Solar panels at home: how they work and what they could mean for your energy bills

Solar panels are a brilliant, more sustainable way to make your home energy-efficient and reduce electricity bills. However, it’s not just that they lower bills by powering your home with 'free' energy from the Sun; you can also earn back money by selling energy back to the National Grid.

There is a huge range of factors that will determine what solar panels could mean for your energy bills, from your location in the UK to whether you’ve opted to install a battery to store energy for use at night.

This guide includes everything you need to know about how at-home solar panels work, how much you could save on energy bills each year and how the Smart Export Guarantee system works.

How do solar panels work?

In the simplest terms, solar panels turn sunlight into electricity, and this is all down to the PV cells that make up the panels. Solar energy is absorbed by the individual PV cells on the solar panels. These cells are made up of layers of semiconducting materials, so they produce an electrical charge when they become energised by sunlight. This charge creates a direct current of electricity, which passes through a solar inverter to turn it into alternating (AC) electricity, which you need to power household appliances.

The stronger the Sun shines on the solar panels, the more electricity is generated; however, the cells don’t need direct sunlight to work, and can still produce electricity on cloudy days. However, it’s typically not recommended to install solar panels on a north-facing roof as they won’t work as efficiently as they would on a south, east or west-facing roof.

If you get your system installed by a fully qualified installer, then your MCS certificate, which you get after installation, will give you an idea of the annual generation of your solar system. However, if you have a smart meter, you can also track your power generation in real time on your smart meter’s in-home display.

How much could I save on energy bills with a solar panel system?

According to the Energy Saving Trust, a typical household in London that is home all day could save and earn between £590 and £650 annually. However, several factors will determine how much you’ll save, including:

• How much energy you can generate from your available roof space
• How much of the solar electricity you use yourself
• Where you live in the UK (areas further south get more direct sunlight)
• If you’ve signed up for export payments to sell electricity back to the grid

Below is a table outlining the annual savings of an average 4-bedroom household of people who are home all day across the UK, if they have solar panels and are signed up for export payments.

Source: Energy Saving Trust

How do you sell solar energy back to the grid?

Another huge benefit of solar panels is that you can sell extra electricity back to the grid. The Smart Export Guarantee scheme allows you to export the electricity you can’t use yourself and get paid for it, as long as you have a fully MCS-certified (or equivalent) installation. This scheme only applies to England, Scotland and Wales; if you live in Northern Ireland, you will need to speak to your energy supplier.

You need to be set up with an SEG provider, such as E.ON Next, to sell your energy back. Different providers offer different tariffs, and SEG tariffs can be both fixed and variable, so you’ll need to shop around to find the right one for you.

For example, E.ON Next offers a preferential tariff for customers who have had their solar panels installed by them after November 2025. The Next Export Premium v3 tariff offers 17.5p per kWh of electricity you export on a 12-month fixed term. They also offer three other tariffs available to anyone with residential solar panels and a smart export meter.

Could battery storage lower energy bills further?

One of the downsides of solar panels is that they don’t generate energy at night or on extremely cloudy days; however, you can store your excess solar generation and reduce your imports of electricity by installing a battery.

A battery will cost around £1,700 for a 5kWh battery system, when installed at the same time as a PV system and will help lower your energy bills further for years to come. According to the Energy Saving Trust, for every unit of electricity stored in a battery and used at night, it will save you around 14p.

Will I still need energy from the National Grid if I have solar panels?

You are likely to still need to supplement your home with energy from the National Grid, depending on how much energy your solar panels are producing. Also, if you don’t have a battery installed, you will need to draw on the grid to use electricity at home during the night.

However, you can still stay in control of your energy bill by tracking your usage at night via a smart meter. You can also speak to your provider about going on a smart tariff. For example, E.ON Next offers several smart time-of-use tariffs which offer different rates for electricity during off-peak hours, such as overnight, making it the perfect companion to a solar panel system.

Installing solar panels is a big investment, but one that pays off with long-term energy savings. It is a cleaner, more sustainable way to power your home, and with the combination of a battery, it will reduce your home's reliance on the grid. However, it’s not just your bills you’re saving on; when combined with the Smart Export Guarantee scheme, your solar panels could also earn you money.