As reported by the Energy Saving Trust, solar panels in the UK can significantly reduce electricity bills, with potential annual savings of up to £340 for a typical household using a 3.5 kilowatt-peak system at current energy prices. Despite the initial investment, solar panels are increasingly seen as a worthwhile long-term solution for homeowners looking to cut costs and reduce their carbon footprint.
Smart Export Guarantee Explained
The Smart Export Guarantee (SEG) is a government-backed initiative introduced in January 2020 to replace the Feed-in Tariff (FiT) scheme. It requires large energy suppliers to pay homeowners for renewable electricity they export back to the National Grid. This scheme applies to various renewable energy systems, including solar panels, wind turbines, micro combined heat and power, hydropower, and anaerobic digestion.
Under the SEG, homeowners with eligible renewable electricity generation systems can earn money for every unit of excess electricity they feed back into the grid. The scheme is designed to make it financially rewarding to contribute surplus power, supporting the UK’s transition to cleaner energy sources.
To qualify for SEG payments, you need to meet certain criteria:
• Your installation must have a capacity of 5MW or less (50kW for micro-CHP)
• You must have a meter capable of providing half-hourly export readings, typically a smart meter
• Your installation and installer must be certified through the Microgeneration Certification Scheme (MCS) or an equivalent accredited scheme
The SEG puts responsibility on consumers to find the best rate for their exported electricity. Energy suppliers set their own rates, which can vary significantly. As of 2025, the highest available rate is E.ON’s Next Export Exclusive tariff at 16.5p per kilowatt hour (kWh) for customers with a total installed capacity of up to 15kW. On this tariff, the average solar panel owner could make around £219 a year from exporting excess electricity.
It’s important to note that SEG payments are only for exported electricity; you won’t be paid for the energy you use yourself. However, you’ll still benefit from reduced energy bills due to using your own generated electricity.
To start receiving SEG payments, you need to apply directly to a SEG tariff supplier. Your SEG supplier doesn’t have to be the same as your energy provider. Tariffs can change over time, so it’s advisable to regularly check and compare rates to ensure you’re getting the best deal.
The SEG scheme not only provides financial benefits to homeowners with renewable energy systems but also contributes to the UK’s goal of reaching net-zero emissions by incentivizing small-scale, low-carbon electricity generation.
Impact of Solar Panel Orientation
Solar panel orientation plays a crucial role in maximizing energy production and efficiency. In the UK, the optimal orientation for solar panels is generally south-facing, as this allows them to capture the most sunlight throughout the day. However, the impact of orientation on solar panel performance is more nuanced than simply facing south.
For UK homeowners, the ideal angle for solar panels is typically between 20° and 50°, with an optimal tilt of around 40° from horizontal. This angle helps to maximize exposure to sunlight throughout the year, accounting for the UK’s latitude and seasonal variations in sun position.
While south-facing panels are generally considered optimal, east and west-facing installations can still be highly effective. Panels facing directly east or west generate approximately 20% less electricity than south-facing systems, but they can still provide significant energy savings. This flexibility in orientation is particularly beneficial for homeowners whose roofs may not have an ideal south-facing aspect.
Interestingly, slight deviations from true south can sometimes be advantageous. For instance, orienting panels slightly southwest can increase energy production during peak demand hours in the late afternoon and early evening. This approach may result in a small decrease in total annual production but can lead to greater economic benefits by aligning energy generation with periods of higher grid electricity prices.
The impact of orientation becomes even more significant when combined with the panel’s tilt angle. For maximum efficiency, the tilt angle should be adjusted based on the geographical latitude. In the UK, which lies between 50° and 60° north latitude, a tilt angle close to 40° is generally recommended. However, for locations closer to the equator, a flatter tilt would be more appropriate.
It’s worth noting that while optimal orientation and tilt are important, they are not the sole determinants of a solar system’s viability. Factors such as shading, roof size, local electricity prices, and solar power policies also play significant roles in the overall effectiveness and economic return of a solar installation.
For UK homeowners considering solar panels, it’s encouraging to know that even if their roof doesn’t have the perfect south-facing orientation, solar energy can still be a worthwhile investment. Modern solar panel systems are designed to be efficient across a range of orientations and angles, making solar power accessible to a wider range of properties.
