Solar panel payback and return on investment

Simple payback is the installed cost divided by the net annual benefit, where the net annual benefit is avoided electricity purchases plus export income, less any ongoing costs. If a system costs £X and nets £Y a year, simple payback is X divided by Y, in years.

Return on investment usually restates the same thing as an annual percentage. Neither figure means much unless you can see the assumptions behind Y.

• Your electricity unit rate, now and over the lifetime of the system.
• The share of generation you use at home rather than export.
• Your export rate, and whether it is fixed or variable.
• Annual generation for your roof's orientation, pitch and shading.
• Panel degradation over time, typically a small annual reduction in output.
• Whether an inverter replacement is budgeted within the system's life.
• Whether a battery is included, and what it adds to both cost and self-consumption.

Change the unit rate assumption alone and payback moves by years. That is why we present ranges rather than a single confident number.

Payback ignores anything that is not a cash flow: resilience during outages if you have suitable battery equipment, the value of a lower-carbon household, comfort in shifting usage, and any effect on property attractiveness. It also ignores the fact that a system keeps generating after payback is reached.

Treat payback as one input to the decision rather than the decision itself, and treat any promise of a guaranteed payback period with real caution.

Our free assessment produces an indicative system size and annual saving range from your property details. Put that alongside real installer quotes and you have a payback range built on your numbers rather than on a generic example. Both sides of the sum need to be yours for the answer to mean anything.