Commercial solar ROI by business type
Self-consumption is the swing factor — the more of your generation you use on site rather than exporting at low SEG rates, the faster the payback. The table below shows typical UK figures by sector for a representative mid-size system. Net-AIA payback assumes a profitable Ltd Co at 25% corporation tax capturing the 100% Annual Investment Allowance.
| Business type | Typical self-consumption | Payback (gross) | Payback (net AIA) | 25-yr IRR |
|---|---|---|---|---|
| Factory (two-shift) | 75-85% | 4.5-6 yrs | 3.5-4.5 yrs | 18-24% |
| Warehouse / logistics (24/7) | 85-95% | 3.5-5 yrs | 2.8-4 yrs | 22-29% |
| Office (single-shift) | 55-65% | 6-8 yrs | 4.5-6 yrs | 13-17% |
| School / college | 45-60%* | 7-9 yrs | 7-9 yrs† | 11-15% |
| Hotel | 65-80% | 5-7 yrs | 4-5.5 yrs | 15-20% |
| Hospital / care (24/7) | 85-95% | 4-6 yrs | 3.5-5 yrs‡ | 18-25% |
*Schools lose self-consumption over summer holidays when generation peaks but the building is empty. †Most schools are not corporation-tax payers, so the gross and net paybacks are the same — public-sector finance (e.g. Salix) or a PPA is usually the better route. ‡NHS trusts and charitable care providers capture AIA differently; we model each entity's actual tax position. Figures are representative UK central-case models, not guarantees.
Cost & return by system size
Turnkey capex per kW falls as systems scale. The figures below assume UK central-case yield of ~950 kWh per kW per year and a blended benefit of 22p per kWh (mix of avoided import at 24p+ and SEG export). Net-AIA payback reflects a 25% year-one tax reduction for a profitable Ltd Co.
| System size | £/kW (turnkey) | Capex | Generation/yr | Annual benefit | Net-AIA payback |
|---|---|---|---|---|---|
| 30 kW | £1,100 | £33,000 | ~28,500 kWh | ~£5,000 | ~5 yrs |
| 50 kW | £1,050 | £52,500 | ~47,500 kWh | ~£8,400 | ~4.7 yrs |
| 100 kW | £950 | £95,000 | ~92,000 kWh | ~£17,500 | ~4 yrs |
| 250 kW | £850 | £212,500 | ~225,000 kWh | ~£45,000 | ~3.5 yrs |
| 500 kW | £800 | £400,000 | ~470,000 kWh | ~£100,000 | ~3 yrs |
| 750 kW | £775 | £581,250 | ~705,000 kWh | ~£155,000 | ~2.8 yrs |
UK yield basis ≈ 900-950 kWh per kW per year. Annual benefit depends heavily on self-consumption — a 24/7 site captures far more than a single-shift office at the same system size. Want your exact figures? Use the commercial solar savings calculator for an instant estimate, or request a full DCF below.
Yes — for the vast majority of UK SMEs with daytime energy use above £25,000 per year, commercial solar panels deliver IRR of 12-18% over 25 years and payback in 5-8 years. But that headline is meaningless without the maths behind it. This page lays out the actual numbers we model on every quote: cost per kW by system size, generation per kW per year on UK roofs, self-consumption ratios that make or break the case, the SEG export side, and the 100% Annual Investment Allowance that turns a £80,000 install into a £60,000 net commitment for a profitable company. Three worked examples run through 50 kW, 250 kW and 750 kW installs end to end. We also lay out honestly when solar isn't worth it — because pretending it always works has cost UK businesses real money.
The maths: what commercial solar costs and generates
Three numbers drive every commercial solar business case. Cost per kW (capex), generation per kW per year (yield), and self-consumption ratio (how much of that generation you use rather than export at low SEG rates). Get those three right and the rest is arithmetic.
