Is solar a good investment in the UK?
Solar PV is one of the strongest home investments available to UK homeowners in 2026. A typical 4 kW system in southern England pays back in 8–11 years and delivers a 25-year ROI of 200–400% — far outperforming most savings accounts or ISAs.
How we calculate ROI
annual generation = system kW × sun hours
annual savings = (self-consumed × import rate) + (exported × SEG rate)
payback = system cost ÷ annual savings (year 1)
25-year profit = Σ annual savings (with 0.5% degradation + 3% rate inflation) − system cost
ROI % = (25-year profit ÷ system cost) × 100
IRR ≈ approximate annualised return, solving for the discount rate where NPV = 0
What makes solar pay back faster?
- High electricity usage during daylight — working from home, EV charging, or a heat pump dramatically increases self-consumption (the most valuable part of your savings).
- A battery — raises self-consumption from ~45% to ~75%, shifting daytime generation into evening use. It adds ~£4,000 to the cost, so the combined system pays back in ~12 years rather than ~10.4 — but it adds ~£4,400 of 25-year profit, and on a time-of-use tariff such as Octopus Go it pays back in ~11.4 years.
- South-facing roof — generates ~15–20% more than east/west. But east/west still achieve 80–85% of maximum.
- High SEG tariff — switching to Fuse Energy (13p/kWh) or Octopus Outgoing (12p/kWh) beats the typical 3–6p default. Switching supplier can add £100–200/year.
- Rising electricity prices — UK rates have risen ~3–5% annually. Every year rates go up, your savings grow and payback shortens.
ROI vs other investments
A 4 kW system in London costing £6,400 and saving £615/year delivers:
- Simple payback: ~10.4 years
- 25-year ROI: ~228% (total profit ~£14,600)
- IRR: ~10.7% annualised — compared to a typical ISA at 4–5% or premium bonds at ~3%.
Crucially, solar returns are largely guaranteed — you'll use electricity regardless of market conditions. The sun doesn't crash.
Where the data comes from
- Electricity rate — Ofgem default-tariff price cap, 26.32p/kWh (Q4 2026, 0% VAT).
- SEG rate — typical 6p/kWh (supplier-set, 3–15p range).
- Sun hours — PVGIS 5.2 regional averages (European Commission), 2026.
- System cost — ~£1,600/kW, 0% VAT until 31 March 2027 (GB only).
- Degradation — 0.5%/year (panel manufacturer standard).
- Rate inflation — 3%/year (conservative vs historical 3–5%).