The idea of using solar panels to generate electricity to power your home is an appealing one for many of us. Helping to save the planet from climate change whilst also reducing sometimes eye-watering energy bills must be good, right? And whilst we’re about it, why not add some battery storage to avoid having to export electricity to the grid?
Will I Get a Payback on an Investment in Solar Panels & Battery Storage?
Simple answer; not at the moment. Whilst saving the planet is certainly worthwhile, at today’s prices the payback on most solar PV installations is likely to be over 20 years. Adding storage batteries considerably worsens the payback. Unless you enjoy being a market pioneer, Great Home would recommend delaying a solar PV or battery storage investment until system prices fall further and the market price for solar exports to the grid becomes clearer.
The typical investment costs and benefits of installing a 4kW Peak solar system and 13.2 kWh of battery storage are summarised in Figure 1. The solar system alone delivers a 21.3 year payback. Adding battery storage to an existing solar system delivers a 52 year payback, much longer than the warranty available on the storage batteries. Combining the two investments gives a payback of 30.5 years, again much longer than the warranties on the systems.
To get payback on solar panels under 10 years then installed prices would have to more than halve to around £3,400. For solar batteries, a 10 year payback would need an installed cost for 13.2 kWh of around £1,442. You can calculate your own figures based on different assumptions by using the Great Home Solar Panel & Battery Storage Calculator.
Figure 1: Payback on 4 kW peak solar panels and 13.2 kWh battery storage
|Solar system alone||£7,264||£340.60||21.3|
|Additional battery storage investment*||£7,500||£144.23||52.0|
* additional costs/benefits only
You can see detailed assumptions and explanations below.
Detailed Breakdown Of Payback for Typical System
The typical home uses around 3,500 kWh of electricity per year (9.6 kWh per day). Investing in a 4 kW peak rooftop solar PV system would typically cost £7,264 and generate 3,400 kWh of electricity per year (9.3 kWh per day) which is close to matching home energy use.
Figure 2 shows that the annual benefits are likely to be £340.60 based on electricity prices of 18p per kWh and an assumed Smart Export Guarantee payment of 5.38p per kWh (the same as the FIT rate for systems installed prior to April 2019). This would deliver a payback on the investment in 21.3 years.
Figure 2: Annual benefits of typical 4 kW Peak solar PV system
|kWh produced||Payment /|
benefit per kWh
|Solar, own use bill savings:||1,249||18p||£224.90|
|Total annual benefit:||3,400||10p||£340.60|
It depends on a home’s electricity usage profile but around 63% of the electricity generated by the solar panels will be exported to the grid, with only 37% being used to power the home. Figure 3 below illustrates the challenge, with the red line showing home energy consumption and the blue line solar electricity generation. Peak time for solar generation is the middle of the day whilst home electricity demand peaks during the early evening. For those out working during the week the profile would be even more extreme. There are ways of switching some electricity demand, such as running dishwashers and washing machines on timers during the day, but these opportunities are limited.
The obvious question is what would happen if battery storage was added to the system.
Figure 3: Typical Electricity Usage and Solar Generation
4kW Peak Solar PV System with 13.2kWh Battery Storage
Adding battery storage will increase the amount of solar-generated electricity used by the home, but does not deliver sufficient financial benefits to give a payback. Figure 4 shows that exports drop to 1,007 kWh (from 2,151 kWh without battery storage) and that a further 1,143 kWh of solar generated electricity is stored in the battery for later use in the home. Annual benefits would be £484.83 which is an improvement of £144.23 on the solar system alone of £340.60. To obtain the additional £144.23 annual benefit, an investment of circa £7,500 would have to be made in the battery storage system; a payback of 52 years on a battery storage system which may last 10 to 20 years.
Figure 4: Annual benefits of typical 4 kW Peak solar PV system with 13.2kWh Battery Storage
benefit per kWh
|Solar used directly in home||1,249||18p||£224.90|
|Solar used in home via battery||1,136||18p||£204.54|
|Additional electricity held in battery||7||18p||£1.18|
|Total annual benefit||2,151||10p||£484.83|