Cost per kW by system size — 2026 UK pricing
Pricing falls in three bands as system size increases, reflecting how mobilisation, design, scaffolding and DNO admin amortise across more panels. Sub-100 kW projects sit at £900-£1,200 per kW (typical: £1,050 mid-band). 100-500 kW projects drop to £750-£950 per kW (typical: £850). Above 500 kW the largest commercial sites achieve £700-£850 per kW (typical: £775). These are turnkey numbers including panels, inverters, mounting, DC/AC cabling, switchgear, design, scaffolding, install, commissioning, G98 or G99 admin, and standard 25-year panel warranty / 10-year inverter warranty. They do not include three-phase upgrades (£3-15k where needed), asbestos-cement roof replacement (£40-100 per m²), or major DNO reinforcement (rare on G98, occasional on G99).
Yield: generation per kW per year
UK commercial roofs typically generate 900-1,000 kWh per kW per year on south-facing arrays at 10-30° pitch, dropping to 800-880 kWh per kW per year for east-west split arrays. Northern Scotland sites run lower (750-850 kWh per kW), South West England higher (950-1,050 kWh per kW). Modelling is done in PVSyst against satellite-derived irradiance for the actual site, accounting for shading, soiling, panel temperature coefficient, inverter efficiency and DC cable losses. We use a conservative central case in DCF — almost every installed system out-performs our modelled yield in years 1-2 because we leave headroom rather than over-promise.
Self-consumption: the ratio that matters most
Self-consumption is the percentage of generated kWh that you actually use on site (avoiding 24p+ retail import) versus exporting to the grid for SEG (4-15p per kWh). It is the single biggest swing factor in commercial PV economics. A 24/7 cold storage site with continuous baseload achieves 90%+ self-consumption. A single-shift office that closes at 5pm achieves 55-65%. A school sitting empty over the summer holidays achieves 35-45% in those months. We model self-consumption against actual half-hourly meter data (or sector averages where meter data isn't available) before quoting. Battery storage can lift self-consumption to 85-95% on most sites — see battery storage for the maths on when storage earns its keep.
Worked example 1: 50 kW office, single-shift, £35k annual electricity
A 14-person professional services firm in a 4,500 sq ft office in Leeds. Three-phase 100A supply, south-pitched roof with 70 sq m of usable space. Annual electricity bill £35,000 (146,000 kWh at 24p). Office hours Monday-Friday 7am-7pm.
- System: 50 kW PV array, 134 panels, 50 kW Sungrow string inverter, G98 connect-and-notify.
- Capex: £52,500 turnkey (£1,050 per kW).
- Generation: 47,500 kWh per year (950 kWh per kW for the Leeds latitude).
- Self-consumption: 65% — 30,875 kWh self-consumed at 24p saving = £7,410 per year. 35% export — 16,625 kWh at 6p SEG = £998 per year. Annual benefit £8,408.
- AIA tax relief: £52,500 × 25% = £13,125 year-one corporation tax saving. Net effective capex £39,375.
- Simple payback: 4.7 years on net capex. 6.2 years on gross capex.
- 25-year IRR: 16.5% on net capex.
- 25-year cumulative cash benefit: £218,000 (assuming 3% electricity inflation, 2% PV degradation per year first 25 years).
Decision: yes, comfortable case. The 65% self-consumption is typical for office hours and the AIA flow-through brings net payback well under 5 years. See offices for sector-specific analysis.
Worked example 2: 250 kW industrial unit, two-shift, £125k annual electricity
A precision engineering business in a 22,000 sq ft industrial unit in the West Midlands. Three-phase 400A supply, east-west pitched roof with 1,200 sq m usable. Annual electricity bill £125,000 (520,000 kWh at 24p). Two-shift operation 6am-10pm Monday-Saturday.
- System: 250 kW PV array, 658 panels, 4 × 60 kW SMA inverters, G99 application.
- Capex: £212,500 turnkey (£850 per kW).
- Generation: 220,000 kWh per year (880 kWh per kW for east-west split, Midlands location).
