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How can solar energy save money?

How can solar energy save money?
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Solar energy is a renewable energy source that can be used for both electrical and heating needs. But can solar energy actually save you money?

The systems you’ll need to install for heating and electrical needs differ. If you want to harness solar energy for heating, you’ll need to install solar thermal heating systems. However, if you want to use solar energy for your electricity needs, you’ll have to install solar panels.

These systems can be initially expensive, but you could save and earn a lot of money in the long term. Let’s take a look at how.

How much does solar power save on electricity bills?

The initial cost of installing solar panels for a family of 3 or 4 averages between £5,000 and £6,000 for a 3kW panel system. You may also come across other panel systems (4kW, 5kW and 6kW) that cost between £7,000 and £10,000. The bigger the system, the higher the initial cost, but the more money you can save in the long run.

How much you save on your electricity bills depends on whether the panel system you install covers all of your electricity needs. If it does, then you’ll save however much you pay monthly or annually for electricity.

Of course, your solar panels might not produce a constant amount of electricity, owing to changes in weather. Because of this, you might still need to be connected to the National Grid.

However, the amount of electricity you use from the grid will be lower than before installing solar panels. This means you still get to save on your electricity bills.

How much can I earn from solar panels?

Applying for solar panel grants and incentives can help you make money by generating and exporting electricity back to the grid. You may come across the:

  • Feed-in Tariff (FIT) – this is no longer open for new applicants. However, those who have already registered receive FIT payments quarterly for the electricity they generate and export to the grid.
  • Smart Export Guarantee (SEG) – this incentive was launched on 1 January 2020. It allows homeowners to sell surplus energy back to the grid. Homeowners should apply to an SEG licensee for payment for electricity exported to the National Grid. How much you get paid, and for how long, depends on the SEG licence you choose and how much electricity you export to the grid.
  • Reduced VAT on energy-saving products – this is a 5% tax reduction that applies to those who are eligible. The eligibility criteria are set out on the website.
  • Renewable Heat Incentive (RHI) – this applies to those who have installed solar thermal panels. They receive payments quarterly for seven years for the amount of clean, green renewable heat it’s estimated their system produces. The incentive is scheduled to end on 31 March 2022.

How long do solar panels take to pay for themselves?

There is no standard duration. However, to get an approximation, you might need to crunch some numbers. It might be wise to involve a solar power specialist for guidance and accuracy purposes.

When calculating how long solar panels take to pay for themselves, the amount you’ll spend purchasing and installing the solar panels is considered. This amount is divided by the sum of how much of your electricity bill you expect to save annually and how much you get annually from the solar panel grants and incentives. The outcome is the number of years it might take to break even.

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