Can solar panels offset the October energy price cap rise?

Households are facing yet another increase in energy bills this autumn, with Ofgem’s energy price cap rising by 4 per cent from 1 October.

For a typical household paying by Direct Debit and using both gas and electricity, the headline figure will rise from £1,663 to £1,723 a year, a £60 increase, or about £5 a month, if those rates remain in place for a full year.

For households with solar panels, that naturally raises a question: if you are already generating some of your own electricity, could your solar panels effectively cancel out the increase?

In terms of the money saved over the course of a year, the answer could easily be yes. The Independent has found that a typical rooftop solar system can save households hundreds of pounds a year through a combination of using their own electricity and selling surplus power back to the grid.

But there is an important catch. Most of October’s price cap increase is being driven by gas, not electricity. So if you heat your home with a gas boiler, solar panels cannot protect you from the fastest-rising part of your energy bill.

How much is the energy price cap rising in October?

The energy price cap doesn’t place a limit on your total bill. Instead, it controls the maximum unit rates and standing charges suppliers can apply to customers on default tariffs, so the more energy you use, the more you will still pay.

From 1 October, the typical annualised figure rises from £1,663 to £1,723. However, looking beyond that headline £60 increase reveals a very different picture for electricity and gas.

The electricity unit rate is therefore barely changing, while its standing charge actually falls. Gas, meanwhile, becomes considerably more expensive.

The government's temporary removal of VAT from household electricity bills from October has helped keep electricity prices broadly stable. Ofgem says that households that don’t use gas will see an increase of less than 1 per cent, while gas bills rise by around 8 per cent.

And this is important if you are wondering how much protection solar panels offer.

Can solar panels offset the £60 price cap increase?

If you already have solar panels, the amount they save you over a full year could comfortably exceed £60.

Solar panels generate electricity that can be used directly in your home. Every kilowatt-hour you generate and consume yourself is one you don’t have to buy from your energy supplier at the rates listed above.

If your panels produce more electricity than you need at that moment, you can also be paid for exporting surplus power to the grid through an export tariff.

Previous modelling by The Independent provides an indication of the scale of those savings.

For a three-bedroom home with a 3.6kW solar system generating around 3,400kWh a year, the savings could be roughly £550 a year under October’s electricity prices. Assuming the home uses around 30 per cent of the solar electricity itself, it would avoid buying about 1,020kWh from the grid, saving around £268 at the new capped rate of 26.32p/kWh. Exporting the remaining electricity at 12p/kWh could bring in another £286, taking the combined annual benefit to around £554.

This is more than nine times the £60 headline increase in the October energy price cap. However, the comparison needs some context: solar only reduces the electricity side of your bill, while most of October’s increase comes from higher gas prices. So actual solar savings will also vary according to where you live, your roof, how much electricity your panels generate and use at home, and the export tariff you receive.

Nevertheless, it demonstrates the difference in scale. Your annual solar savings can amount to several hundred pounds, rather than the £60 represented by the headline October price cap rise. Larger systems can potentially save even more.

Read more: Find out whether solar panels are worth it for your home

Solar panels cannot protect you from rising gas prices

This is the biggest limitation when looking specifically at October's price increase. A conventional solar PV system generates electricity. If you have a gas boiler, it does nothing to reduce the amount of gas you need to buy to heat your home or hot water. And it is precisely gas that becomes more expensive from October.

The average capped gas unit price climbs from 7.33p to 7.97p per kWh. By comparison, electricity increases by just 0.21p per kWh, while the electricity standing charge drops.

In other words, somebody with rooftop solar and a gas boiler could already have dramatically reduced the electricity portion of their energy bill and still see costs rise this autumn because their gas has become more expensive.

And there is yet another charge solar can’t avoid: your electricity standing charge. Even if you buy very little electricity from the grid, you will normally still have to pay the daily charge just for being connected with your supplier.

So it’s more accurate to say that solar panels can help offset the overall financial impact of higher energy prices over the year than to say that they directly cancel October's price cap rise.

What happens to solar savings during autumn and winter?

There is another complication with the timing of the October increase: solar panels produce considerably less electricity just as households start consuming more energy.

Panels do not stop working when the weather turns cold. They need light rather than heat, so they will continue generating electricity on cold and cloudy days.

But shorter days, a lower sun and heavier cloud cover mean output falls substantially. Depending on your location and system, winter generation can fall to around 15 to 30 per cent of summer output.

That means the benefit of solar is better judged over 12 months than by comparing your October or December electricity bill with one from summer.

A system may generate far more electricity than your home needs during a bright June afternoon, for example, but only a fraction of that amount on a dark December day.

Read more: How solar panels perform in winter and on cloudy days

Would a solar battery help?

A battery can increase the amount of solar electricity you use yourself. Without one, surplus electricity produced in the middle of the day is exported to the grid if you can’t use it immediately. A battery lets you store some of that electricity and use it later, perhaps when you are cooking dinner or running appliances after the sun has gone down.

This can reduce the amount of electricity you need to buy from the grid, particularly for households that are out during much of the day.

But a battery isn’t automatically the most profitable option. It adds thousands of pounds to the upfront cost of a solar installation, while good export tariffs can make selling surplus electricity attractive in their own right.

Read more: Is solar battery storage worth it?

What if you don't use gas?

For an all-electric household, the picture is rather different. If you have a heat pump rather than a gas boiler, for example, a much greater proportion of your household energy consumption comes through your electricity meter. Solar panels can therefore offset more of the energy you would otherwise have to buy.

There is still a seasonal mismatch. Heat pumps consume the most electricity for heating during winter, just as solar generation is at its lowest.

But looking across the whole year, combining the two technologies can make a significant difference. Previous modelling highlighted by The Independent found that for one illustrative semi-detached home, annual electricity costs with a heat pump fell from £1,622 to £931 when solar was added – a difference of £691.

And households that rely entirely on electricity are also less exposed to October's price cap increase in the first place. Ofgem says households that do not use gas will see a much smaller increase than the headline 4 per cent figure.

Read more: How solar panels and heat pumps work together

So, will solar panels protect you from higher energy bills?

Solar panels will not make you immune to movements in the energy price cap. You will still need electricity from the grid when your panels aren’t generating enough; you will still pay a standing charge, and households with gas boilers remain exposed to changes in gas prices.

Although the headline price cap is rising by £60 a year for a typical dual-fuel household, electricity prices are changing very little.

But over the longer term, solar can reduce the part of your energy bill that depends on buying electricity from the grid. For many suitable homes, those annual savings could be several times greater than October's £60 headline increase.

That doesn’t mean spending thousands of pounds on a new solar panel installation purely to avoid one price cap rise makes financial sense. But for those who are already considering solar as a long-term investment, generating more of your own electricity offers you less exposure to whatever happens to grid electricity prices going forward.

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