Solar panel sales soar – but not the price energy companies pay for your electricity: The price of electricity for home generation is paltry
High energy prices have led to a surge in demand for solar panels, but buyers shouldn’t expect to make a fortune by selling electricity back to the national grid.
Figures from the UK Solar Trade Association show a surge in the number of panels used to generate electricity at home and make money by selling the excess back to the grid.
More than 3,000 solar systems were installed per week, up from 1,000 per week in July 2020.
There are three spots for solar power. First, it is environmentally friendly. Second, it can cut your electricity bills, and third, you can sell excess electricity.
Generating your own electricity will definitely reduce your bills. In most of the UK, a typical 4kW solar panel system will generate around 3,500 kilowatt-hours (kWh) of electricity per year – the amount depends on the number of hours of sunshine. The same amount of energy will cost more than £1,260 when the government’s new price cap is set at £2,500.
The problem is making money from your panels. If they generate more electricity than you need, the excess electricity can be sold through the grid.
The energy company pays for your electricity through the Smart Export Guarantee (SEG). But you have to sign the SEG tariff or the grid will get your excess electricity for free. And the tariffs are not worth much. The best price for standard SEG electricity rates is 7.5p per kWh (see table). Even so, it was 73% lower than the electricity bills charged by businesses.
“We agree with the call for households who install solar panels to be fairly rewarded for providing low carbon electricity to the grid,” said Ben Whittle, senior adviser at the Energy Saving Trust.
Despite the spike in electricity prices over the past 12 months, there has been little change in what companies pay for the energy you generate.
Most companies still pay nearly the same rates they did two years ago. However, there are ways to reduce the low tariffs on the SEG. First look at switching energy companies because SEG tariffs are really different.
The best SEG rates are paid to people who buy energy from the same company. For example, Octopus pays its own customers 7.5p, but if you use another company for energy, you only get 4.1p per kWh. So it might be worth looking at if you can switch your energy supply to a company that buys electricity to increase your SEG rate.
Rates range from 1.5p per kWh for non-customers by EDF (5.6p for its own customers) to 7.5p per kWh for Octopus Energy for its own customers. Assuming you export 500 kWh per year to the National Grid, the difference between the best and worst rates adds up to £30.
Alternatively, you can choose Octopus Energy’s Agile Outgoing export duties. Electricity rates change every 30 minutes, depending on prices on the wholesale market. This could pay off handsomely.
“On average, customers using this tariff have paid a whopping 28.37p per kilowatt-hour over the past three months,” the company told the Daily Mail on Sunday.
For agile rates, you need a smart meter that can send data every 30 minutes. Another option is not to sell excess electricity, but to store it.
“As prices go up, homes with solar panels can save even more money with the energy they generate — and batteries can play a role,” Whittle said.
Batteries aren’t cheap – you can expect to pay between £1,200 and £6,000 depending on the size of the battery – but if it means you can use more power and pay less from the supplier then this could be an option Worth the investment.
Whittle added: “In all cases, having the battery can save you more than just having the panel, but whether the amount of savings justifies the installation cost will depend on several factors, including how much excess power your panels generate.”
On Friday, So Energy said it would raise its SEG tariffs “in due course.” EDF said it constantly reviews its prices “to ensure they remain competitive”.