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June 30, 2024

How Much Do Solar Panels Save On Electricity Bills?

Saving money with solar panels

As the cost of living remains high, many homeowners are looking for ways to reduce spending. Energy bills are a particular concern, swallowing a large portion of household income, and an increasing number of families are turning to solar energy to cut electricity bills. If you’re considering switching to solar, the big question is whether it’s worth the initial expense. 

This post explains how much solar panels cost and how much they can save on your electricity bills.

How Do Solar Panels Work?

Solar panels use the sun’s energy to power homes with electricity. They do this by using the photovoltaic effect. This is a phenomenon in chemistry and physics. It generates an electric current when a semiconducting material is exposed to light.

Solar photovoltaic (PV) panels contain silicon cells that absorb electromagnetic radiation from the sun, which triggers an electric charge.

As electrons in the solar cell start moving upon contact with sunlight, they create a direct current (DC) of electricity. A solar inverter turns this into alternating current (AC) compatible with household electrical systems.

Solar panels perform best in direct sunlight but only need daylight to produce power. This is why they work in overcast weather or if they’re partially shaded, although output will be less.

How Much Do Solar Panels Cost?

The average price of solar panels has fallen by £1,500 in the past 12 months, according to the Microgeneration Certification Scheme (MCS), the industry standards organisation.

Costs depend on factors such as power output of your solar panels, how much energy your household uses, and when you use it.

Typical costs of installing solar panels in 2024 are estimated at around:

  • £4,200 for a one- or two-bedroom home.
  • £7,000 for a three-bedroom home.
  • £9,800 four a four-bedroom property.


Annual Cost Savings With Solar Panels 

Solar panels produce electricity from sunlight – an abundant source of renewable energy that costs nothing. Generating your own free energy means you rely less on expensive electricity from the National Grid.

For most homes, solar panels cut electricity bills by up to 50-70 percent – around £300 to £700 a year. 

Average estimated annual savings on electricity bills are:

  • One- or two-bedroom home – £290.
  • Three-bedroom house – £480.
  • Four-bedroom house – £670.


These savings will continue long after your solar panel system has paid for itself, which typically takes 14.5 years. You can then expect your solar panels to produce free electricity for a further 11 to 16 years.

The Energy Saving Trust estimates it takes on average 12 to 17 years to recoup the cost of installing solar panels, depending on how much electricity you use, when you use it, and what you’re paid through the Smart Export Guarantee.

The Smart Export Guarantee

Besides cutting your energy bills, you can also use your solar panels to earn money and further relieve pressure on household budgets.

Energy suppliers pay for excess solar energy you send back to the grid. This happens under the Smart Export Guarantee (SEG), which replaced the Feed-in Tariff (FiT) in 2020. Households in England, Scotland and Wales are paid for solar energy they generate but don’t use and this is then pumped back into the energy grid.

Payments vary depending on the energy provider. They can differ widely, ranging from around 1p a kilowatt hour (kWh) to 40p per kWh. According to the Energy Saving Trust, households typically earn £220 to £320 a year through the Smart Export Guarantee.

Importance Of Solar Panel Energy Efficiency

Solar panel efficiency refers to how much energy from the sun is converted into electricity. Solar panels with higher energy efficiency produce more electricity, resulting in greater savings on electricity bills.

Solar energy efficiency is largely determined by the type of solar cells in the panels. Monocrystalline solar cells have the highest energy efficiency – 15 to 24 percent – and last the longest.

Other factors that affect solar panel efficiency include roof orientation and slope. Solar arrays perform best when installed at a 35-degree angle on a roof that faces south. However, they’ll also work on other roofs and at a wider range of angles, and they can perform efficiently on flat roofs with the proper hardware installed for effective angling towards the sun.

How To Maximise Solar Power Savings

Certain measures will ensure you get the full financial benefit from your solar panels. 

Install high-efficiency solar panels if you can afford the higher price. Although these panels cost more, they take up less roof space and produce more electricity, delivering bigger long-term savings over their lifespan.

Make sure your solar panels are installed so they get optimal sun exposure, ideally with no shading from obstructions such as trees and buildings.

