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Solar panels: How they work, how much they cost and how much money they can save you

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With energy bills going through the roof, millions of UK households are wondering how they’ll cope with the mounting cost of living crisis. On April 1st, Ofgem raised its energy price cap by £693 to £1,971 a year.

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The increase comes after months of spiralling wholesale gas prices, which have forced scores of smaller UK energy suppliers out of business. As a result of these rocketing energy costs, a lot of people have been exploring alternative energy sources.

Many people are wondering whether it’s a good idea to install solar panels on their home. But how exactly do solar panels work, how much do they cost – and can they really save you money?

How do solar panels work?

Solar panels are composed of photovoltaic (or PV) cells. These absorb energy from sunlight and then convert this into electricity, thereby generating a direct current which is then passed through an inverter, converting it into an alternating current.

The electricity generated by solar panels can then be consumed by the property to which the panels are attached, or connected to the National Grid. The smart export guarantee scheme, launched in 2020, guarantees households payments for ‘exports’ of their solar energy.

Photovoltaic cells don’t need direct sunlight in order to work, though they do generate more electricity when there is strong sunshine. Solar panels do not work at night, though the energy generated through the day can be stored so that the home has energy when it’s dark.

Can solar panels power a house?

Solar panels can generate enough electricity to power household appliances, but to power an entire house using solar power alone would require a lot of panels. Most homeowners simply don’t have that sort of space, but solar panels can provide substantial energy.

It goes without saying that energy needs will vary significantly from household to household. A number of factors will influence how much energy you need, including whether you work from home and the overall energy efficiency of your property.

Are solar panels good for the environment?

Solar panels can help households reduce their carbon emissions and consume fewer fossil fuels. Solar power is derived entirely from the sun’s energy, rather than from oil, gas or coal – so solar panels have a positive impact on the environment overall.

How much do solar panels cost?

According to the Energy Saving Trust, a typical 4.2 kilowatt-peak solar panel system will cost you around £6,500. However, the government is trying to offer some incentives to boost installation of solar panels and other low-carbon energy sources.

To encourage households to install low-carbon energy systems, Chancellor Rishi Sunak announced in his Spring Statement that solar panels – as well as heat pumps and insulation – would be exempted from VAT for five years. VAT was previously levied at five per cent.

When will solar panels get cheaper?

Solar panels are still quite expensive for most households, but they are expected to get cheaper over the long term. Increased demand for solar panels has led to increased production, bringing down overall costs.

However, the price of solar panels is still likely to be prone to some fluctuation. For example, shortages of some raw materials may sometimes cause the price of solar panels to rise temporarily, but the long-term trend still indicates that they will generally get cheaper.

Do solar panels save money?

According to MoneySavingExpert, based on figures from the Energy Saving Trust, a typical household with a 4.2 kilowatt-peak solar energy system could save between £165 and £405 a year on its energy bills.

Households could also stand to make between £80 and £110 a year from energy they sell to the National Grid via the smart export guarantee, based on a rate of 3.99p per kilowatt hour. However, the exact amount you’re paid will vary between different energy companies.

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