Commercial Solar Payback: Worked Examples by System Size

How to calculate solar payback

The payback period is simply how long it takes for the energy savings from a solar system to repay what you spent installing it. For UK commercial projects the honest version of the formula has two layers, because the capital allowances available to a trading business materially change the cash position in year one.

The headline calculation is:

Simple payback (years) = Total installed cost ÷ Annual financial benefit

Then, because most companies can claim the Annual Investment Allowance (AIA) — a 100% first-year capital deduction on qualifying plant — the figure that matters for a profitable business is:

Adjusted payback (years) = Net cost after AIA ÷ Annual financial benefit

AIA lets you deduct the full cost of the system from taxable profit in the year of purchase. At a 25% corporation tax rate that is worth roughly 25% of the capital cost back as a cash benefit, so a £100,000 system effectively nets to around £75,000 once the tax relief is banked. That single mechanism is why post-AIA payback is typically a year to eighteen months shorter than the simple figure.

The annual financial benefit is the other half of the equation and has two components: electricity you no longer buy from the grid (self-consumption), and surplus you export and get paid for under the Smart Export Guarantee (SEG), which currently pays between 8p and 20p per kWh depending on tariff. Self-consumed units are worth far more than exported ones, because you are displacing a commercial import price that is usually 25–35p/kWh, so a high daytime load is the biggest single driver of fast payback.

Worked example: 30kWp retail unit

A typical retail or trade-counter unit with a south-facing roof in the Midlands. At our standard commercial pricing of £0.75–£1.05 per watt, a 30kWp system lands around £24,000–£31,500 installed; we use £27,000 here. Midlands yield is roughly 950 kWh per kWp, giving about 28,500 kWh of generation a year.

Item	Figure
System size	30 kWp
Installed cost	£27,000
Annual generation (Midlands ~950 kWh/kWp)	~28,500 kWh
Self-consumed (60% @ 30p saved)	£5,130
Exported (40% @ 12p SEG)	£1,368
Annual benefit	~£6,500
Simple payback	~4.2 years
Net cost after AIA (−25%)	~£20,250
Payback after AIA	~3.1 years

Retail units often have strong daytime occupancy, so a 60% self-consumption share is realistic and pushes the post-AIA payback comfortably into the three-year range.

Worked example: 100kWp warehouse

This is the size most people mean when they search commercial solar payback 100kw. A 100kWp array suits a mid-sized warehouse or light-industrial unit and costs £75,000–£105,000; we use £90,000. Warehouses typically run lower daytime electrical intensity than retail (lighting, charging, some plant), so self-consumption is often nearer 50% unless paired with battery or EV charging.

Item	Figure
System size	100 kWp
Installed cost	£90,000
Annual generation (Midlands ~950 kWh/kWp)	~95,000 kWh
Self-consumed (55% @ 28p saved)	£14,630
Exported (45% @ 12p SEG)	£5,130
Annual benefit	~£19,800
Simple payback	~4.5 years
Net cost after AIA (−25%)	~£67,500
Payback after AIA	~3.4 years

This is the classic result for the size: a simple payback around 4.5 years that drops to roughly 3.4–4.5 years once AIA is claimed, with an internal rate of return (IRR) commonly in the 15–25% band over the 25-year panel life. Because panels degrade only about 0.5% a year, the system is still producing roughly 88% of its original output after 25 years, so the benefit shown above persists for two decades beyond the payback point.

Worked example: 250kWp factory

A 250kWp roof-mounted system suits a manufacturing site with continuous daytime load — the ideal solar profile, because nearly everything generated is consumed on site at full import-displacement value. At £0.75–£1.05/W the cost is £187,500–£262,500; larger systems often sit at the lower end of the range thanks to economies of scale, so we use £210,000.

Item	Figure
System size	250 kWp
Installed cost	£210,000
Annual generation (Midlands ~950 kWh/kWp)	~237,500 kWh
Self-consumed (75% @ 30p saved)	£53,440
Exported (25% @ 12p SEG)	£7,125
Annual benefit	~£60,500
Simple payback	~3.5 years
Net cost after AIA (−25%)	~£157,500
Payback after AIA	~2.6 years

The factory delivers the fastest payback of the three despite the largest outlay, purely because high, steady self-consumption converts almost every generated unit into a 30p saving rather than a 12p export. The lesson is consistent across all sizes: payback is driven less by system price than by how much of the output you use yourself.

How AIA, SEG and battery each move payback

Three levers shift the numbers above, and it is worth seeing them in isolation.

• AIA (capital allowance): the biggest single lever. Claiming 100% first-year relief cuts net cost by roughly 25% for a company paying 25% corporation tax, shortening payback by roughly a year on every example here. It only helps profitable, tax-paying entities — a loss-making year defers the benefit.
• SEG (export tariff): a smaller lever, because export is worth less than self-consumption. Moving from an 8p to a 20p SEG tariff on a 100kWp system raising £5,000 of export income could add several thousand pounds a year, trimming a few months off payback. Shop the SEG market — rates vary widely between suppliers.
• Battery storage: a battery raises self-consumption by storing midday surplus for evening or early-morning use, converting low-value export into high-value displacement. It also adds capital cost, so the effect on payback is mixed: it deepens lifetime savings and resilience but rarely shortens the headline payback unless your load profile is heavily out of sync with generation.

For a fuller breakdown of how these interact over a 25-year horizon, see our detailed guide to the commercial solar payback period, which walks through cash-flow modelling year by year.

How region changes payback

The same system pays back faster in Cornwall than in Aberdeen because solar yield varies with latitude and cloud cover. Yield is measured in kWh generated per kWp of panel installed per year, and the spread across the UK is meaningful but not dramatic.

Region	Yield (kWh/kWp/yr)	100kWp annual generation	Relative payback impact
South England	~1,000	~100,000 kWh	Fastest
Midlands	~950	~95,000 kWh	Baseline
North England	~880	~88,000 kWh	~10% slower
Scotland	~800	~80,000 kWh	~20% slower

A southern site generating 1,000 kWh/kWp produces a fifth more energy than a Scottish site at 800 kWh/kWp from identical hardware, so a payback of 3.4 years in the Midlands might be nearer 3.1 years in the south and 4 years in central Scotland. Region matters, but roof orientation, shading and — above all — your self-consumption profile move the needle harder than geography.

Is commercial solar worth it?

On the numbers above, yes, for any business with a meaningful daytime electricity load and a profit against which to claim AIA. A simple payback of 4–7 years falling to 3–4.5 years post-AIA, an IRR of 15–25%, and 25-plus years of generation from hardware that loses only about 0.5% output a year together make commercial solar one of the more predictable capital investments a UK business can make. Where IETF grants of 30–60% are available for industrial process energy, the case strengthens further. The decisive factor is always self-consumption — the more of your own generation you use on site, the faster every one of these examples pays back.