Cost Breakdown by System Size
In the UK, solar panel system costs vary significantly based on size and capacity. As of 2025, a typical 3.5kW solar panel system, suitable for an average 3-bedroom house, costs around £7,000. This system usually comprises about 10 panels, each rated at 350 watts.
For smaller homes or those with lower energy needs, a 3kW system is often sufficient. These systems typically cost between £5,500 and £7,500. At the other end of the spectrum, larger homes or those with higher energy demands might require a 6kW system or larger, which can cost between £10,500 and £12,000.
Here’s a breakdown of costs by system size:
• 1-2 bedroom homes (2.5-3kW system): £2,500 – £5,500
• 2-3 bedroom homes (3-4kW system): £5,000 – £8,500
• 4-5 bedroom homes (4-6kW system): £9,500 – £10,500
It’s important to note that these prices include installation costs. The price per individual 350-watt solar panel ranges from £150 to £300, but this doesn’t account for installation and additional equipment.
Larger systems, while more expensive upfront, often provide better long-term savings and shorter payback periods. For instance, a 6kW system could save homeowners between £1,200 and £1,350 annually, with a payback period of 5-7 years.
When budgeting for solar panels, it’s crucial to consider additional costs. These may include:
• Solar battery storage: £1,500 – £3,000
• Inverter replacement (typically needed after 10-15 years): £800 – £1,500
• Scaffolding for installation: £800 – £1,200
The cost of solar panels has decreased significantly over the years, with prices falling by around 20% every time global cumulative capacity doubles. This trend, combined with rising electricity prices and government incentives like the Smart Export Guarantee, continues to make solar panels an increasingly attractive investment for UK homeowners.
Eligibility Criteria for SEG
To qualify for the Smart Export Guarantee (SEG) scheme in the UK, generators must meet specific eligibility criteria:
Renewable Energy Technologies: The power generation must come from one of the following approved renewable sources:
• Solar Photovoltaics (PV)
• Wind turbines
• Micro Combined Heat and Power (micro-CHP)
• Hydroelectric systems
• Anaerobic digestion
Capacity Limits: Installations must have a total installed capacity of up to 5MW for most technologies, or up to 50kW for micro-CHP. This 5MW limit is equivalent to a substantial 12,500-panel solar array, far exceeding typical residential installations.
Certification Requirements: For solar PV, wind, and micro-CHP installations up to 50kW, both the installation and the installer must be certified. This is typically demonstrated through:
• A Microgeneration Certification Scheme (MCS) certificate, or
• Certification from a scheme accredited as equivalent to MCS, such as the Flexi-Orb renewables scheme
For installations above 50kW and up to 5MW, only the installation itself needs to be certified, not the installer.
Metering: Participants must have an installed smart meter or half-hourly meter capable of measuring exported electricity. These meters must automatically transmit readings to the SEG tariff supplier.
Location: The installation must be located in Great Britain.
Grid Connection: The system must be capable of feeding electricity into the grid using an existing electricity connection.
Exclusions: Generators cannot receive SEG payments if they are already receiving export payments under the Feed-in Tariffs scheme.
Anaerobic Digestion: For anaerobic digestion installations, additional sustainability criteria and reporting requirements apply.
It’s important to note that while these are the general eligibility criteria, individual SEG licensees (energy suppliers offering SEG tariffs) may have their own specific application processes and requirements. Potential generators should contact their chosen SEG licensee directly to understand the exact information and documentation needed for their application.
Comparing SEG Tariff Rates
The Smart Export Guarantee (SEG) scheme offers a range of tariff rates from various energy suppliers, with significant variations in the amount paid per kilowatt-hour (kWh) of exported electricity. As of 2025, the highest SEG rates are typically offered by suppliers to their existing customers, with some exclusive tariffs reaching up to 40p/kWh.
Octopus Energy leads the market with innovative time-of-use tariffs. Their Intelligent Octopus Flux tariff offers an average rate of 29.4p/kWh, with peak rates between 4-7pm, incentivizing customers to export during high-demand periods. This is followed by their Octopus Flux tariff at 25.9p/kWh, also featuring time-of-use pricing.
E.ON Next has recently launched a competitive offering with their Next Export Premium v2 tariff, paying 21p/kWh for a 24-month fixed term. This tariff is available to E.ON Next customers who had solar panels installed by the E.ON Solar and Storage team.
