How to check a solar payback figure

A payback figure is an estimate, not a date when a system is guaranteed to have paid for itself. Ask for the calculation behind it, using the same costs and assumptions when you compare proposals.

Start with the simple calculation

Simple payback in years = net upfront cost ÷ estimated annual net benefit.

Net upfront cost means the full installed price and included extras, less the grant explicitly assumed in the proposal. Show the grant separately and compare the position without it too. Borrowing is not a discount on the project.

Annual net benefit means the value of electricity purchases avoided, plus qualifying export payments, less the recurring costs included in the calculation. If that benefit is zero or negative, this calculation does not produce a payback period.

This simple division treats the annual benefit as unchanged. It is not a full lifetime forecast. Ask whether finance, repairs, replacement equipment, changing tariffs, declining output and the value of money over time have been considered separately.

Give each unit of electricity one value

First check the estimated annual generation in kWh. Ask how the roof layout, direction, pitch, shading and location were assessed. Panel capacity in kWp is not the same as annual electricity production.

1. Used at home: solar electricity can replace a grid purchase. Value it at the import rate that would otherwise apply at that time, not automatically the most expensive rate on your bill.
2. Exported: eligible surplus earns the supplier’s export rate. It does not earn the import rate as well. Check the registration and metering conditions.
3. Lost or unavailable: energy losses and any limits on output must not be counted as electricity used or sold.

Do not count the same kWh as both used at home and exported. Solar does not by itself remove your standing charges. A proposal should say how much electricity is expected to fall into each category and which tariff dates it uses.

A battery needs its own comparison

Storage can shift some solar electricity to later use, but adds cost and loses some energy during charging and discharging. The amount delivered to the home matters, not just the amount sent into the battery.

Compare the proposal with and without storage. Include the export income forgone when surplus is stored, the later import cost avoided, and the battery’s added cost. If overnight grid charging is included, show its purchase cost separately from solar generation. A battery does not automatically shorten payback.

Put these questions beside each quote

• What is the full installed price, including applicable VAT, extras and any BER cost?
• Which grant is assumed, and has eligibility and approval been checked?
• What annual generation and household usage evidence supports the forecast?
• How much is used, exported or lost, and which import and export rates apply?
• Are battery costs, maintenance, monitoring fees or replacement equipment included or excluded?
• What happens with lower generation, less daytime use or a lower export rate?

Read the grant guide before committing to purchase or work. If borrowing, compare the loan’s interest, fees and repayments separately; a favourable energy estimate does not make finance free.

For a business, use the site’s actual demand pattern and a separate investment review with your finance team. The commercial consultation is the appropriate next step, rather than treating a household estimate as a business forecast.