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 × 0.7 (derate for losses)
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. Adds ~£4,000 to cost but can cut payback by 1–2 years in high-rate areas.
- South-facing roof — generates ~15–20% more than east/west. But east/west still achieve 80–85% of maximum.
- High SEG tariff — Octopus Outgoing (15p/kWh) and E.ON Next Export (16.5p/kWh) beat the 13p average. Switching supplier can add £50–100/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 £537/year delivers:
- Simple payback: ~11.9 years
- 25-year ROI: ~186% (total profit ~£11,900)
- IRR: ~6.5% 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, 26.11p/kWh (Q3 2026, incl. 5% VAT).
- SEG rate — typical 13p/kWh (supplier-set, 3–15p range).
- Sun hours — NREL PVWatts / Solar Energy UK regional averages, 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%).