- Self-consumption: 82% — 180,400 kWh self-consumed at 24p saving = £43,296 per year. 18% export — 39,600 kWh at 6p SEG = £2,376 per year. Annual benefit £45,672.
- AIA tax relief: £212,500 × 25% = £53,125 year-one corporation tax saving. Net effective capex £159,375.
- Simple payback: 3.5 years on net capex. 4.7 years on gross capex.
- 25-year IRR: 22.4% on net capex.
- 25-year cumulative cash benefit: £1,180,000.
Decision: strong case. The two-shift operation drives self-consumption to 82% which is where industrial economics really start to shine. G99 admin adds 8-12 months to timeline but doesn't change the fundamental economics. See factories and G99 process.
Worked example 3: 750 kW logistics warehouse, 24/7, £350k annual electricity
A regional distribution warehouse in the East Midlands, 80,000 sq ft. Three-phase 800A supply, large flat membrane roof with 7,500 sq m usable. Annual electricity bill £350,000 (1,460,000 kWh at 24p — incumbent contract). 24/7 operation: refrigerated dock, conveyor systems, lighting, two-shift workforce.
- System: 750 kW PV array, 1,975 panels, 10 × 75 kW Huawei inverters, G99 application with ANM curtailment offer (modelled 2.5%).
- Capex: £581,250 turnkey (£775 per kW).
- Generation pre-curtailment: 720,000 kWh per year. Post 2.5% curtailment: 702,000 kWh per year.
- Self-consumption: 92% — 645,840 kWh self-consumed at 24p saving = £155,002 per year. 8% export — 56,160 kWh at 6p SEG = £3,370 per year. Annual benefit £158,372.
- AIA tax relief: £581,250 × 25% = £145,313 year-one corporation tax saving (within £1m AIA annual cap). Net effective capex £435,938.
- Simple payback: 2.8 years on net capex. 3.7 years on gross capex.
- 25-year IRR: 28.7% on net capex.
- 25-year cumulative cash benefit: £4,210,000.
Decision: outstanding case. Scale economics on capex, very high self-consumption from 24/7 operations, and AIA captured against substantial corporation tax. ANM curtailment of 2.5% is well inside what we accept rather than waiting for full network reinforcement. See warehouses and industrial solar panels.
When solar isn't worth it — honestly
Five scenarios where commercial solar struggles or fails to deliver. Recognising these honestly upfront saves customers time and money — we routinely walk away from quotes where the case doesn't stand up.
1. Night-shift only operations. A printing plant running 10pm-6am has near-zero daytime demand. PV generation goes almost entirely to SEG export at 5-7p versus avoided import at 24p, collapsing the economics. Battery storage can recover some ground but rarely enough to make the case. Recommendation: green tariff, LED retrofit, or operational shift to capture some daytime load.
2. Very short lease without roof portability. A 3-year lease where you can't take the panels with you means you need to pay back capex inside 3 years to break even. That requires unrealistic conditions on every other variable. Either negotiate roof portability into the lease, opt for PPA where the third party owns the asset, or skip solar.
3. Structurally unsuitable roofs. Older steel-portal sheds with thin purlins, deteriorating membrane roofs, asbestos-cement roofs without budget to replace. Solar PV adds 18-25 kg/m² of dead load — roofs that can't support it need structural reinforcement at £30-£60 per square metre, which destroys the economics on top of the install cost.
4. Severely shaded sites. A roof shaded by tall buildings or trees for 4+ hours of midday sun loses 30-50% of modelled yield. Module-level optimisers (SolarEdge) recover some performance under shading but never fully — heavily shaded sites need to be designed around shade tolerance and modelled honestly. We have walked away from quotes where shade modelling came back below 700 kWh per kW per year.
