energy bills through the roof.

“That’s making low-carbon options even more cost effective. Whether it’s large-scale wind farms now costing four times less than gas power, or home solar systems that could pay back the initial outlay within less than five years, the economic case for net-zero has never been stronger.”

Carbon Brief puts the cost of installing a 3kW capacity rooftop solar panel system at £4,300 and based calculations on the presumption households are using 45% of their generated electricity and selling the rest back to the grid at 4p per kWh.

It claims the repayment time has already dropped to 11.1 years under the current price cap.

Analysts based their 2023 estimates on forecasts released by energy consultancy group Auxilione earlier this month that predicted the price cap could hit £3,628 in October, £4,538 in January and £5,277 in April.

The cap is currently £1,971 and the next announcement will be made on August 26, coming into effect on October 1.

However, Work and Pensions Secretary Therese Coffey rubbished the £5,000 plus estimation. She said: "Just like in May, we waited for Ofgem to come out with the formal changes on what might happen to energy prices or what would happen with the price cap.

"All the figures I have seen do not in any way suggest an average energy bill next year of £5,000, nothing near like that."

Despite uncertainty about just how high the energy cap will rise by April, all forecasts point to eye-watering sums.

It’s even led some schools to consider three day weeks to try to reduce energy costs.

Lower income households will have to reduce spending by three times as much as high income families to afford their energy bills, according to thinktank Resolution Foundation.

Those in the lowest fifth of earners will have to cut nearly £1 in every £4 of their non-essential spending. That rises to about £1 in every £12 of non-essential spending for the richest tenth of households.

Nimblefins has pulled together 11 ways to save energy in the home.

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