Solar cost per kWh explained
How to think about solar cost per kWh in the UK, including installed cost, lifetime generation, self-consumption and export value.
Key takeaways
- Simple solar cost per kWh is installed cost divided by expected lifetime generation.
- That is not the same as annual savings, because self-used and exported kWh have different values.
- Use PVGIS or a roof-specific estimate before relying on lifetime generation numbers.
The simple formula
A rough solar cost per kWh calculation is installed cost divided by expected lifetime generation. If a system costs £7,000 and is expected to generate 72,000kWh over 20 years, the simple generation cost is about 9.7p per kWh.
That can be a useful sense check, but it doesn't tell you the full household saving. The electricity you use at home and the electricity you export are worth different amounts.
Why savings are different
Self-used solar helps because you buy fewer kWh from your supplier. Exported solar helps because you can be paid under a SEG or export tariff. Those rates are rarely identical.
That is why the calculator values self-used kWh at the import unit rate and exported kWh at the export tariff. A single cost-per-kWh figure can hide that split.
What lifetime generation depends on
Annual generation depends on system size, location, roof direction, pitch, shading and system design. A common early shortcut is 800 to 1,000kWh per kW installed per year, then a better estimate from PVGIS or installer modelling.
If a quote uses an optimistic generation figure, the cost per kWh will look artificially low. Ask what roof assumptions sit behind the annual kWh number.
How to use it in practice
Use cost per kWh as a quote comparison tool, then use annual benefit for payback. The first tells you whether the installed price looks sensible against generation. The second tells you what the system may be worth to your household.
Run a lower-generation case too. If the decision only works when generation is perfect, the quote is more fragile than it looks.
- Calculate cost per kW from the installed quote.
- Estimate annual kWh from PVGIS or a survey.
- Test 20-year lifetime generation with a conservative case.
- Keep self-use and export income separate for payback.
Sources checked
- Energy Saving Trust solar panel guideConsumer guidance on costs, payback, savings and maintenance.
- European Commission PVGISSolar radiation and PV performance estimates by location.
- Ofgem energy price cap unit ratesCurrent unit-rate context for electricity tariffs.
- Ofgem SEG guidance for generatorsOfficial SEG eligibility, certification, metering and payment guidance.