Commercial Solar ROI: How UK Businesses Calculate Returns in 2026

For a UK business weighing a rooftop or ground-mounted PV system, "is solar worth it?" eventually reduces to one question: what is the return on the capital? The trouble is that "return" means at least four different things, and a supplier quoting one metric in isolation can make a mediocre project look excellent or a strong one look dull. This guide sets out how to calculate commercial solar ROI properly — defining each measure, walking through a full 100kWp worked example, and benchmarking the result against other places you could park the money.

The four ways to measure a solar return

Before reaching for a solar ROI formula, it helps to separate the metrics, because each answers a different question.

• Payback period — how many years until cumulative savings equal the upfront cost. Simple, intuitive, and the first number most boards ask for. Typical UK commercial payback is 4–7 years on a simple basis, falling to roughly 3–4.5 years once the Annual Investment Allowance (AIA) tax effect is counted.
• Lifetime savings — total cash generated (bill savings plus export income) across the system's working life, usually modelled over 25 years.
• Lifetime ROI % — net lifetime profit divided by the capital outlay, expressed as a percentage. A headline figure that captures the whole-life return but ignores when the cash arrives.
• IRR (internal rate of return) — the annualised, time-weighted return; the discount rate at which the project's net present value equals zero. Commercial solar IRR in the UK commonly lands at 15–25%. This is the figure that lets you compare solar against any other investment on a like-for-like basis.
• NPV (net present value) — the sum of all future cash flows discounted back to today's money at your chosen cost of capital. A positive NPV means the project beats that hurdle rate in absolute pounds.

The relationship between solar NPV vs IRR matters: IRR tells you the rate of return; NPV tells you the size of the value created. A small system can post a high IRR but a modest NPV; a large array might show a slightly lower IRR yet a far bigger NPV. Sensible appraisals look at both.

The ROI formula and a full 100kWp worked example

The core solar ROI formula is straightforward:

Lifetime ROI % = (Total lifetime savings − Net system cost) ÷ Net system cost × 100

And payback in its simplest form:

Simple payback (years) = Net system cost ÷ Annual net benefit

Let's run the numbers on a representative 100kWp rooftop system in the English Midlands. We use the site standard inputs: an installed price of around £0.75–£1.05 per watt, so £75,000–£105,000 — we'll take a mid-case £90,000. Midlands yield is roughly 950 kWh per kWp, giving about 95,000 kWh in year one. We assume 70% of generation is self-consumed against a 28p/kWh import price, with the remaining 30% exported at a 12p/kWh Smart Export Guarantee (SEG) rate.

Input	Value
System size	100 kWp
Installed cost (mid-case)	£90,000
Year-1 generation (Midlands ~950 kWh/kWp)	95,000 kWh
Self-consumed (70%) @ 28p saved	66,500 kWh × £0.28 = £18,620
Exported (30%) @ 12p SEG	28,500 kWh × £0.12 = £3,420
Year-1 gross benefit	£22,040
Simple payback	£90,000 ÷ £22,040 ≈ 4.1 years

Now layer in tax. AIA gives a 100% first-year capital deduction, so the £90,000 is offset against taxable profit. At 25% corporation tax that is worth roughly £22,500 in reduced tax — about a 25% cash benefit — pulling the effective net cost down to around £67,500. On that basis payback shortens to roughly £67,500 ÷ £22,040 ≈ 3.1 years.

For the lifetime view we model 25 years. Panels degrade at about 0.5% per year, so output drifts down gradually, while energy prices realistically rise over time — the two partly offset. Holding the year-one benefit broadly flat as a conservative proxy (degradation roughly cancelled by price inflation), 25 years of ~£22,000 gives about £550,000 of gross lifetime benefit. Deduct the £90,000 capital and a modest allowance for an inverter replacement and maintenance over the period, and net lifetime profit comfortably exceeds £400,000.

Metric	Result (mid-case 100kWp)
Simple payback	~4.1 years
Payback after AIA	~3.1 years
Lifetime savings (25yr)	~£550,000 gross
Lifetime ROI %	(~£460k ÷ £90k) ≈ 500%+
IRR (indicative)	~18–22%

That headline lifetime ROI of several hundred percent is real but can mislead — it ignores the time value of money, which is exactly what IRR and NPV correct for. Discount those 25 annual cash flows at, say, a 6% cost of capital and the NPV remains strongly positive, while the IRR settles in the high-teens to low-twenties — consistent with the 15–25% range typical for well-specified UK commercial systems.

