Solar Panel Costs UK Government Grants

Last updated: November 15, 2023

How much does a new domestic solar panel installation cost in the UK? Including when you factor in current government grants?

In this guide we will explain what solar panel grants and funding is currently available, how much you are likely to receive as well as the eligibility criteria.

Let’s begin..

Please note: the Green Homes Grant, as well as the feed in tariff are no longer available for new solar installs.

Quick Takeaways:

  • You can earn money from your solar panels via the Smart Export Guarantee.
  • The VAT reduction scheme means you will pay 0% VAT on new solar panels, which is set to run between April 2022 and April 2027.
  • Certain households that meet the eligibility criteria may also be able to receive funding via the ECO4 scheme.
  • If you live in Scotland, you may be eligible for a low interest loan from Home Energy Scotland.

What Solar Panel Grants Are Currently Available?

As of December 2022, the only government funding available for solar panels is via the ECO4 scheme.

ECO4 for Solar Panels

The Energy Company Obligation (ECO) is at it’s 4th iteration hence the name ECO4.

This funding is only available to households who meet the eligibility criteria, which includes the following:

  • Your household earns less than £31,000 per year.
  • You’ve been referred by your energy provider, local authority, or doctor.
  • You receive certain benefits.

In order to qualify for ECO4 funding for solar panels you home must also use an electrical heat source e.g. a heat pump or an electric boiler.

Your home must also be insulated to a certain standard and so you may be able to receive funding for home insulation too.

VAT Reduction Scheme

The other scheme which is value added tax (VAT) reduction means that the VAT on certain energy saving materials has been reduced to 0%.

Those eligible for this offer only need to pay 5% VAT on products like solar batteries and solar panels as opposed to the regular 20% VAT.

The new VAT rate applies to a variety of eco-friendly home improvements, including:

  • Solar panels
  • Air source heat pumps
  • Controls for central heating and hot water systems
  • Draught stripping
  • Ground source heat pumps
  • Insulation
  • Micro combined heat and power units
  • Wood-fuelled boilers

The scheme is in operation from April 2022 to 2027 and means that vulnerable households will pay less to make upgrades that meet the requirements of the scheme.

Home Energy Scotland

If you live in Scotland, you may also be eligible for a grant to help pay for your solar panels and battery.

Home Energy Scotland Loan is an interest-free loan designed to help finance various energy efficiency initiatives and renewable systems like solar panels and solar batteries.

You can get a loan of up to £6,000 for a solar PV system, and £5,000 for a solar battery storage system.

The repayment period is between 5-10 years, depending on the installation. For specific eligibility criteria, you can visit the Home Energy Scotland website.

Smart Export Guarantee (SEG)

As previously mentioned, you can use the Smart Export Guarantee scheme that allows you to earn money for exporting stored electricity you don’t use to the national grid.

Export tariffs depend on the supplier tariff and the area of the country you reside, but the best tariffs can be as high as 15p per kWh, so make sure you shop around.

For reference, this means a typical household based roughly in the middle of the country could make between £80 and £110/year (based on a rate of 3.99p per kWh).

Solar Panel Finance & Loans

If you are not eligible for the solar panel government grants and funding currently on offer, you can seek private financial assistance in the form of a loan.

Surprisingly, there are some companies that now offer low-interest loans and reasonable repayment plans to enable more homeowners to take advantage of solar.

For example, Pegasus Finance and EvoEnergy both now offer loans especially designed for solar panel installation.

Can you get free solar panels?

At present no, free solar panels are not available in the UK.

Back in 2010 many solar companies would practically install solar panels for free, this was largely due to the incentives of the Feed-in tariff.

However, since the feed in tariff ended, this incentive no longer exists and so solar companies are back to charging for solar panel installs.

Why did the Feed-in Tariff End?

The Feed-in tariff was launched by the UK government to incentivise households to adopt solar.

The feed-in tariff paid households for every kilowatt hour (kWh) of electricity they generated using renewable methods like solar panels.

In addition, households were also able to sell any excess energy generated to the National Grid.

During it’s course, the feed-in tariff was a triumph and many households in the UK did adopt solar.

Sadly the scheme concluded in April 2019, but those who did sign up at the time are able to take advantage of for 20 years, at which point it will expire.

Why did it end?

The UK government ended the feed in tariff scheme as they wanted to instead focus on large scale solar projects.

The major reason for this is that back when the scheme was launched domestic solar installs were extremely expensive and so the government wanted to help households by subsidising the costs.

Things have now changed and the costs of installing a new solar array have decreased significantly.

For example, the cost of a new solar system over 20 years ago would cost as high as £30,000 for the average UK home.

Today, the average cost of a new solar array for the average three-bedroom home is between £5,000 and £7,000.

Are Solar Panels still worth it?

Of course! Due to increasing energy prices, installing solar panels is arguably more financially rewarding than ever before.

For example, the buy back period or “break even” point has vastly reduced to around 10 years. This is the time period at which the panels will have paid for themselves and it is now lower than it’s ever been before.

It’s also important to remember than the average solar panels last for around 25 years, meaning that for 15 years of that time you can now expect your solar panels to generate you a profit.

In summary, here are the major benefits of installing solar panels:

  • Save money on your energy bills – the average household with a 4.2 kW solar system could save you as much as £514 a year on your energy bills (based on the new October price cap).
  • Use a storage battery to earn even more – if you also use a solar battery, you could save even more, in fact, without one around 50% is returned back to the National Grid.
    • So by using a solar battery you could save an extra £230 on average or sell the energy back to the grid using the Smart Export Guarantee (SEG).
  • Therefore, to conclude you could save as much as £744 a year for the average sized home (that’s the £514 from the energy generation itself and £230 in SEG revenues you’ll generate for the year).
  • Good for the environment – solar panels produce zero carbon and use renewable energy i.e. sunlight!

Solar Panel Cost UK Government Grants Summary:

In summary, this is the current situation with solar panel government grants and funding in the UK:

  • There are no government grants for solar panels.
  • There are no free solar panels on offer.
  • However, you can take advantage of the Smart Export Guarantee.
  • To conclude you could save as much as £744 a year for the average sized home (that’s the £514 from the energy generation itself and £230 in SEG revenues you’ll generate for the year).