Is Cash the Best Way to Finance Solar Panels in the UK?
In the United Kingdom, there exist several ways to finance a new solar installation, but buying your system outright remains one of the most popular.
If you have the cash on hand, true solar ownership offers the highest returns and shortest payback periods.
However, how does purchasing your system outright compare to other financing options? Equally important, why would you ever pay for a new system out-of-pocket when other financing options allow you to go solar for free?
Buying Your Solar PV System with Cash
A standard 4 kW PV system costs about £7,000 in the UK (although exact prices vary, depending on the installer and components).
£7,000 may sound pretty steep, but given the lifetime benefits of going solar and the financial returns it provides, it’s one of the best investments you can make with your spare cash. However, there are countless PV contractors throughout the UK who will install your system for free (parts and labour).
So why would you pay for a new solar installation on your own?
The Advantages of Owning Your Solar Panels
As a homeowner or business manager, you enjoy several benefits when you own your solar installation, including:
1. Ease & Set-up
Cash transactions are simple, requiring minimal paperwork, credit checks, or loan applications. If you're solvent, using your own money is the fastest way to go solar.
2. Optimal Savings
As the system owner, all solar-related financial benefits and incentives come directly to you. Although the upfront cost is considerable, you have very few (if any) expenses after that. Once installed, your panels generate decades of free electricity – even as utility rates continue to rise.
In the first year alone, your 4 kWp system can save you an average of £650 (often more, if you live in the south).
As grid electricity becomes more expensive with time, those solar savings will only continue to grow. This is because your PV panels help shield you from any and all future price hikes.
Over time, your savings will eventually exceed the upfront cost of your installation. In the UK, the average solar payback period is about 9 years. After reaching this breakeven point, all of the additional power that your panels generate is pure profit.
The biggest benefit of solar ownership is the money you make from your system. Thanks to the UK's feed-in tariff (FiT) incentive, you're allowed to sell your solar electricity to National Grid at a profit.
So in addition to unbelievable savings and a short payback period, solar ownership provides tremendous earning potential – about £16,000 to £21,000 over the next 25 years.
In other words, solar energy becomes an investment when you own your system. Throughout the UK, the average annualised ROI of a 4 kW system is 10.2%, which is comparable to (if not better than) retirement pensions or Wall Street's S&P 500 Index.
Check out this shareable infographic that breaks down the financial benefits of solar ownership in the United Kingdom.
Making money from sunshine sounds like an unbeatable deal. But are there any downsides to financing your system with cash?
Let's take a look.
The Disadvantages of Solar Ownership in the UK
Using money to finance your system isn't for everyone. Below are 2 of the biggest disadvantages of this approach:
1. You Must Have the Money
The most obvious downside is cost. If you have £7,000 lying around, that's great. Not everyone is so fortunate, however.
If you want to enjoy some of the benefits of solar without paying out-of-pocket, be sure to read our article on using solar loans to finance your PV installation.
2. Maintenance Is Your Responsibility
As the system owner, you’re responsible for all upkeep and repairs. However, this obligation isn't nearly as complicated as it seems – for 2 important reasons:
1. Solar is one of the most resilient renewable energy technologies in the world. With no moving parts, PV panels are incredibly durable. Even cleaning isn't really necessary (although some installers charge a premium for this value-added service).
2. Most reputable PV contractors offer one or more of the following:
- Equipment warranties that protect you from component-related defects
- Workmanship warranties that shield you from labour-related issues (i.e. improperly installed panels)
- Production guarantees that cover you for any dips in solar energy output
This is why most solar customers in the UK don't spend a lot of time or money on PV installation upkeep.
Is Using Your Own Money the Right Choice for You?
In many cases, paying cash is indeed the best way to finance your solar PV installation – but not always.
Before moving forward, be sure to read our comprehensive guide that walks you through the pros and cons of each solar financing option. Using cash may be the right decision for you, but there could be an even better approach given your energy goals and budget.
No matter which financing option you choose, it's always a good idea to receive multiple quotes from different PV contractors. You can request 3 free solar quotes from MCS-certified installers by clicking here.