Personal Finance

How long does it take to pay back solar panels - and how much money will you make (or lose)?

With electricity prices skyrocketing, is now the time to install solar panels on your roof? NimbleFins digs into the data to see how long it takes to pay back a solar panel investment for different types of setups.

With electricity prices skyrocketing and the UK coming off a hot and sunny summer, you may be wondering if you should invest in solar panels for your home. But what are the economics of it? How long does it take to pay back the initial investment of around £6,000? NimbleFins looks at the time to pay back solar panels, and how this varies by factors like geography (i.e town), compass directions (i.e. which way the roof faces), amount of shade and even, perhaps surprisingly, how many hours you're home each day.

(If you'd like to learn more about how these factors affect solar production and usage, please see our related article 'Would solar panels work well on my home? How can I tell?')

To find out how many years it takes solar panels to break even, and how much money you could make (or lose) on solar, we ran different scenarios through the Energy Saving Trust's solar calculator. Here's what we found.

Solar Payback: Best Case (south facing, no shade)

For a south-facing roof that is unshaded, solar panels could pay off in a range of 9 to 22 years, depending on home occupancy during the day.

The shortest payback time is for households in which someone is home all day to make use of the solar power as it is generated. By the end of 25 years, this homeowner could be ahead by £7,300 (compared to just buying electricity from the grid).

But the economics are not as good for households that are home less during the day. When a home is empty most of the day until 6pm, the payback time is 22 years and the benefit is just £1,246 over 25 years. The economics are worse here because no one is home to use up the solar energy as it's generated—instead the energy can be sold back to the grid but the Smart Export Guarantee (SEG) rates for this are really low (3.2 - 5.5p/kWh range).

The table below shows the estimated payback time and economics for this 'best case' south-facing, unshaded setup ('best case' because it gets more direct sun than other compass directions or shadier conditions and therefore generates the most solar energy).

South, less than 20% shadingPayback periodTotal benefit over 25 years
Home all day9£7,300
Home in the mornings13£5,207
Home in the afternoon14£4,410
Out all day until 4pm18£2,143
Out all day until 6pm22£1,246

See our methodology section to read about our assumptions like future electricity prices, as these also affect the result.

Solar Payback: Worst Case (north facing, heavy shade)

At the other end of the spectrum are solar panel setups facing north and under heavily-shaded conditions. These clearly generate less energy—is it even worth getting solar panels in this situation? Does it make any economic sense?

It depends—largely on home occupancy. As with the 'best case' scenario above, homes that are occupied more during the day make the best use of solar generation. It's therefore these households for whom solar panels can still be profitable—even north-facing, shaded panels.

In the table below, the data shows that households home all day with north, heavily-shaded setups can pay back in 15 years (compare this to the 9 years for the south, unshaded setup). And the positive financial impact after 25 years can be £3,244 (compared to £7,300 for south, unshaded).

But for households out for most of the day until mid afternoon, solar panels look to be a money-losing proposition if they're facing north and heavily shaded. In our trials, the solar panel investment for this scenario is not paid back even after 25 years and the households are worse off by thousands of pounds.

North, heavy shade (>80%)Payback periodTotal benefit over 25 years
Home all day15£3,244
Home in the mornings22£1,251
Home in the afternoon24£553
Out all day until 4pmn/a-£1,465
Out all day until 6pmn/a-£2,212

Solar Payback: Moderate Case (east/west-facing, modest shade)

In between the best and the worst case scenarios, we considered an east or west setup under modest shade. This pays back in about 13 years for those home all day, but will be money losing for those out all day until 6 pm.

East/West, modest shading (20-60%)Payback periodTotal benefit over 25 years
Home all day13£5,372
Home in the mornings16£3,354
Home in the afternoon17£2,581
Out all day until 4pm24£414
Out all day until 6pmn/a-£408

Solar Panel Payback by City

The time it takes for solar panels to be profitable (if at all) also varies by geography, as some towns simply get more sun than others. Chicester is known to be one of the sunniest locations in the UK. Here, the data shows that solar panels can pay back in just 9 years under ideal conditions (south facing, less than 20% shade, home all day). But even here, solar panels don't make economic sense where conditions are poor (north facing, >80% shading, out until 6pm).

Glasgow, on the other hand, is less sunny but it only takes two more years to pay back a solar panel investment than in sunny Chicester.

