Solar-VAT-Reduction-

Solar panels are a great way of reducing rising energy bills and making a positive contribution to the environment. 

It’s therefore no surprise that a solar revolution of sorts is underway across Ireland and Europe, with the number of solar panels being installed on homes rising exponentially each year.

But despite the many advantages of installing solar panels, many homeowners remain unsure about whether the investment is worth it. 

One of the main factors to consider when making a decision is the solar payback period. Here we’ll examine what this means, as well as some other things to keep in mind when thinking about making the switch.

What is a solar payback period?

The solar payback period is the length of time it takes for solar panels to pay for themselves. 

While the initial investment in a solar PV system may seem expensive, one of the main benefits of solar panels is that they require very little maintenance. 

This essentially means that once they have been installed, you can sit back and watch your energy bills reduce with each passing month. 

Those who install solar panels will see a reduction on their monthly electricity bills, and these savings will, over time, add up to the amount of the installation costs.

The solar payback period ends when these savings have equalled the initial cost of installing the solar PV system.

And as the solar payback period has shortened drastically in recent years, this is arguably the best time for Irish homeowners to install a solar PV system. 

solar payback period

Break Even on Solar Panels in Just 6 Years

Less than three years ago, the Sustainable Energy Authority of Ireland (SEAI) was suggesting that a typical solar payback period would be around 12 years. 

But the Irish Government now estimates the average payback period at around 6 years and 2 months – a drastic reduction of nearly 100% in just a few years.

So what has happened? The main reasons for the shorter solar payback period are threefold: skyrocketing energy prices, the removal of VAT, and solar grants.

Energy prices

The average wholesale price of electricity in Ireland has roughly doubled over the past four years, from €79.05 per megawatt hour in January 2019 to €159.19 in February 2023.

VAT

From 1 May 2023, the rate of VAT on solar installations was reduced to 0%  — down from the previous rate of 13.5%. This reduced the average cost of the supply and installation of solar panel systems by around €1,000.

Grants

SEAI grants of up to €2,400 are available for homeowners to reduce the initial installation of solar panels, which also has a positive impact on the solar payback period.

The Cost of Solar Panels in Ireland

The average cost of solar panel installation in Ireland is between €4,000 and €12,000, with larger systems naturally costing more. 

The SEAI estimates an average family in Ireland can reduce their bills by 33% by installing between four and six panels, which is towards the smaller end of the scale. 

Systems of this size typically cost around €5,500, including the inverter, meters and controls.

Installing ten 410 watt panels – a 4.1 kilowatt peak solar PV system – may cost around €8,500 with all the components included and taking the SEAI grants into consideration.

But again, these are just estimates, and the exact cost of the ideal solar PV system for you will depend on a number of factors. The best way of finding out how much they will cost is by getting a free quote.

Grants available for solar panels

Solar Grants in Ireland

Even those who are extremely interested in installing solar panels on their home, may be put off by the initial costs. But SEAI grants make a considerable difference to the installation costs.

The Microgeneration Support Scheme allows for homeowners to apply to the SEAI for solar PV grants of up to a maximum of €2,400.

In addition, SEAI grants of €1,200 are available for those who wish to install solar thermal panels instead.

solar energy grants

The Price of Electricity in 2023

The price of electricity has gone through the roof in recent years, increasing by 300% between March 2021 and March 2022. 

And while the prices have decreased slightly since last year, they are still double what they were before the pandemic.

The average household in Ireland consumes 4,200 kWh of electricity each year – about 12 units of electricity a day. This works out at about €2,000 per year, but it depends on the supplier.

In July 2023, the cheapest electricity providers in Ireland offering a one-year contract for new customers are Waterpower, Flogas, Community Power and SSE.

Electricity Supplier Annual Bill (based on average consumption)
Waterpower €1,768.32
Flogas €1,801.24
Community Power €1,840.75
SSE Airtricity €1,866.10

Note: Prices relate to residential 24 Hour urban tariff on 23 July 2023.

Solar Panels Lifespan

Something to be mindful of when considering the solar payback period is the longevity of modern solar panels, which generally have a lifespan of around 25 to 30 years with very little maintenance.

This means that once the solar panels have paid from themselves (or the solar payback period has elapsed), you could potentially have upwards of 20 years of free, green electricity. 

PV technology is advancing all the time, and the lifespan of modern panels could be even longer. 

As well as that, some providers include a performance warranty of 20 to 25 years, meaning you can be sure that your solar system will perform to the highest standard in the long term.

lifespan of solar panels is 25 - 30 years

How to Break Even on Solar Energy Faster

While the payback period is now estimated by the Government to be 6.2 years for an average solar installation, there are a few ways of ensuring the that it is as short as possible.

Selling Solar Back to the Grid

A great way of shortening the solar payback period is to sell excess electricity generated by their solar PV panels back to the grid. 

Your energy supplier will pay you for electricity that you supply back to the grid by means of the Clean Export Guarantee under the Micro Generation Support Scheme.

The amount of money you can make selling surplus solar energy depends on the size of your solar system as well as the rates offered by your electricity provider.

The latest rates offered by energy companies in Ireland:

  • Pinergy: 25c per kWh
  • SSE Airtricity: 24c per kWh
  • Flogas: 22c per kWh
  • Electric Ireland: 21c per kWh
  • Bord Gáis Energy: 18.5c per kWh
  • Energia: 18c per kWh

Note: Rates accurate as of 15 June 2023

sell surplus solar energy back to the electricity grid

Cleaning Solar Panels for Maximum Efficiency

While solar PV panels require very little maintenance, cleaning them from time to time will be beneficial as dust or leaves can decrease their efficiency and extend the payback period.

Homeowners can clean their solar panels themselves, or hire a trained professional to carry out the work.

Those who choose to DIY should use a soft brush and detergent to remove any dust that has built up.

Solar Batteries

Solar batteries reduce the amount of solar energy that goes to waste by retaining electricity when it is not used, for use at another time. 

Batteries, or energy storage units, can reduce the amount of time that it takes for solar panels to pay for themselves by utilising energy that would otherwise be wasted.

Start your Solar Journey Today

The payback period has dramatically decreased to just over six years, with those who have installed solar panels enjoying up to 24 years of 100% free renewable energy after that point. If you are interested in installing solar panels, avail of a FREE quote today!

consider getting solar panels installed on your home or business

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