Solar Panel Installation Cost Updated for 2020

By October 8, 2018 March 17th, 2020 Guides and Information

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Photovoltaic solar systems for home installation have been around for decades. However, they haven’t caught on as well as the government would like them to. Cost is the big issue. A solar system capable of generating enough power to run your home and put some energy back into the grid can cost several thousand pounds.

Be aware that solar panel installation costs are influenced by many different factors. If you are thinking of an installation for your home, understand that you will be paying for more than just the panels. There are other components in a working solar system that add to the total cost. There is also the cost of labour and any additional costs that might be necessary to prepare the installation space.

Average Costs for 2019

Pricing photovoltaic solar systems involves two measurements: area and power output. If you were to call a contractor and inquire, the representative would likely start by explaining the different levels of power output expressed as kilowatts (kW). Depending on your preferred power output, you would then have to talk about installation area as represented in square metres.

A basic 1 kW system covering 8 square metres costs between £1,500 and £3,000 on average. The estimated first-year return per kW is £185 while the estimated 20-year return is £640. This size system is considered the minimum in the UK.

Here are cost estimates based on three more common systems:

  • 2 kW system – £3,000-£4,000; 14 m² of installation space; 20-year return of £3,800.
  • 3 kW system – £4,000-£6,000; 21 m² of installation space; 20-year return of £5,630
  • 4 kW system – £6,000-£8,000; 28 m² of installation space; 20-year return of £6,750

As you can see from the above data, larger systems generate a greater per kilowatt return over 20 years. So if you can afford a 4-kW system and you have the installation space to support it, you will save more money for every kilowatt of energy your system generates.

Note that these prices are based on average costs for photovoltaic solar panels. You can also purchase solar tiles instead, but they are considerably more costly. Also note that a photovoltaic system is not the same thing as a solar thermal system.

Photovoltaic solar panels convert sunlight directly into electricity. By employing a system of circuits and regulators, that electricity can be harnessed and used to power appliances, lighting, and so forth.

Solar thermal systems do not use photovoltaic panels. Instead, they are built using vacuum tube solar collector panels that convert ultraviolet light into heat energy. That heat energy can then be used to heat water or provide space heating. We mention this because there has recently been a push to encourage solar thermal systems for heat and hot water in residential builds.

What You’re Paying For

Let’s say you choose to purchase a solar panel system for your home. What exactly will you get for your money? In terms of materials, you will get:

  • Solar Panels – Your contractor will supply the correct number of panels to match your desired power output.
  • Power Inverter – The power inverter is the device that converts sunlight into usable electricity. Without the inverter, collected energy would be useless in your home.
  • Controller Unit – The controller unit regulates the flow of electricity between the collection system and the house. It controls how much power is used and how much is stored.
  • Batteries – Photovoltaic solar systems include batteries for storing extra energy. You will not get much storage capacity with a basic system, but every little bit helps.

You will also pay for the labour necessary to install your system. Contractors generally charge by the hour, but they should be able to give a fairly accurate estimate at the time they first quote the job. If unforeseen conditions increase the amount of labour required, your total price is likely to go up.

Finally, there may be additional materials required to complete the installation. Be sure that your contractor details any and all such materials on the written estimate. You do not want to be caught off guard by additional expenses you weren’t informed of.

Saving Money with Solar Panels

The primary motivation for installing solar panels is to save money on electricity. How much you save really depends on where you live. In the UK, we are not known for our exceptionally sunny environment. So a photovoltaic system here is not likely to generate as much electricity as a similar installation along the Mediterranean coast.

Still, average savings realised by a 3-kW system in the UK come in at about £570 per year. Straight up you are looking at savings of about £5,630 over 20 years. Throw in the Feed-in Tariff scheme and you could be looking at upwards of £11,400 over 20 years.

We should point out that the Feed-in Tariff scheme was set to expire in March 2019 at the time this post was written. It may or may not still be in force at the current time. You should also know that the National Grid offers a sell-back rate of £4.77 per kilowatt hour for extra energy a solar system returns to the grid. An average 3 kW system can generate up to £70 in sell-back savings annually.

The Removal of Feed In Tariff 

Most UK homeowners decided to delay their purchase of solar panels since its price keeps on decreasing. They thought that they will be spending more money if the prices keep on going downwards. However, the result is quite unfortunate since the government eliminated the Feed In Tariff for new installations. 

What is the Feed In Tariff? With the Feed In Tariff, homeowners will be paid each year for 20 years for the extra electricity that is generated from their solar panels as well as on the electricity that they sold back to the grid.

More than 700,000 homeowners were inspired to install solar panels because of the Feed In Tariff. And now that it’s been removed, it created concerns among environmentalists as well as people in the industry. Was it a big mistake? How can its disappearance affect the future?

The Smart Export Guarantee

One of the greatest features of the previous Feed In Tariff scheme was the export levy. This is the amount that the homeowners received from electricity companies when they fed their extra electricity back into the grid. The major difference between the previous export levy and the new Smart Export Guarantee is that instead of paying homeowners with a fixed amount, electricity companies can now bid for the extra electricity.

With its great desire to become green, the Smart Export Guarantee provides electricity companies the opportunity to increase their capacity by purchasing electricity from homeowners instead of constructing their own power stations.

When this scheme was first introduced, there was a concern that even if these electricity suppliers are competing, they will not enforce the old amount that is paid to the homeowners during the Feed In Tariff scheme. Well, those fears have turned out to be accurate.

In June 2019, the guidelines for the new Smart Export Guarantee were released by the Department for Business, Energy and Industrial Strategy (BEIS) and it took effect on the 1st January 2020. Based on the guidelines, electricity suppliers that have over 150,000 domestic clients are required to provide at least one export tariff to buy homeowners’ excess energy.

Shop Around Before You Buy

With all of this information at your disposal, are you now ready to buy solar panels for your home? If so, make the effort to shop around before you choose a supplier and contractor. All the prices mentioned here are average prices based on numbers taken from across the UK. Prices may vary significantly depending on where you live.

As for the expense, be encouraged by the fact that financing is generally available. Most contractors have worked out payment arrangements through either panel suppliers or third-party lenders more than willing to finance your installation. Simply put, you will not have to pay the entire bill out-of-pocket. You can finance your installation and pay over time.

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