Solar Panel Payback Period

Resumo

Solar panel payback period is the time it takes for the cumulative savings from a solar PV installation to equal the upfront installation cost. After payback, the system generates free electricity for the remainder of its 25+ year lifespan.

Savings come from two sources: avoided electricity purchases (self-consumption) and income from exporting surplus electricity to the grid via the Smart Export Guarantee (SEG).

Como funciona

A solar PV system generates electricity from sunlight. The electricity you use directly offsets your grid purchases at the full retail rate. Any surplus is exported to the grid, earning a smaller SEG tariff.

Key factors that determine payback:

1. System size (kWp) — larger systems generate more electricity but cost more
2. Installation cost — the upfront investment to recover
3. Electricity rate — the higher the grid rate, the more you save per kWh self-consumed
4. Self-consumption ratio — the proportion of generated electricity used on-site (typically 30–50% without battery, 70–90% with)
5. SEG export tariff — income per kWh exported (ranges from 1p to 25p/kWh depending on supplier)
6. Panel degradation — output decreases ~0.5% per year (NREL median)
7. Electricity price inflation — rising grid prices increase future savings

A fórmula

Each year, generation decreases by the degradation rate and the electricity rate increases by the assumed inflation rate:

• Year N generation = base generation × (1 − degradation)^(N−1)
• Year N electricity rate = base rate × (1 + inflation)^(N−1)

The payback year is the point where cumulative savings exceed the total installation cost. ROI is calculated as (total net savings ÷ total cost) × 100%.

Generation estimate

Annual generation depends on system size and location:

Source: MCS Standard Estimation Method, Energy Saving Trust.

Smart Export Guarantee (SEG) rates

The SEG requires licensed electricity suppliers with 150,000+ customers to offer an export tariff. Rates vary widely:

Average household SEG earnings in 2024–25: 13p/kWh (Ofgem data).

Exemplo prático

Entradas explicadas

• System size (kWp) — the peak power rating of the solar array. A typical UK home installs 3–6 kWp. The average in 2024 was 4.6 kWp (MCS data).
• Installation cost — total upfront cost including panels, inverter, mounting, and labour. Currently 0% VAT (until March 2027). UK median for 4kW: ~£7,500 (DESNZ 2024/25); market range £5,500–£8,000.
• Electricity rate — your current grid electricity cost in pence per kWh. The Ofgem Q1 2026 price cap is 27.69p/kWh.
• Export tariff (SEG) — the rate your energy supplier pays for exported electricity. Ranges from 1p to 25p/kWh.
• Self-consumption % — the proportion of solar generation used on-site. Typically 30–50% without battery, 70–90% with.
• Battery storage — optional addition that increases self-consumption by storing daytime surplus for evening use.
• Panel degradation — the annual reduction in panel output. Industry standard is 0.5%/year (NREL).
• Electricity price inflation — assumed annual increase in electricity prices. Historical UK long-term average is ~3–4%.

Resultados explicados

• Payback period — years until cumulative savings equal installation cost. Interpolated for fractional years.
• 25-year net savings — total cumulative savings minus installation cost over the system lifespan.
• Year 1 savings — first-year savings (useful as a baseline before inflation effects).
• Return on investment (ROI) — net savings as a percentage of total cost.
• CO2 saved — total carbon emissions avoided, using DEFRA 2024 UK grid factor (0.22535 kg CO2/kWh including transmission and distribution losses).

Premissas e limitações

• The calculator assumes a fixed self-consumption ratio throughout the system life. In reality, this varies seasonally and with household behaviour.
• SEG export tariff is assumed fixed over 25 years. In practice, SEG rates may change.
• The calculator does not model battery degradation (batteries lose capacity over time, typically 1–3% per year).
• Maintenance costs (inverter replacement at ~10–15 years, typically £500–£1,000) are not included.
• Generation estimates assume an unshaded, well-oriented roof. Real-world output depends on orientation, pitch, shading, and weather.
• The calculator uses UK-average figures. Actual performance varies significantly by location (see generation table above).
• CO2 savings use a static grid carbon factor. The real factor is declining as the UK grid decarbonises.

Verificação