The eight inputs that actually drive your ROI

Every credible model rests on the same eight levers. Get these right and the rest is arithmetic.

1. Installed cost (£/W) — £0.75–£1.05 per watt for commercial scale. Below this and quality may be compromised; far above and the economics suffer.
2. Annual generation — driven by system size and regional yield (see below).
3. Self-consumption ratio — the single biggest swing factor. Every kWh used on site is worth your import price (often 25–30p); every exported kWh earns only the SEG rate (8–20p). High daytime load is gold.
4. Import electricity price — the rate you avoid paying. The higher and more volatile it is, the better solar looks.
5. SEG export price — 8–20p/kWh depending on tariff and supplier.
6. Tax position — AIA's 100% first-year deduction delivers roughly a 25% cash benefit at the 25% corporation-tax rate.
7. Degradation and O&M — panels lose about 0.5% output per year; budget for inverter replacement around years 10–15 and light annual maintenance.
8. Grants and finance — IETF grants of 30–60% for eligible industrial sites, or a finance/PPA structure, materially reshape the cash-flow profile.

How scale and region move the numbers

Two structural factors set the baseline before you optimise anything. Scale works in your favour: fixed costs (design, scaffolding, grid applications, mobilisation) spread across more kilowatts, so a 250kWp array usually has a lower £/W than a 30kWp one and a correspondingly tighter payback. Region sets the energy yield ceiling.

Region	Typical yield (kWh/kWp)	100kWp year-1 output
South of England	~1,000	~100,000 kWh
Midlands	~950	~95,000 kWh
North of England	~880	~88,000 kWh
Scotland	~800	~80,000 kWh

A southern site generates roughly 25% more per panel than a Scottish one, which directly compresses payback. But region rarely makes or breaks a project on its own — a Scottish factory running heavy daytime machinery (high self-consumption) can easily out-perform a southern warehouse that exports most of its output cheaply. For a deeper look at how these levers interact over time, our companion guide on commercial solar ROI and payback breaks the cash-flow build-up down year by year.

Solar ROI versus property, equities and cash

The reason finance directors increasingly treat rooftop solar as a capital investment rather than an energy decision is the comparison below. A 15–25% IRR is exceptional for an asset that is low-risk, tangible and largely inflation-linked (because it offsets a rising cost).

Investment	Typical net return	Risk / liquidity
Commercial solar (IRR)	~15–25%	Low risk, illiquid, asset-backed
Commercial property yield	~5–8%	Moderate risk, illiquid
Equities (long-run average)	~7–10%	Volatile, liquid
Business savings / cash	~2–4%	Very low risk, fully liquid

Solar is not liquid — you cannot sell next quarter's generation overnight — but as a deployment of surplus capital it typically beats every conventional alternative on rate of return, with the bonus that the "income" (avoided cost) is tax-efficient and rises with energy prices.

What counts as a good ROI — and how to improve it

So what is a good ROI for commercial solar? A well-designed UK system in 2026 should target a simple payback under 6 years, an IRR comfortably above 15%, and a clearly positive NPV at your cost of capital. Beating those benchmarks is largely a matter of pulling three levers:

• AIA — claim the 100% first-year deduction; it is the fastest, cheapest ROI uplift available and shaves roughly a year off payback.
• Maximise self-consumption — shift flexible loads into daylight hours, or add battery storage so evening demand draws on stored solar rather than the grid. Every percentage point of self-consumption replaces a low SEG rate with a high import saving.
• Grants and finance structure — IETF grants of 30–60% for eligible industrial decarbonisation projects transform the IRR; alternatively a PPA or asset finance lets you capture savings with little or no upfront capital, trading some lifetime return for zero day-one outlay.

The discipline is to model all four metrics — payback, lifetime ROI%, IRR and NPV — on your own load profile and tariff, not a generic quote. The system that wins on payback is not always the one that wins on NPV, and the right answer depends on whether your priority is capital recovery speed or total value created.