Solar Energy Costs & Benefits

The return on your investment for solar technologies depends on some key factors. For both solar thermal and solar PV, these include:

  • Where do you live? Your return will be higher if you live in the sunny south west than north-east Scotland.
  • Is the siting of your solar panels optimal? Partial shading (especially during the middle of the day) will reduce your return on investment.
  • What is the cost of your solar installation? Higher installed costs per installed m2 mean a longer payback. Include any grant funding in your net cost calculation.
  • What’s the overall system efficiency? A more efficient system at reasonable cost is better for your return on investment.

For solar thermal hot water systems, you also need to think about:

  • What’s your current heating fuel? Payback is much improved if you are currently using expensive oil, electricity or solid fuel for your water heating. Returns are lower if you use cheaper gas for hot water.

For solar electric (PV):

  • What is your current electricity tariff? The more you pay for your electricity means better returns from your PV. And as energy prices increase, your return improves.
  • For PV, make sure that you obtain any available grant. These are higher (up to £2,500) for PV than solar thermal (£400), and this can make a big difference to payback.
  • Are you selling your excess electricity and renewable certificates? With sales tariffs of over 10p per kWh available, this can benefit your return.

Typical returns on investment for solar thermal systems range from around 4% to 10% per year depending on your existing water heating fuel.

For more expensive solar PV the returns are lower, ranging from 2% to 4% per year if all available grants and sales tariffs are included.

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