5. Single-phase supply too small to justify three-phase upgrade. A small office with a 60A single-phase supply maxes out at 17 kW under G98. The three-phase upgrade to enable a larger system costs £3-15k and only earns its keep if the site can usefully host 50+ kW. For sites with modest daytime use the single-phase 17 kW limit caps the system at a size where economics are tight.
Quick disqualifier checklist. If you tick three or more of the boxes below, solar is unlikely to stack up on its current numbers — get a second opinion before spending on a feasibility study:
- Annual electricity spend under £15,000 with no plan to grow consumption.
- Night-shift or evening-only operation with near-zero daytime load.
- Remaining lease under 5 years with no roof portability or PPA option.
- Roof structurally weak, heavily shaded (4+ midday hours), or asbestos-cement with no replacement budget.
- Loss-making or zero-corporation-tax entity that cannot capture the AIA (consider a PPA instead).
- Single-phase supply capped at ~17 kW where a three-phase upgrade can't be justified.
None of these is automatically fatal — a PPA, battery, or operational shift can rescue several of them — but each one materially weakens the case, and being honest about them upfront is exactly how we avoid selling systems that won't pay back.
Do you need planning permission for commercial solar?
For most businesses, no. Roof-mounted commercial solar on a standard industrial or office building usually falls under permitted development rights in England, Scotland and Wales, provided the panels project no more than 200mm above the roof slope and the building is neither listed nor in a designated area. Planning permission becomes a genuine consideration in three cases: listed buildings, which need listed building consent regardless of placement — see our listed building solar panels guide; conservation areas, AONBs and World Heritage Sites, where principal-elevation arrays facing a highway typically need consent — see our conservation area solar panels guide; and large ground-mounted arrays. A five-minute pre-application enquiry to your local planning authority removes the risk entirely, and we handle the planning check as part of every feasibility study.
The corporation tax position matters
Commercial solar PV qualifies as plant and machinery under HMRC capital allowances rules. The 100% Annual Investment Allowance (AIA) — £1 million per year per company — applies in full to PV system capex. For a profitable UK limited company at the 25% main rate of corporation tax, AIA returns 25% of capex as year-one tax relief: an £80,000 install costs £60,000 net of tax. This is the single largest leverage point in the financial model and we always show net and gross numbers explicitly so the customer's accountant can verify against actual corporation tax position. Companies in low or zero corporation tax positions (loss-makers, charities, education) capture less or none of this benefit, which weakens the cash-flow case meaningfully — for these customers PPA structures often work better because the PPA provider absorbs the AIA and passes the saving back as a discounted per-kWh rate. See finance options for full route comparison.
Inflation hedge — the often-overlooked argument
UK retail electricity has gone from 12p per kWh to 24p+ in five years. Every commercial energy contract renewal carries inflation risk. Commercial solar PV locks in your kWh cost at the panels-and-inverter capex divided by lifetime generation — typically 4-8p per kWh on UK installs. That is the price you pay for self-consumed solar electricity, full stop. As grid retail rises with gas prices, carbon costs, and network charges, the gap between your locked solar price and the rising grid price widens — and so does the IRR of the system. We model two inflation scenarios in every DCF: 2% conservative and 5% stretch. The 5% scenario adds £150k-£800k of additional 25-year benefit on a 250 kW system depending on operating profile. For energy-intensive businesses this hedge value is often as important as the headline payback.
Concrete buying decision framework
For a 30-second sanity check: annual electricity spend × 2 = budget headroom for a system that pays back in 6-7 years. Spend £40k per year, £80k system fits. Spend £200k per year, £400k system fits. Then layer the qualifiers: corporation tax position (full AIA captured = strong case, partial or zero = weakened), daytime use proportion (over 30% daytime = strong case, single-shift evening = weak), lease length (over 10 years remaining = strong, under 5 years = problem), roof condition (sound modern roof = no issue, asbestos pre-2000 = budget for replacement, structurally weak = ask for engineer report). If three or more of those qualifiers are positive, solar is almost certainly worth pursuing seriously. If two or more are negative, the case becomes marginal.
