How Much do Solar Panels Cost?

How much do solar panels cost in 2021?

A typical Solar Panel system

In 2021, an average-sized solar PV system for a house should cost around £5,300 including VAT @5%.

£5,300 should get you a system sized at between 4 kWp and 4.5 kWp (see our page on Energy Terminology for an explanation of ‘kWp’ and other confusing terms).

The system will comprise, for example:

• 13 x 325W panels = 4.225 kWp
• 12 x 350W panels = 4.2 kWp

If you are thinking about getting an electric car, and have the roof space, you might want to consider a larger solar array. Something along the lines of:

• 16 x 325W panels = 5.2 kWp
• 19 x 325W panels = 6.175 kWp

Obviously, your overall price will be higher with more panels on. However, solar panels are relatively inexpensive nowadays, and the extra panels won’t add a huge amount to the total cost of the project.

Having a bigger solar panel system = more electricity to feed your electric car (EV) with. EVs have very big batteries, and to keep your home electricity costs down, you should install as large a solar panel array as possible.

VAT on Solar Panels

On 1 October 2019, the VAT rules for solar panels changed.

For most solar panels systems, VAT will still be applied at 5%. All good.

However, if the cost of the materials (excluding VAT) is 61% or higher than the total cost of the project, then VAT at 20% has to be applied to the materials element of the invoice only. The rest of the invoice still attracts VAT at the more favourable 5%.

If you are just having solar panels installed – with no battery storage – then the materials element of your invoice is generally less than 61% and you can enjoy 5% VAT on the whole lot.

However, if you wish to have battery storage installed alongside solar panels, then the total materials cost may be greater than 61%, and you’ll have to pay 20% VAT on all of the materials.

Exceptions to the new VAT rules

The government has allowed three exceptions to the new VAT regulations, if certain ‘social policy conditions’ are met. The exceptions are:

1. The supply of the installation is to a ‘qualifying person’ in the qualifying person’s sole or main residence. You qualify if you are aged 60 or more, or if you receive certain benefits, e.g. Council Tax Benefit, Disability Living Allowance, and others.
2. The supply of the installation is to a ‘relevant housing association’.
3. Installations where the residential accommodation is a building or part of a building used solely for a ‘relevant residential purpose’, e.g. children’s homes, care homes, and accommodation for the armed forces.

Best to read the full government guidance on the new rules if you are in any doubt.

When might you pay more than £5,300?

There are often reasons why your particular 4 to 4.5 kWp system may cost more than £5,300.

For example:

1. If the scaffolding is complicated or larger than usual.
2. You have a small roof and need to use expensive, high capacity panels to reach your desired system size, e.g. 11 x 400W panels = 4.4 kWp.
3. If your roof suffers from shading and you therefore require shade-mitigation technology such as SolarEdge.
4. You have an ‘in-roof‘ installation, rather than an ‘on-roof’ one.
5. If you have slate or clay tiles, rather than concrete tiles.
6. If the installer wants to make higher profits.

When might you pay less than £5,300?

On the other hand, if everything is in your favour, you may pay as little as £4,800 for a 4 to 4.5 kWp system.

Conditions conducive to a low price include:

• Bungalows with easy roof access, meaning scaffolding costs are lower.
• A big roof allows you to use lower capacity panels which are cheaper.
• Concrete tiles are easier and cheaper to install on than slate or clay tiles.

If you can then find a local installer who is fair and reasonable with their pricing, you are on to a winner.

Beware, though, if the price is too low, let’s say close to £4,000. It may be the installer is cutting corners to get the price down that low.

For example, they might be:

1. Employing cheap, unqualified labour.
2. Skimping on proper scaffolding = unsafe working conditions.
3. Using the very cheapest solar panels and inverters.
4. Rushing your job so they can fit another one in on the same day.

Smaller Solar Panel Systems

If your roof is very small, or you don’t have the budget for a larger system, here are guideline prices for some smaller systems:

• 10 x 325W panels = 3.25 kWp = £4,700
• 7 x 325W panels = 2.275 kWp = £4,200

Larger Solar Panel Systems

As mentioned above, if you have or are getting an electric car, which has a big battery inside, you might well want to go for a larger solar panel array.

Here are some sample costings:

• 16 x 325W panels = 5.2 kWp = £5,800
• 19 x 325W panels = 6.175 kWp = £6,300
• 22 x 325W panels = 7.15 kWp = £7,000

Additional Components

There are a couple of technologies which are often installed at the same time as solar panels.

They both have the same objective: to capture excess solar electricity.

Why would you have excess solar electricity? Because solar electricity falls into the “use it or lose it” category.

When solar panels generate electricity, the electricity needs to flow somewhere. If you have devices turned on in your home, the solar electricity will flow to those devices.

Equally, if your electric car, say a Kona Electric, is plugged into its charging point, solar electricity will flow to it.

However, if your electric vehicle is away at work and most of the devices at home are turned off, you will almost certainly be generating a lot more electricity from your panels than you need at that moment.

This is especially the case around lunchtime, if you have south-facing solar panels.

This surplus solar electricity has to flow somewhere, and if your electric devices are turned off and not calling for it, it will flow out to the national grid.

On 1 January 2020, the government introduced the Smart Export Guarantee. This means you can be paid for any solar electricity you export to the grid. You just have to sign up with a participating electricity supplier and have a smart meter installed (free of charge). The rate you get varies significantly from supplier to supplier and is currently in the range of 0.5p to 5.5p for every unit (kWh) of electricity exported. So it’s worth shopping around for the best rate.

However, rather than export your precious, zero-cost electricity from the sun, why not keep it in the home in one or both of the following ways…

Immersion Controllers

A battery captures excess solar electricity and lets the electricity out again later in the day or during the night.

An immersion controller works differently.

It diverts excess solar electricity – at the moment the electricity is generated – and sends it to the immersion element inside your hot water tank. When the immersion element receives this solar electricity, it turns on and heats your water.

In other words, the immersion controller device allows you to store your surplus solar electricity in the form of hot water.

These devices are relatively cheap and easy to install on the same day as the solar panel system. Typically they cost about £500 fully installed.