Don’t miss out on solar panel grants you may be eligible for (more about these later). If you can get your solar panels for less money or for free, your overall savings on energy bills will increase.

If your energy supplier offers time-of-use tariffs, take advantage of lower electricity rates during off-peak hours when solar energy production is highest. 

Solar panels need little maintenance but cleaning the system periodically is advisable to ensure it’s operating efficiently. Hose down the panels to remove any dirt and debris not washed away by rainfall. Scheduling maintenance checks and an annual service by a professional will identify and address any problems promptly.

Using energy-efficient appliances and lighting will further reduce overall energy consumption. Another way to maximise solar power savings is by adding battery storage to the system.

Solar Battery Storage

Combining battery storage with solar panels results in bigger savings on electricity bills – up to 90 percent.

A solar battery stores surplus solar energy generated during the day so you can use it at night, when demand for electricity is typically higher. This further reduces dependence on the grid. Solar battery prices have come down substantially in recent years.

Typical prices now are:

  • £2,500 for a one/two-bedroom home.
  • £4,500 for a three-bedroom household.
  • £8,000 for a property with four or more bedrooms


Bear in mind that solar batteries usually have to be replaced at some stage. They last around 12 years – about half as long as the lifespan of solar panels.

Solar Panel Grants

Solar panel grants are no longer as widely available as previously. However, some households across the UK are still eligible for government-backed funding that substantially reduces the cost of solar panel installation or covers it completely.


ECO4 – the fourth and final phase of the Energy Company Obligation – runs until the end of March 2026, with £4 billion of funding available to households in England, Scotland and Wales receiving a means-tested state benefit.

The grants, funded by major energy suppliers, are aimed at easing fuel poverty and reducing carbon emissions in energy-inefficient homes. These households have a low Energy Performance Certificate (EPC) rating and energy costs account for 10 percent or more of income.

ECO4 pays up to 100 percent of the cost of solar panels to power electric heating, when a heat pump or a biomass boiler isn’t feasible.

ECO Flex

An extension of the Energy Company Obligation, ECO Flex makes solar panel funding available to more households – you don’t have to be getting a means-tested benefit. Local councils set their own eligibility conditions for low-income households struggling to keep their homes warm.

ECO Flex funding may also be available if someone in your household has a chronic medical condition aggravated by living in a cold home.

Home Upgrade Grant

The Home Upgrade Grant (HUG2) is open until March 2025 to households in economically disadvantaged areas in England. Solar panel grants up to £10,000 are on offer to lower-income households with no access to mains gas for central heating.

Nest Scheme Wales

The Nest initiative is part of the Welsh government Warm Homes programme. It provides free solar panels for households in energy-inefficient homes who get a means-tested benefit or if someone has a chronic health issue.

How Solar Panels Reduce Carbon Footprint

Apart from savings on electricity bills and getting paid for your solar energy, solar panels also reduce carbon emissions.

They harness a renewable and infinite source of energy from the sun. This enables them to produce clean, green, low-carbon electricity that emits no greenhouse gases.

Traditional ways of generating electricity rely on burning fossil fuels – coal, natural gas, and oil. Solar power, on the other hand, reduces negative environmental impact and contributes to a more sustainable future. Solar panels produce 20 times less carbon than coal and 12 times less carbon than natural gas.

A further problem with fossil fuels is that they’re likely to become even more expensive as supplies dwindle before eventually becoming non-existent.

Are Solar Power Savings Worth the Cost?

Solar panel costs have decreased significantly over the years, making solar power an affordable investment for more households. One and a half million households across the UK have so far installed solar panels. They benefit from significantly reduced electricity bills while helping combat climate change.

Producing your own electricity with solar panels saves hundreds of pounds a year by reducing the amount of electricity you take from the grid. Savings increase if you install a solar battery.

Solar panels generally last 25 to 30 years. This means that once your solar panels have reached price break even point, you can expect to save around £8,000 on electricity bills over the rest of their lifespan.

VAT on solar panels is currently zero-rated, which cuts installation costs still further by several hundred pounds.

Leading national solar panel provider Effective Home can help you decide whether solar panels are worth the cost for your home.

Get a free solar home survey now.

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Justine Effective
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