How to evaluate if commercial solar is worth it — 5 steps
Run these five checks in order before committing to a system. Any business owner or finance director can work through them in an afternoon; the result tells you whether to commission a full feasibility study.
- Check your annual electricity spend. Pull your annual electricity cost from your bills or supplier portal. Above £25,000 per year, commercial solar is almost always worth modelling. Apply the rule of thumb: annual spend × 2 = the system budget that pays back in roughly 6-7 years.
- Profile your daytime load. Establish how much electricity you draw during daylight hours — ideally from half-hourly meter data. High daytime self-consumption (60%+), typical of warehouses, factories, hospitals and 24/7 operations, drives the strongest economics. Evening-only or night-shift load weakens the case sharply.
- Assess roof suitability and planning. Confirm the roof is structurally sound, unshaded through the key midday hours, and free of asbestos that would need replacing. Check whether the building is listed or sits in a conservation area — both can require consent before you can proceed.
- Confirm your corporation tax position. A profitable UK limited company paying 25% corporation tax captures 25% of capex as year-one relief via the 100% Annual Investment Allowance, cutting net cost by about a quarter. Loss-makers, charities and the public sector capture less and should look at a PPA or public-sector finance.
- Model the numbers and pick a finance route. Run a full DCF on your actual meter data — gross and net-of-AIA payback plus 25-year IRR — then compare cash, asset finance, bank loan and PPA (see the table below). If three or more qualifiers are positive, proceed; if two or more are negative, the case is marginal and worth a second opinion.
Finance routes compared
How you fund the system changes who owns the asset and who captures the tax relief — which in turn changes the real return. The four main UK routes:
| Route | Upfront cost | Who owns the asset | Who gets the AIA | Best for |
|---|---|---|---|---|
| Cash purchase | Full capex day one | You, immediately | You (100% AIA) | Profitable firms with spare capital chasing the highest IRR |
| Asset finance / HP | Deposit only, then fixed terms | You (on final payment) | You (AIA on hire purchase) | Firms wanting to preserve cash but keep the asset and tax relief |
| Bank loan | Little/none (debt-funded) | You, immediately | You (100% AIA) | Firms with loan headroom wanting ownership without using cash |
| PPA | £0 | The PPA provider | The provider (passed back as a lower per-kWh rate) | Loss-makers, charities, schools, short leases, zero-capex situations |
Full route-by-route modelling, including indicative rates and break-even comparisons, is on finance options and PPA vs cash purchase.
Alternatives and decision context
Solar is rarely the only decarbonisation option on the table. For a side-by-side comparison against green tariff, CHP, heat pump, and LED-only retrofit, see solar vs alternatives. To understand DNO connection process implications see G98 for sub-100 kW or G99 for above. For grant funding into the system see grants and funding. Sector hubs covering specific industries: factories, warehouses, offices, hospitals, hotels, schools. For larger industrial sites see industrial solar panels. Battery storage modelling: battery storage.
Authority resources
UK government net zero policy framework: gov.uk Net Zero Strategy. Ofgem regulates SEG export tariffs: Ofgem SEG. MCS certification for installer competency: MCS. HMRC capital allowance rules including AIA: gov.uk Capital Allowances.
Are commercial solar panels worth it — common questions
What is the typical payback period for commercial solar in 2026?
For UK SMEs with reasonable daytime energy use, simple payback runs 5-8 years. Smaller systems (sub-50 kW) at the higher end of that range due to higher £/kW; larger systems (250 kW+) at the lower end. 25-year IRR consistently lands in the 12-18% range. The strongest paybacks come from sites with high self-consumption (60%+) — typically warehouses, factories, hospitals, hotels with daytime operations.
What annual energy spend justifies commercial solar?