Several other suppliers offer attractive rates to their customers:
• Good Energy’s Solar Savings Exclusive tariff pays 40p/kWh, but is limited to customers who have had solar panels and batteries installed by Good Energy’s partners
• EDF Energy and Ovo Energy both offer 20p/kWh to customers with specific solar and battery setups
• British Gas provides a rate of 15.1p/kWh exclusively to their electricity customers through their Export and Earn Plus tariff
For those unwilling to switch energy suppliers, the options are more limited. Pozitive Energy offers a universal SEG tariff of 5p/kWh, open to all solar generators regardless of their energy supplier.
It’s important to note that these rates can change, and some are fixed for specific periods. For example, E.ON Next’s 21p/kWh rate is fixed for 24 months, while others like British Gas’s tariff are variable and can fluctuate.
When comparing SEG tariffs, consider not only the rate but also any additional requirements or benefits. Some tariffs may require specific hardware, such as batteries, or may be part of a broader energy package. Additionally, time-of-use tariffs like those offered by Octopus Energy can provide higher returns if you can align your export patterns with peak pricing periods.
For businesses, SEG tariffs are also available, with rates generally lower than residential offerings. British Gas Business Energy, for instance, offers 15.1p/kWh to their business customers, while also providing a 3p/kWh tariff to any SEG-eligible business.
As the SEG market continues to evolve, it’s advisable for solar panel owners to regularly review and compare available tariffs to ensure they’re maximizing their returns on exported electricity.
Impact of Shading on Output
Shading can have a surprisingly severe impact on solar panel output, far beyond what might be expected from the shaded area alone. Even partial shading of a single cell can dramatically reduce the power output of an entire solar panel or array.
The disproportionate effect of shading is due to the series connection of solar cells within panels. When one cell is shaded, it limits the current through the entire string of cells. This phenomenon is sometimes called the “Christmas light effect,” analogous to how one faulty bulb in an old string of Christmas lights could cause the entire string to go dark.
The severity of power loss from shading depends on factors like the extent of shading and panel configuration. Studies have shown that shading just one cell in a panel can reduce the solar power output of the entire panel by 50-80%. In some cases, shading as little as 10% of a panel’s surface area can result in a 50% decline in efficiency.
To mitigate these effects, modern solar panels incorporate bypass diodes. These diodes allow current to flow around shaded sections, preventing complete power loss. Typically, one bypass diode is used for every 20-24 cells in a panel. While bypass diodes help, they don’t eliminate shading losses entirely.
The impact of shading on overall system performance can be significant. Experts estimate that homeowners could be losing 40-80% of their potential solar generation due to shade. In typical residential installations, shading can reduce annual energy production by 5-25%, and even more in severe cases.
It’s important to note that different types of shading have varying impacts:
• Soft shading (e.g., light cloud cover, atmospheric haze) generally results in a uniform reduction in power output across affected cells or panels
• Hard shading (e.g., solid objects like chimneys or dense tree branches) can have more severe effects, potentially shutting down entire strings of cells or panels
To maximize solar panel efficiency, it’s crucial to minimize shading through careful system design and regular maintenance. This includes considering factors like panel placement, tree trimming, and cleaning to remove temporary obstructions like leaves or snow. In cases where some shading is unavoidable, technologies like microinverters or power optimizers can help mitigate the impact by allowing each panel to operate independently.
Understanding the significant impact of shading on solar panel output underscores the importance of proper site assessment and system design in maximizing the benefits of solar energy installations.
Summary
Solar panels in the UK represent a significant investment in sustainable energy with clear financial benefits. With potential annual savings of up to £340 for typical households, combined with Smart Export Guarantee (SEG) payments for excess energy, solar installation can be a worthwhile long-term investment. While factors such as orientation, shading, and system size significantly impact performance, modern solar technology offers solutions for various property types. Current costs range from £2,500 to £12,000 depending on system size, with payback periods typically between 5-7 years. For UK homeowners looking to reduce both their carbon footprint and energy bills, solar panels present an increasingly attractive option, especially given falling installation costs and rising electricity prices. When considering installation, it’s crucial to assess factors like roof orientation, local shading, and available SEG tariffs to maximize the return on investment.