Solar panels - why mathematics say that they don’t work
The following is for INSTALLED solar panels, NOT DIY...
You have £10,000 sitting in an investment account, which you don’t know what to do
I have spent some time explaining to people why it isn’t me who says that solar panels
don’t work, it’s maths. I’m going to show a very simple calculation to explain that.
So let’s dive in...
The problem is in using the energy your solar panels are generating. A typical 3kW
(kilowatt) array will provide (on average) 7 kW a day. The trouble is that it may
be providing that when you can’t use it! You could be at work, on holiday, down the
pub...and no one is home to use what is being provided.
You could send it to your electricity provider for a tiny amount of payment (so that’s
no good). Or you could ensure (by planning) that you do use it. Or you could store
the energy in batteries (at considerable cost). Clearly, the middle way is better
- that you ensure by planning that you use your 7 kW a day. So let’s go with that
Let’s say that your hot water demand is 7 kW a day - a 3 kW immersion heater coming
on twice a day, for a little over an hour both times, will be 7 kilowatts. At current
rates of electricity (34p per kWh) that will be costing you £2.38 a day or £869 a
year. So if you could get a solar array to pay for your hot water demands of £869
a year, great, right? A 3kW solar array will indeed provide around 2,500 kW a year.
That’s almost 7 kW a day. So it looks like we’ve cracked it. All you have to do is
trump up the £5,400 which you currently have sitting in an investment account. You
will save, remember, £869 a year. So in about seven years, your savings will have
paid your capital investment of the panels. From then on you’re getting free energy
to pay for your hot water right?
The problem is that some days your solar panels will be bathed in sunshine, and other
days, they won’t get any sunshine at all, maybe even for days, or even a week or
more. So some days your panels will generate enough energy to heat up your hot water
cylinder, but on other days they won’t. Now, this is no good. If you send that energy
back (on days when the sun is shining more than you need) you won’t get paid much.
Or you might waste that energy.
A way around this is to store that energy in batteries...and that’s where costs really
kick in. An array with batteries is going to cost just shy of £10,000. And the batteries
will fail in time, requiring replacement. Your £10,000 is currently earning 4% interest,
that’s £400 a year added. But, of course, inflation hits it, so we need to do the
Purchase cost of a TYPICAL 3kW system with batteries - £10,000
Generates 2,500 kW a year
At 27p per kWh that is £675 'saved'
Minus the cost of maintenance & repairs which is £4,000 over the 25 years, so £160
This means we are down to £515 a year 'saved'
We put that in a savings account (which with compounded interest comes to £10,724
after 15 years)...to pay for the new inverter and battery array which costs £10,724!
So the overall payback from a TYPICAL system is...£0...you get a big fat nothing
from your solar panel array after 15 years. After this time, they have also degraded
by 9%. The above data even IGNORES the loss of interest (at £400 a year) on the £10,000
spent!!! It assumes you have been gifted the panels and installation. If you purchase
them, then you will be out of pocket big time, obviously. Not only do you have that
initial capital expenditure of £10,000 you also lose interest on it at £400 a year
- that's £6,000 LOST in interest after 15 years.
ALL solar panel data is supplied by Contact Solar, and is for a typical system with
When you see it as simple as that, you realise that it’s not worth bothering, and
that your solar array will NEVER pay its costs back. In fact, it will be a cost burden
- for nothing.
I have assumed a battery pack change at £3,495 for a 3kW array and an inverter cost
at £3,714 - a total of £7,209. Both of these costs were obtained from ‘Contact Solar’,
and have had inflation added, meaning a total after 15 years of £10,724. It should
be remembered that the batteries and inverters could fail twice!
Now, I know some people struggle to comprehend this, and say I must be wrong. But
the problem is that this is mathematics - it can’t be wrong. The data is right there
above for you to see. A typical solar array will NEVER pay its costs back.
Remember, this is supposed to be an exercise in saving money! Although it is an ideal
to be generating your own electric, the fact is that it just doesn’t work out financially.
It’s actually an exercise in how to lose money.
So, what if you had kept your £10,000 invested at 5% for 30 years? Your investment
would have grown to £21,000 even accounting for inflation at 2.5% per annum. It would
be worth, in real terms, double what it’s worth today. Remember, inflation hits BOTH
investments at the same rate.
Solar panels are therefore mathematical madness at ‘saving’ you money! If the cost
of electricity drops (from the quoted 34p per kWh) then your reason for solar panels
is even less. If you can get better than 5% interest, then your reason for solar
panels are even less.
Also, you could get better than 5% interest by investing it into a pension for 25
years. You receive tax relief at your highest marginal rate for personal pensions
contributions; however, access is restricted until you’re 55. Once funds are in a
pension, they grow tax-free, and it’s a really efficient vehicle for long-term savings...as
is property. A pension would likely grow 2.5% ON TOP of the inflation rate, and even
if you assumed a medium pension growth rate, the value of a £10,000 pension investment
would still be £25,000 in 25 years from now (Aviva). Alternatively, you could invest
in Ripple (wind turbine) account and see a 7% annual return on your money.
The bottom line is that you would do much better to keep your money, and not spend
it on some glass panels on your roof. It really is as simple as that! You can play
around with interest rates, inflation rates, and costs of energy, but the maths STILL
comes out in favour of keeping your money.
There is no real-life scenario where solar panels with batteries are anything like
worth the investment. If you think I’m wrong, show me your maths. Remember, the data
above are not mine, but from one of the leading solar companies in the UK for a 3kW
system with batteries.
I have had a report of a man who installed a £14,000 system 5kW , and is getting
£2,000 a year from it in energy savings. He says it is paying him back in seven years.
He says it’s the bee’s knees and he’s chuffed he’s getting £2,000 a year.
Let’s look at the figures:
Cost of investment £14,000
Loss of interest £9,100 after inflation (completely ignored!)
Replacement parts £5,000 (5kW system over 25 years)
Replacement batteries £6,000 (remember just one, over 25 years - questionable)
Replacement inverter £6,000 (remember just one, over 25 years - questionable)
Divided by his saving of £2,000 a year (but minus panel degradation) =
21 years...three times longer than he thinks it is.
I understand that people who have spent thousands of pounds don’t want to admit that
they have bought a lemon, but we have to admit to mathematics.
The only way solar panels can work out economically is if you install them yourself.