What payback means for a business
Simple payback is the installed cost divided by the first year's saving. It is the figure most proposals lead with, and it is useful for comparing one site or one quote with another. It leaves out finance costs, inflation, changes in your electricity price, the panels' slow loss of output and any tax relief.
So look at it next to two other numbers in a proposal: the saving over the system's life, and the share of the output the installer expects you to use yourself. A short payback built on an optimistic self-use figure is worth less than a slightly longer one built on your real data.
What makes payback shorter or longer
- How much you use in daylight. The biggest factor. A site that runs machinery, chillers or kitchens through the day, seven days a week, uses more of its own output than an office shut at weekends.
- What you pay per unit. Smaller users pay more per unit, so a unit of solar saves them more. DESNZ's figures for the second quarter of 2026, including the Climate Change Levy and excluding VAT, run from 38.4p per kWh for businesses using under 20 MWh a year to 22.2p for the largest users (source).
- The installed cost per kW. DESNZ's 2025/26 average for business systems of 10 to 50 kW is £1,167 per kW, and the cost per kW falls as systems get bigger (source). See what commercial solar panels cost.
- Where the site is. PVGIS gives yields of about 810 to 1,160 kWh per kWp a year across the UK regions in our calculator, lowest in the Highlands and North Wales and highest on the south coast (PVGIS). The roof's direction, tilt and shading matter as much as the region.
- The export rate. Suppliers set their own Smart Export Guarantee rates, which Ofgem says must always be above zero (Ofgem). Our examples use Octopus Energy's published 4.1p (Octopus).
| Annual electricity use | Average price per kWh |
|---|---|
| Under 20 MWh | 38.4p |
| 20 to 499 MWh | 28.6p |
| 500 to 1,999 MWh | 27.7p |
| 2,000 to 19,999 MWh | 25.2p |
| 20,000 to 69,999 MWh | 24.4p |
| 70,000 to 150,000 MWh | 22.7p |
| Over 150,000 MWh | 22.2p |
Two worked examples
These come from our commercial solar payback calculator, which uses the DESNZ costs and prices above, PVGIS yields and a 4.1p export rate. They are examples on stated assumptions, not quotes.
Example only
1. 30 kWp office, Birmingham
- 60,000 kWh a year at 28.6p; 60% used in daylight, 5 days a week
- Generation 29,043 kWh a year
- Used on site 20,745 kWh (71%), exported 8,298 kWh
- Saving £5,933 + £340 = £6,273 a year
- Cost 30 × £1,167 = £35,010
- Simple payback 5.6 years
Example only
2. 50 kWp farm, near Exeter
- 45,000 kWh a year at 28.6p; 50% used in daylight, 7 days a week
- Generation 52,610 kWh a year
- Used on site 22,385 kWh (43%), exported 30,225 kWh
- Saving £6,402 + £1,239 = £7,641 a year
- Cost 50 × £1,167 = £58,350
- Simple payback 7.6 years
The farm's system makes far more electricity, but the farm uses well under half of it, so most of its extra output earns 4.1p instead of saving 28.6p. Its payback is two years longer. That one comparison is why the installer asks for your bills or half-hourly data before sizing anything.
Get a payback figure for your own site, from your own data: book a free survey.
Book a free site surveyTax relief and payback
The examples leave tax out. Solar panels are special rate plant and machinery (HMRC CA22335), and most businesses can claim the Annual Investment Allowance on them, up to £1 million of plant and machinery a year (GOV.UK). That reduces the tax the business pays in the year it buys the system, which shortens the real payback for a profitable business. How much depends on your profits and tax rate: see capital allowances on solar panels and ask your accountant.
Pros and cons of commercial solar
| For | Against |
|---|---|
| Every unit used on site is a unit you don't buy | Exported units earn far less than they would save if used |
| Less exposed to future electricity price rises | A large upfront cost, or a long contract if you choose a PPA |
| Tax relief through capital allowances for most buyers | The roof may need work first, or an asbestos assessment |
| Panels on a roof you already have, or a car park | Larger systems need the network operator's approval |
| A visible step on carbon reporting | If you rent, you need your landlord's agreement |
When solar isn't worth it
- Most of your use is at night. A site that runs mainly overnight uses little of its own output unless a battery is added, and a battery has to earn its own place. See commercial battery storage.
- The roof is near the end of its life. Panels are usually there for decades. Fix or replace the roof first, or look at the ground or a car park.
- You are leaving the site soon. Unless the lease or sale can take the system with it, or a PPA allows for a move.
- Heavy shading. Trees, taller buildings or plant on the roof can cut output more than the price suggests.
A survey tells you which of these apply. If the answer is no, the installer should say so. Related: commercial battery storage, solar on an asbestos roof and solar carports.
Sources
The costs, prices, yields and export rate in the examples were taken on 23 October 2026 for our payback calculator; the DESNZ, Ofgem and HMRC pages were checked again on 2 November 2026. Figures change, so check the source before relying on one.
- DESNZ: Solar PV cost data 2025/26 (published 28 May 2026)
- DESNZ: Gas and electricity prices in the non-domestic sector (QEP 3.4.1 and 3.4.2, updated 29 Sep 2026)
- Ofgem: Smart Export Guarantee (rates set by suppliers, always above zero)
- Octopus Energy: Smart Export Guarantee tariff (4.1p/kWh, used in our examples)
- European Commission JRC: PVGIS 5.3 (the yields behind our examples)
- HMRC CA22335: solar panels are special rate expenditure
- GOV.UK: Annual Investment Allowance (£1 million)
An estimate from public data, not financial or tax advice.