Location, location, location? Not when it comes to solar. While location is certainly important here, other factors like where the roof faces, amount of shade and home occupancy are bigger drivers of solar panel economics.

Solar Panel Payback Times by CityBest Case (south facing, less than 20% shade, home all day)Modest Case (east/west facing, modest shade, home all morning)Worst Case (north facing, >80% shading, out until 6pm)
Chicester9 years15 yearsDoesn't pay back in 25 years
London9 years16 yearsDoesn't pay back in 25 years
Manchester9 years16 yearsDoesn't pay back in 25 years
Glasgow11 years17 yearsDoesn't pay back in 25 years

Methodology

The team at NimbleFins ran a number of potential solar panel scenarios through the solar calculator at Energy Saving Trust's solar calculator to gather data on solar generation potential. We then ran these numbers through our model to determine how long the initial solar investment would take to pay back given these different solar production levels.

The data in this article reflects sun in London, unless otherwise specified. Some areas in the north might take a couple years longer to pay back; the sunniest areas like Chicester might pay back in slightly less time.

We have assumed:

  • 4kWp system
  • Initial cost of £6,000
  • Maintenance cost at 10 years of £750
  • Maintenance cost at 20 years of £750
  • 30° roof slope
  • Annual decrease in efficiency of 0.5%
  • SEG tariff (for selling unused solar energy back to the grid) of 4.5p/kWh
  • Initial electricity prices of 52p/kWh that drop back to 25p/kWh in ten years, before they start growing again at an annual inflation rate of 3%
  • No battery storage (battery storage changes the importance of home occupancy, but these come at an added cost)

Note, a primary limitation of this study is the impact of future electricity prices, which are unknown, on the results. We have estimated future electricity prices, but they could vary a lot from these estimates. In the table below you can see the electricity prices estimates that we used.

Here is what the model looks like for the best case scenario for London (i.e. south-facing roof with less than 20% shade)—at the end of 25 years, the homeowner is better off by £7,300 and was breakeven at year 9:

YearEnergy generated EnergySelf consumption SelfExportElectricity price ElectricityFuel bill saving Fuel billSEG tariff SEGSEG payments SEGAnnual benefit AnnualInstallation & maintenance InstallationNet benefit Net
0-£6,000-£6,000
13,6481,4612,187£0.52£760£0.05£98£858-£5,142
23,6301,4532,176£0.52£756£0.05£98£854-£4,288
33,6121,4462,165£0.52£752£0.05£97£849-£3,439
43,5941,4392,155£0.47£673£0.05£97£770-£2,669
53,5761,4322,144£0.42£603£0.05£96£700-£1,969
63,5581,4252,133£0.38£540£0.05£96£636-£1,333
73,5401,4172,123£0.34£484£0.05£96£579-£754
83,5221,4102,112£0.31£433£0.05£95£528-£226
93,5051,4032,101£0.28£388£0.05£95£482£256
103,4871,3962,091£0.25£347£0.05£94£441-£750-£52
113,4701,3892,080£0.26£356£0.05£96£452£400
123,4521,3822,070£0.26£365£0.05£99£464£864
133,4351,3752,060£0.27£374£0.05£101£475£1,339
143,4181,3692,049£0.28£383£0.05£104£487£1,826
153,4011,3622,039£0.29£393£0.05£106£499£2,325
163,3841,3552,029£0.30£402£0.05£109£511£2,836
173,3671,3482,019£0.31£412£0.06£112£524£3,360
183,3501,3412,009£0.32£423£0.06£115£537£3,897
193,3331,3351,999£0.32£433£0.06£117£550£4,448
203,3171,3281,989£0.33£444£0.06£120£564-£750£4,262
213,3001,3211,979£0.34£455£0.06£123£578£4,840
223,2841,3151,969£0.35£466£0.06£126£593£5,433
233,2671,3081,959£0.37£478£0.07£129£607£6,040
243,2511,3021,949£0.38£490£0.07£133£622£6,662
253,2351,2951,939£0.39£502£0.07£136£638£7,300
Erin Yurday

Erin Yurday is the Founder and Editor of NimbleFins. Prior to NimbleFins, she worked as an investment professional and as the finance expert in Stanford University's Graduate School of Business case writing team. Read more on LinkedIn.

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