We all know solar panels are a great solution for households. They help reduce your electricity bills, help you reduce your dependence on the grid, and they are also environmentally friendly. But how exactly does this work? How do solar panels reduce electric bills?

The obvious answer is they limit the amount of energy you need to draw from the grid, but there’s so much more a well-constructed solar power system can do to reduce your household’s electricity bill.

In this article, we’ll go through how exactly a solar power system works, how it contributes to reducing your household electricity bills, and some additional information on installation and the environmental benefits it provides. Let’s dive in.

1. How do solar panels reduce electric bills in UK households?

From reducing your usage of grid energy to enabling sell-backs of excess energy, solar panels can reduce your electric bills in many different ways. Here are some notable contributions.

The SEG allows small-scale generators/SEG Generators like you to get paid for the excess energy they generate and send back to the national grid via certain electricity suppliers, known as SEG Licensees.

While the payment amount varies depending on the technology type, the total installed capacity, and the energy performance certificate (EPC) of the installation, you can earn some additional income with the SEG, reducing your electricity bills.

The ECO4 (Energy Company Obligation Scheme) was allocated £4 billion between 2022 and 2026—and this allows households, especially low-income ones, to get funding for a variety of solar energy projects, including solar PV installations. This will also lead to a reduction in your electricity bills.

Additionally, in the UK, the VAT for solar panels—whether it is for the whole product or simply for the installation is 0%. So, the process of actually getting a solar power system installed is also significantly cheaper, at least until March 2027.

While a solar power system may not be able to completely make up for your household's energy consumption (this depends on the household, of course), it can still be a significant contributor in helping you reduce your grid energy usage.

The average solar power system in the UK tends to be a 3kW or 4kW array, which can generate up to 4500kWh of electricity a year, on average. This can usually cover 50-70% of the average UK household’s demand, so you will most likely be saving up to that amount from your annual energy bills. If we crunch the numbers, this would total annual savings of between £170 to £565.

But wait, there’s more. Let’s take a quick look at the installation costs and how long it will take you to recoup your investment as well.

The average cost of a solar panel solution in the UK is around £5,000 to £11,000. How long would it take you to recoup this investment? Well, it depends on several factors. Your household consumption, the solution you opt for, and the financial incentives you are eligible for, you can see positive returns in as little as 6 years!

2. Any other reasons to invest in solar energy?

Why yes, there is! The planet’s environmental well-being is not doing great at the moment. However, actions are being taken, global warming, climate change, and a host of other factors have made us shift our focus almost entirely towards renewable energy.

Sustainability considerations are at an all-time high, and countries around the world are putting together initiatives for a greener future. It is in all of our hands to do our part for the environment, the planet, and for the future generations.

We can start here—with solar energy. It has the potential to reduce our reliance on coal power plants and fossil fuels, and from an individual sense, it can severely cut down our carbon footprint.

3. How can you get on the solar energy train?

Well, the first step is to find and evaluate the type of solar energy solution you need and find a reliable installer to get it done for you. Now, you can scour the internet and try to find an installer in your area, or, you can join Solar Save Club where we readily have a whole host of installers who will guarantee that your solar energy installation goes as smoothly as possible.