Considering Installing Solar Panels?

Kingsnorth Electrical is one of the leading solar panel installers in Ashford, Kent. In this article we discuss the implications of falling electricity prices on the viability of a solar power investment.

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Are you considering installing solar panels on your home, but with the recent forecasts of falling electricity prices, you maybe unsure if it is still worth the investment? Don't worry, in this article, we will explore the pros and cons of solar power and answer the question: Is solar power still worth it? We aim to uncover the potential cost savings, environmental benefits, and return on investment (ROI) that solar power can offer. We will look at the wider issues and attempt to find out if solar power remains the right choice for you.

What Drives Electricity Price Levels?

An economist will tell that price is simply what a buyer and a seller agree on. In a wider market context, this happens when the demand curve and the supply curve for a product coincide, in what is called equilibrium. However, electricity is a complex industry. Subject to the geo-political environment, government regulation and many other forces. Below, we have identified 8 different factors that have a direct impact on the price a consumer of business pays for their electricity.

1. The unfolding level of supply and demand – As mentioned above.
2. Fuel costs – The cost of generating electricity.
3. Infrastructure and maintenance costs – For production and transmission.
4. The cost of capital – Electricity generation is a capital intensive industry.
5. Seasonality – Prices vary by time of year and even time of day.
6. Weather conditions - A cold snap or lack of wind will push up prices.
7. The global political and economic environment – Wars, OPEC etc.
8. Government and OFGEM regulation – Price caps and subsidies.

We will go into further detail on each of these factors in a later blog post. Suffice to say, that in recent years the environment for electricity supply has been generally negative and has forced up prices. But in recent months, the outlook has marginally improved. 

Recent Electricity Price Movements

In the short-term the Electricity Cap rose by 5% on 1^st January 2024. More recently, forecasts by industry specialists Cornwall Insight expect prices to fall by 16% in April, a further 10% fall in July, before rising 5% in October. At the end of 2024, electricity prices are expected to be 20% lower than the current tariff.

Cost Savings

One of the main motivations for homeowners choose to install solar panels is the potential for cost savings. By generating your own electricity, you can reduce or even eliminate your monthly electricity bill. This can result in significant savings over time, especially as over the long-term electricity prices have a tendency to rise. Generally faster than consumer prices in general. The forecast fall in prices may well reduce future cost savings, but they will still be substantial.

Environmental Benefits

Solar power is a clean and renewable energy source, meaning it does not produce harmful emissions or contribute to climate change. By using solar power, you can reduce your carbon footprint and help protect the environment. The price of electricity does not change this.

Energy Independence

By generating your own electricity, you become less reliant on the national grid, the risk of blackouts and the fluctuating prices of electricity. This can provide a sense of energy independence and stability, as you are not at the mercy of utility companies.

Increase in Home Value

Installing solar panels can also increase the value of your home. According to a study by the Royal Institute of Chartered Surveyors a fully green home may see its value increase by between 9 and 20%. This means that not only can you save money on electricity, but you can also potentially make a profit when selling your home.

Long-Term Savings

While electricity prices may decrease over the next 6-8 months, they are expected to continue rising in the long term. This means that the cost savings from solar power will still be significant over time.

Environmental Impact

Even with falling electricity prices, solar power still has a positive impact on the environment. By reducing your carbon footprint and using clean energy, you are contributing to a more sustainable future.

Personal Values

For some homeowners, the decision to install solar panels may not be solely based on cost savings. Personal values and a desire to use renewable energy may outweigh any potential savings from traditional electricity sources.

Return on Investment (ROI)

The return on investment (ROI) for solar power can vary depending on factors such as location, energy usage, and the cost of electricity. However, at 2023 electricity prices, homeowners can expect to see a return on their investment within 10 years. This means that after this time, the electricity generated by the solar panels will essentially be free. If prices were to fall 20%, and stay there over the long term, the payback period is still within 12 years.

Conclusion - Solar Panels are Still Worth Installing

While the forecast of falling electricity prices may cause some to question the value of solar power, there are still many benefits to consider. From cost savings to environmental impact, solar power offers numerous advantages for homeowners. Ultimately, the decision to install solar panels should be based on individual circumstances and priorities. However, with the potential for long-term savings and a positive impact on the environment, investing in a solar power system remains a viable option for many homeowners.