Above £25,000 per year on electricity, commercial solar is almost always worth modelling seriously. Below £15,000, the system size is small enough that economics get marginal. Between £15,000-£25,000 it depends on the load profile — strong daytime use can justify a system, evening-only use rarely does. The rough rule: annual electricity spend × 2 = budget headroom for a system that pays back in 6-7 years.
Is solar worth it for a business with a short lease?
For leases under 5 years, traditional solar economics get harder because the payback period typically exceeds the remaining lease. Three options work: (1) negotiate roof rights and portability into the lease, (2) opt for PPA where the third party owns the system, (3) accept that solar is not the right fit for this property and explore green tariffs or LED retrofit instead. We always model lease length explicitly in the DCF and recommend honestly.
What corporation tax position do I need for solar to be worth it?
A profitable UK limited company paying 25% corporation tax captures 25% of capex as year-one tax relief through the 100% Annual Investment Allowance (AIA), up to the £1m annual cap. That effectively reduces an £80,000 install to £60,000 net. Loss-making companies, charities, and businesses with low corporation tax exposure see weaker economics — for those, PPA or operating lease structures often work better because the third party captures the AIA benefit and passes a slice back as a lower per-kWh rate.
How does solar compare to a green tariff like REGO?
On every dimension that matters, solar wins. Green tariffs (REGO-backed) cost a 5-15% premium over standard electricity, deliver no actual grid decarbonisation (REGOs are widely understood as weak certificates that simply re-allocate existing renewable generation), and provide no asset value. On-site solar reduces real grid demand, locks in your kWh cost, delivers Scope 2 emissions reduction your customers and investors can verify, and adds asset value to the building. Green tariffs are a defensible holding position for businesses without roof rights or capex; they are not a strategic decarbonisation move.
What roofs are not suitable for commercial solar?
Three categories of unsuitability: structurally weak roofs (older steel-portal sheds without sufficient purlin capacity for the additional 18-25 kg/m² of panel and mounting load), severely shaded sites (PV output drops 50%+ below model on heavily shaded roofs), and asbestos-cement roofs without a budget to replace the roof during install. Asbestos is a particular trap — pre-2000 industrial buildings often have asbestos roofs that are technically safe in situ but become disturbed by panel mounting work, requiring a roof replacement at £40-£100 per square metre on top of the PV cost.
Is solar worth it if my business operates 24/7?
Yes — even more so. 24/7 operations have continuous baseload that absorbs PV generation efficiently during daylight hours, achieving self-consumption ratios of 80-95% versus 55-70% for single-shift operations. That higher self-consumption translates directly to better economics: every avoided kWh of grid import is worth 24p+ versus 5-7p for SEG export. Cold storage, food production, hospitals, care homes and 24/7 logistics consistently show the strongest paybacks in our portfolio.
How does inflation affect the solar business case?
It strengthens it. Solar locks in your kWh cost at the panels-and-inverter cost divided by lifetime generation — typically 4-8p per kWh. Grid electricity has risen from 12p to 24p+ in five years. Every year that retail electricity inflates further, the solar IRR climbs and the payback shortens. We always model two inflation scenarios in the DCF — 2% conservative and 5% stretch — to show the inflation hedge value explicitly. The hedge is real and material to large energy users.
Do you need planning permission for commercial solar panels?
In most cases no. Roof-mounted commercial solar on a standard industrial or office building usually falls under permitted development rights in England, Scotland and Wales, provided the panels do not project more than 200mm above the roof slope and the building is not listed or in a designated area. Planning permission is genuinely required in three situations: (1) listed buildings, where listed building consent is needed regardless of panel placement — see our listed-building solar panels guide; (2) conservation areas, Areas of Outstanding Natural Beauty and World Heritage Sites, where front/principal-elevation arrays facing a highway typically need consent — see our conservation-area solar panels guide; and (3) ground-mounted arrays above 9m² or roof systems that materially alter the building. Always confirm with your local planning authority before ordering — a five-minute pre-application enquiry removes the risk. We handle the planning check as part of every feasibility study.