How much do solar panels save you on your bills?
The UK has finally decided to let the sunshine in. The last quarter of 2019 saw renewable energy overtake fossil fuels in the National Grid for the first time, with 40 per cent of the UK’s electricity generated by solar, wind and biomass fuels. Solar panels, or photovoltaics (PV), use solar cells to convert the sun’s light into electricity. An estimated one million homes and businesses worldwide now use solar power. The idea of going solar may be attractive to boost your business’s green credentials and sustainability. But as a business owner, you need to know about the bottom line: is this going to save me money?
How much do solar panels reduce electricity bills?
Electricity prices are rising, so generating your own is a smart move. A PV system will reduce your electricity bills, but it’s hard to predict exactly how much. This depends on how many panels you have, where they are situated and how much electricity you use. In the South East, a small commercial 10kW set-up will generate up to 9,000kWh of electricity per year. The average small business uses 20,000kWh per year, so that’s nearly half of your electricity needs met.
Do you still have an electric bill with solar panels?
Most businesses using solar panels will still have an electricity bill to pay. Solar power needs to be used instantly or stored in a battery system, or it is fed back to the grid. This means that you will probably need to use electricity from other sources during winter and hours of darkness. However, businesses are particularly suited to solar panels because they use most of their energy during daylight hours.
Will I get paid for the electricity I generate with solar panels?
The ‘feed-in tariff’ (FIT) used to be the scheme through which the UK government legislated how customers are paid for supplying renewable energy. This scheme has been replaced by the smart export guarantee (SEG), which launched in January 2020. Industry experts believe that this scheme is likely to be less generous to customers in the tariff they receive for generating energy. The good news is that this is offset by lower prices for solar panels and batteries.
Under the old system, customers generating solar power received both a ‘generation tariff’ (money paid for making the energy) and an ‘export tariff’ (money paid for each kWh of surplus electricity that was fed back to the National Grid). The energy regulator Ofgem used to set the rates and they could be fixed for long terms, typically 20-25 years.
Under the new SEG system, there is no generation tariff. Instead, customers generating renewable energy will only be paid for electricity that is fed back to the National Grid. This means that if your solar panels generate more energy than your business needs, you will receive a payment from your energy company. Energy companies now set their own tariffs for buying electricity back from you. Customers will usually have the choice between fixing rates for short terms or choosing a market-tracking variable rate. While wholesale electricity prices can sometimes fall below zero, the energy company must offer you a rate that always stays above zero. A fair rate is likely to be somewhere in the region of 5p-6p per kWh, according to the Solar Trade Association. Your SEG licensee (the company that pays you for your energy) does not have to be the same as your electricity supplier, so you are free to shop around. Utility Bidder’s renewable energy services can help find you the best rate for your business.
What equipment will I need and what does it cost?
How many panels you need depends on how big your premises are and how much electricity you would like to generate. PV systems are much more affordable than they used to be. A typical “small” set-up is a 4kW system, with 16 panels and a grid connector. This costs an average of £5,890 excluding VAT, according to the Energy Saving Trust. A decade ago, this would have been nearer £14,000. Larger, 10kW commercial systems are popular with businesses because they generate more power. However, with 40 panels, they do take up a lot more space.
Solar panels should last for at least 25 years, and have low maintenance costs as there are no moving parts. Cleaning is required to keep them operating efficiently, so factor this into your estimates. You may also have to replace the inverter every 10 years or so.
You will also need a smart meter so that you can measure the energy that you export to the grid. Many energy companies will now offer these to business customers at low or no cost.
Investing in a battery storage system will store up your generated electricity so you can use it later, such as when it’s dark. A battery system could benefit you if your business uses a lot of electricity outside daylight hours or if you run electric vehicles that need charging. Batteries used to be prohibitively expensive but prices have fallen dramatically in recent years.
Solar panels are not a get-rich-quick scheme, but they are a long-term, sustainable solution to reducing your business’ energy bills.