Solar panels are well known for their ability to generate electricity, reducing your need to buy power from the grid and cutting your energy bills. But they can also earn you money, thanks to the Smart Export Guarantee (SEG).
SEG is where energy companies pay for the surplus electricity generated by your solar panels but not used to power your home.
How much money you earn will depend on the amount of electricity generated – and that in turn depends on the size of your solar panel system, the direction it faces, how shaded it is, and the weather conditions. But the key point remains: you can earn money by selling unused solar electricity to the grid, which in turn can help offset the cost of installing your solar panels.
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How can I make money with solar panels?
There are two distinct ways solar panels can improve your household finances. The first is how they let you create your own electricity instead of buying it from the grid.
A typical domestic solar panel installation of 10-12 panels might be capable of producing 4 kWh and generating roughly 3,500 kWh of electricity per year. According to Ofgem, the typical median-use home uses 2,500 kWh of electricity per year.
That’s less than the potential annual generation of a solar system, but since solar panels don’t generate electricity at night and perform less well on cloudy days, during those hours electricity will still be purchased from the grid. Solar power can be stored in a battery to help out here, but we’ll come back to that later.
In short – with solar panels generating electricity during the day, your household can purchase less energy from the grid, therefore lowering your electricity bill.
The other way solar panels can improve your finances is by selling unused electricity to the grid. This is where the Smart Export Guarantee comes in, which dictates how much each kWh of solar-generated electricity is sold for.
If you’re at work and the household is unoccupied during the day, it’s likely that more electricity is being generated by your solar panels than the house needs. The surplus is then automatically exported to the grid, earning you an income.
How much money can I make from solar panels?
Right away, it is important to say this is money earned, not profit. Installing a solar panel system can cost anywhere between £2,500 and £15,000, with the average being around £7,600, so you’re only really in profit once that has been paid off. According to UKPower, this can take between eight and 11 years.
So while you won’t see a true profit for around a decade, exporting surplus electricity generated by your panels can provide an immediate financial benefit.
Exactly how much money you’ll earn depends on the size of the solar panel system, how much electricity it generates, and how much your home consumes. Naturally, a larger system will generate more electricity – but this is likely fitted to a bigger property with higher electricity demands.
As a rough example, a typical 4kWp solar panel system might generate around 3,000kWh of electricity a year, according to Which?. If the household uses about 40 per cent of that itself – as in this real-world example from the Energy Saving Trust – then 60 per cent can be exported. For our example, that means about 1,800kWh of electricity being exported, which at a typical rate of 12p per kWh means annual earnings of £216.
The actual figure will depend on the size of the solar system, the direction and angle of the roof, shading and sun exposure, weather and geographical location. Earnings will also vary depending on the rate paid for exported electricity and how much electricity the household uses.
How does the Smart Export Guarantee work?
Launched at the start of 2020, the Smart Export Guarantee (SEG) is a government-backed scheme that pays households for the renewable electricity they generate and export to the electricity grid. It replaced the Feed-in-Tariff scheme, which closed to new users in 2019.
Under the SEG, your export supplier pays you for each kWh of electricity you export. This is electricity generated by your solar panels but not used by the household (or stored in a battery, if you have one).
To qualify, your solar installation must meet the SEG eligibility requirements, and you’ll need an MCS certificate or equivalent. You’ll also need a smart meter capable of recording your electricity exports in half-hourly periods.
To get everything set up, you need to apply to an energy supplier that offers a SEG tariff. This doesn’t have to be the same energy company that supplies electricity to your home, and companies set their own export rates, contract lengths and other terms, so it’s worth comparing before deciding who to export to.
Not every electricity supplier offers an export tariff, but larger firms with at least 150,000 domestic customers are required to do so.
How much can I earn from the Smart Export Guarantee?
How much you’ll earn through the Smart Export Guarantee depends on how much electricity your panels generate, how much is exported and the rate paid by your export tariff.
According to the Energy Saving Trust, you’ll typically get around 12p for every unit (kWh) of electricity generated by solar panels and exported. The trust also says you should get around £220 a year in Great Britain and £130 in Northern Ireland.
Export rates can vary by tariff. For example, Octopus pays a flat rate of 12p/kWh with its Outgoing Octopus (Variable) tariff, but 16p/kWh during peak hours (4pm to 7pm) and 9p/kWh for the rest of the day with its Prime Outgoing Octopus tariff.
These are available to existing Octopus customers who also have an import energy tariff (in other words, they buy their electricity from Octopus too). Customers who buy their electricity from a different supplier can still export to Octopus, but at 4.1p/kWh.
It is important to remember that the process of exporting surplus electricity is automatic. Since electricity companies sell electricity for more than they pay for it, it is most cost-effective to use your solar power to lower your need for grid electricity, and only sell back the electricity that will otherwise go to waste.
The primary financial advantage of solar panels is a reduction in your electricity bills. Any income made from surplus electricity exported to the grid should be seen as a welcome bonus.
FAQs
Will I make the same money every year from solar panels?
Not necessarily. Your earnings will vary depending on how much electricity your system produces, how much you use yourself, and the export rate your tariff pays. Solar output naturally fluctuates year to year due to weather conditions, and export tariffs can also change, so the amount you make won’t be identical each year.
How do I get paid from my solar panels?
You earn money through a Smart Export Guarantee (SEG) tariff. After registering with an SEG provider, your smart meter records how much surplus electricity you send back to the grid. Your SEG provider then pays you for electricity exported, with the rate and payment terms depending on the tariff you choose.
How much do solar panels save on energy bills?
Savings depend on your system size, your home’s electricity use and how much solar power you use during the day. A typical 4kW system can cut bills by several hundred pounds a year by reducing the amount of electricity you need to buy from the grid.
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