Solar panel sales are skyrocketing – but NOT the prices energy companies pay you for electricity

Solar panel sales are skyrocketing – but NOT the price energy companies pay you for electricity: ridiculously low prices for household-generated electricity

Skyrocketing energy prices have led to a surge in demand for solar panels, but buyers shouldn’t expect to make a fortune selling power back to the national grid.

Figures from trade association Solar Energy UK show there has been a boom in the number of panels being used to generate electricity in the home and earn money by selling any surplus back to the grid.

More than 3,000 solar systems are installed every week, compared to 1,000 per week in July 2020.

There are three solar-powered attractions. First, it is environmentally friendly. Second, it can significantly reduce your electricity bills and third, you can sell the excess electricity.

Generating your own electricity will certainly reduce your bills. A typical 4kW solar panel system will generate around 3,500 kilowatt hours (kWh) per year in most parts of the UK, the exact amount depending on the number of hours of sunshine. That same amount of energy would cost just over £1,260 when the government’s new price cap of £2,500 comes into effect.

The problem is making money with your panels. If they produce more electricity than you need, the excess can be sold through the grid.

Energy companies pay for the electricity you supply through a Smart Export Guarantee (SEG). But you have to sign up for an SEG tariff, otherwise the grid picks up your excess electricity for free. And the prices are poor. The best price you can get on a standard SEG tariff is 7.5 pence per kWh (see table). Even that is 73% less than what companies charge for electricity.

Ben Whittle, senior consultant at Energy Saving Trust, says: “We agree with calls for homes with solar panels to be fairly rewarded for delivering low-carbon electricity to the grid.”

Although the price charged for electricity has skyrocketed over the past 12 months, what companies will pay you for the energy you produce has barely changed.

Most companies are still paying virtually the same rates as two years ago. However, there are ways to mitigate low SEG rates. Consider changing the energy company first, as SEG tariffs vary.

The best SEG tariffs are paid to those who buy their energy from the same company they sell to. For example, Octopus pays its own customers 7.5p, but if you use another company for your energy supply, you will only get 4.1p per kWh. So, it may be worth seeing if you can shift your energy supply to the company buying your electricity to increase your SEG rate.

Tariffs range from 1.5 pence per kWh from EDF for non-customers – it offers 5.6 pence to its own customers – to 7.5 pence per kWh from Octopus Energy for its own customers. Assuming you export 500kWh per year to the national grid, the difference between best and worst tariffs is £30.

Alternatively, you can opt for Octopus Energy’s Agile Outgoing export tariff. The price paid for your electricity changes every 30 minutes according to the price charged on the wholesale market. This can lead to exceptional returns.

The company told the Mail on Sunday: ‘On average, customers on this tariff have been paid up to 28.37p per kWh over the past three months.

To get the agile tariff, you will need a smart meter capable of sending data every 30 minutes. Another option is not to sell your excess electricity, but to store it.

Whittle says: “With rising prices, households with solar panels can realize greater savings using the energy they produce themselves – and a battery can make the difference.”

Batteries aren’t cheap – you can expect to pay between £1,200 and £6,000 depending on size – but if that means you can use more of the electricity you produce and pay less from your supplier, it could be a worthwhile investment.

Whittle adds: “In all cases, having a battery results in more savings than just having panels, but whether the amount saved will justify the cost of installation will depend on several factors, including the amount of excess electricity generated by your panels.

On Friday, So Energy announced that it would increase its SEG tariff “in due course”. EDF said it continually reviews its prices “to ensure they remain competitive”.

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Solar panel sales are skyrocketing – but NOT the prices energy companies pay you for electricity

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