Late August 2022, we had Solar Panels (PV) installed as our first step in towards decarbonising our home. It is now over a year later, and I want to analyse that first year to calculate the true return on investment (ROI), so far.
Unfortunately, there’s many varying factors around the system, generation and consumption which impact this, so let’s briefly explore those together before seeing how it played out for us.
The Setup
Our installation size is 3.3 kWp. This figure just indicates the systems peak generation capacity, so the maximum energy (3.3 kWh for us) that will be produced at the peak of a clear sky sunny day.
You can calculate the size my multiplying the number of panels by their peak power output. We have 8 x Jinko Tiger Neo N-Type 415 W = 3320 W aka 3.3 kWh.
It is expected, as with everything, the panel performance will degrade over time. This was one of the main reasons I chose these specific Jinko modules, as they came with 25 year product warranty but more pertinent to this point a 30 year performance warranty with output guaranteed to be over 87%. Therefore, worst case scenario I’ll lose 13% capacity over the next 30 years reducing the system size to 2.88 kWh (3320 W * 0.87).
Other factors which impact the installation are:
Roof direction and pitch
The orientation of the panels is important for maximising efficiency, the more sunlight received throughout the day, the more electricity.
For the majority of the UK a roof facing South is optimal on a 40° pitch elevation roof.
Ours face 210° South West on a 40° pitch, so about 97% optimal.
Shading
You’ll need to consider any shading from trees, other houses, or whatever else might be between the sun and the panels. It’s worth noting the sun path is higher in the sky, compared to the winter when it’s much lower (for northern hemisphere of course).
We have no shading, until peak winter when the sun is so low in the sky for a period of the day the panels are shared by houses approximately 15 metres away.
Array
Typically the easiest and cheapest installation of Solar panels is putting them in array. This means they are all interconnected meaning they are electrically connected in series or parallel.
The impact is, even if only one panel is shaded (particularly or entirely), it can have a cascading effect on the entire array’s output.
Others
I won’t bore you with too many more and all the details, but generally to a lesser degree these could impact your setup:
- Local climate (extreme temperatures, snow cover…)
- Altitude
- Air quality
The Generation
Through the year we generated 2880 kWh of electricity, and as expected it peaked in summer months and bottomed out in the winter.
To calculate the savings from this, we can’t simply multiply the generate by the cost of electricity at the time (which didn’t have to buy). That’s because we weren’t able to consume 100% of it and were still reliant on, and used the grid.
Let me explain with two simplified analogies:
Solar is generating a steady 1 kWh of energy, and we boil the kettle. The kettle will pull 3 kWh of energy, therefore ⅓ will come from solar and the rest from the grid.
Solar is generating 3 kWh of energy, and we start the dishwasher. The first part of the cycle heats water needing all the solar for about 10 minutes, but the rest of the cycle drops to 0.8 kWh. So we’re then exporting majority of generation and only using a bit.
The point I wish to convey is supply and demand are very rarely aligned, especially when considering this across multiple devices in the home each with varying peaks/troughs, and the UK weather which can change generate in a moment.
We therefore need to break the savings into two categories:
- Self-Consumed - was used by house demand, therefore reducing need to pull this energy from the grid. The saving can be easily calculated as the ‘would be’ cost of grid electricity which was avoided.
- Exported - was unable to use, so was exported to the grid. An income according to the grid buy rate.
Savings
Total saved in year 1 = £692.39
Whilst that is my true first year savings, it would be disingenuous to attribute this all to the solar panel investment. This is because in May 2023, we had home battery (energy storage) installed, massively improving our ability to consume more of our own generation.
Therefore, I’ll make a reasonable adjustment that for May onwards we would have continued to average 48% self-consumption without the battery.
First years savings (solely attributed to solar) = £507.73
Cost
Our install cost:
- Solar Panels - £2320
- Install - £1740
- Bird mesh - £280
- Total - £4340
ROI
With the saving of £507.73 from £4340 investment, that’s an 11.46% annual return on investment. Resulting in a payback period of 8.7 years.
When combined with home battery the savings will high likely only increase, albeit no longer in isolation. Further, whilst I can’t predict the next 8 years I’m fairly confident energy prices will fluctuate but on average upwards, and the generate will degrade but negligible impact over this period.
I’ll continue to track, but I believe there’s a strong probability the ROI period will shorten. That being said, a greater than 11% return is already brilliant! And this is just the personal finance view, it’s obviously a massive decarbonising step for our home.