Are Solar Panels Worth It? The Honest Payback Maths

Solar quotes are built to produce an attractive payback figure. The arithmetic underneath is simple enough to check yourself, and doing so usually changes which quote looks best — and sometimes whether to buy at all.

The four numbers that decide everything

1. System cost after incentives. The installed price minus any grant, tax credit or rebate you will genuinely receive. Incentives often have income caps, timing rules or require the credit to be claimed against tax you actually owe.

2. Annual generation. Measured in kilowatt-hours, driven by system size, your latitude, roof orientation and pitch, and shading. A south-facing roof at 30 degrees in a sunny region can generate nearly double what a shaded east-facing roof produces from identical panels.

3. Self-consumption share. The proportion of what you generate that you use yourself rather than exporting. This is the number quotes are most optimistic about, and it matters enormously because using a unit yourself saves the full retail rate, while exporting it earns a much lower rate.

4. Your electricity price and its trajectory. Solar's return is the price of the electricity you no longer buy. A high tariff shortens payback; a cheap one lengthens it regardless of how good the system is.

Doing the calculation

Annual saving equals (generation × self-consumption share × retail price) plus (generation × export share × export rate). Divide system cost by that annual saving and you have simple payback in years. Compare it against the panels' warranty period: a payback comfortably inside the warranty is a sound investment; one that approaches or exceeds it is a bet on equipment outliving its guarantee.

The self-consumption assumption is where proposals diverge from reality. A household out all day, with no battery and no timed appliances, may self-consume only 25 to 35% of generation. Quotes frequently assume 50% or more. Halving that assumption can add years to payback, so ask what figure was used and why.

Batteries change the maths, rarely in your favour

A battery raises self-consumption substantially — often from around 30% to 70% or more — which genuinely increases annual savings. It also adds a large capital cost with a shorter warranty than the panels, and it will likely need replacing once within the panels' lifetime. Run payback with and without it as separate calculations. Batteries make strong sense where outages are common, where import and export rates differ sharply, or where time-of-use tariffs let you arbitrage cheap overnight power. They rarely pay for themselves on savings alone.

What quotes tend to understate

1. Inverter replacement. Panels commonly carry 25-year performance warranties; inverters typically last 10 to 15. Budget for one replacement.
2. Degradation. Output declines slowly, usually quoted around 0.5% a year. Over 25 years that is a real reduction in later savings.
3. Roof condition. If the roof needs replacing within a decade, do it before installation. Removing and refitting an array is expensive.
4. Export rate changes. Export tariffs are set by policy and suppliers and have been cut in many markets. A payback model leaning on a generous export rate is fragile.
5. Cleaning and maintenance. Modest, but not zero.

Reading a proposal properly

Ask for the generation estimate in kWh per year, and which modelling tool produced it. Ask what self-consumption percentage the savings assume. Ask what happens to the warranty if the installer ceases trading — panel and inverter warranties come from manufacturers, but workmanship warranties are only as good as the company behind them. Get the total cost with everything included: scaffolding, electrical work, monitoring, and any grid application fee.

Then get three quotes for a comparable system size and compare cost per installed kilowatt, not headline price. A larger, cheaper-per-kW system with a longer payback may still be the better purchase if it covers more of your usage.

Ownership models, and why they change the answer

Buying outright with cash gives the best return, because every unit generated is yours and there is no financing cost. A loan still works if the interest rate is below the effective return, but it lengthens payback by the cost of the credit — run the calculation on total repayable, not the monthly figure.

Leases and power purchase agreements are a different product entirely. You pay little or nothing upfront and buy the generated power at an agreed rate, or rent the equipment. The provider keeps the incentives. These can make sense if you lack capital, but read the escalator clause — many increase the rate annually — and check what happens when you sell the house, since a lease attached to the roof can complicate a sale.

Sizing: bigger is not automatically better

A system sized well above your consumption exports most of its output at the low export rate, which lengthens payback. A system sized to your daytime baseline load self-consumes nearly everything and pays back fastest, but leaves savings on the table. The usual sweet spot covers your daytime usage with modest export, and grows only if you are adding an electric vehicle, a heat pump or a battery — all of which raise self-consumption substantially.

If an electric vehicle is likely within a few years, factor it in now. Charging at home during daylight is the single most effective way to lift self-consumption, and it changes the optimal system size materially.

When the answer is no

Solar struggles to justify itself on a heavily shaded roof, on a roof needing replacement soon, where electricity is unusually cheap, where you expect to move within a few years and cannot recover the cost in sale price, or where the roof faces predominantly north in the northern hemisphere. None of these are reasons never to buy — they are reasons the maths will not work today.

The honest summary: solar is usually a sound long-term investment on a suitable roof with a high electricity price, and a mediocre one otherwise. The variable is your roof and your tariff, not the panels.

This is general information, not professional advice. Costs, cover, rates and rules vary by provider and location and change over time. Confirm current details directly with providers before deciding.